Frontline plc.

Thank you very much, dear all, and thank you for dialing into Frontline's quarterly earnings call. Being in the tanker industry, one that's used to evolving and ever-changing markets, largely affected by geopolitical events. But it's becoming a little bit exhausting having potential seismic shifts by the hour. At Frontline, we manage to stay calm, trade our ships, and wait for the facts or actual outcomes instead of attempting to analyze every statement out there. A red line in all the action is focused on sanctions enforcement and a widening scope within that area, which we welcome. Before I give the word to Inger, I'll run through the TC numbers on slide three in the deck. In the fourth quarter of 2054, Frontline achieved $35,900 per day on our VLCC fleet, $33,000, sorry, $400,000 per day on our SUSEMAX fleet, and $26,100 per day on our LA2 slash Afromax fleet. So far in the third quarter, 80% of our VLCC days are booked at $43,700 per day. 77% of our SUSEMAX days are booked at $35,400 per day, and 64% of our LR2 slash Afromax days are booked at $29,700 per day. Again, all these numbers in the table are on a low-to-discharge basis, with the implications for ballast days at the end of the quarter, this incurs. With that, I'll give the word to Inger. And we move to page three on the deck.

Thank you, Lars, and good morning and good afternoon, ladies and gentlemen. We are now on slide four, profit statement. We report profit of 66.7 million this quarter, or 30 cents per share, and adjusted profit of 45.1 million, or 20 cents per share. The adjusted profit in this quarter decreased by about 30 million compared with the previous quarter. And that was mainly due to a decrease in our TCE earnings. But it was partly offset by reduction of expenses as well. Then we can move to slide five, balance sheet. The balance sheet movements in this quarter are related to sale of a vessel, repayments of debt, and also refinancing, in addition to ordinary items. Frontline has a solid balance sheet and strong liquidity of $693 million in cash and cash equivalents. That's including the undrawn amount of the senior unsecured revolving credit facility, marketable securities, and minimum cash requirements. as per December 31st, 24. In the first quarter of 25, we have further strengthened our strong liquidity with revolver capacity up to $91.9 million. We have no new building commitments and no meaningful debt maturities until 2028. Then you can move to slide six. Our fleet consists of 41 to 22 tankers and 18 LRQ tankers. Has an average age of 6.6 years and consists of 99% ecovessels. We are 56% scrub refitted. We estimate average cash cost break-even rates for 2025 of approximately $29,200 per day for wheeled disease, $24,000 per day for ZeusMax tankers, and $22,200 per day for LR2 tankers, with a fleet average estimate of about $26,200 per day. This includes dry dock of two VLCs and one Zeus Maxx tanker in 2025. We recorded OPEC expense in the fourth quarter of $7,600 per day for VLCs, $9,100 per day for Zeus Maxx tankers, and $7,600 per day for LR2 tankers. This includes dry dock of one VLC and one Zeus Maxx tanker. The Q4 24 fleet average OPEX excluding DRADOC was $7,400 per day. Then we can move to slide seven, cash generation. With about 30,000 earnings days annually, Frankland has a substantial cash generation potential. As you can see from the graph on the right hand side of this slide, The cash generation potential at current fleet and spot market earnings from Clarkson Research as of February 25 is $447 million, or $2.01 per share. And a 30% increase from current spot market will increase the potential cash generation with about 80%. With this, I leave the word to Lars.

Thank you very much, Inger. Let's move to slide eight. We've done the presentation a little bit different this time, basically kind of trying to focus a little bit on what we regard the normal market, which is basically everything kind of besides what's going on in the media and around tariffs, sanctions, war and whatnot. So global oil consumption averaged 103.4 million barrels in Q4. That's a fairly good number. Up one million barrels per day, year on year. This is expected to reach one of 4.5 million barrels by year end. In a normal market, this would have been looked upon as a very kind of firm development within Calendia. Global supply was up 600 barrels per day. OPEC maintain their production cuts in December 24, and we actually are expecting inventory to start building in 2025, at least according to EIA, and supply to reach 105.5 million barrels in Q4 2025. For Q4, and this to a large degree explains some of the disappointments we've seen in rates, global oil exports were actually down 700,000 barrels per day compared to Q4 23. DEC alone was down 1.5 million barrels per day. This can be explained partially by what is expected to be seen as inventory draws during the period. You also need to remember that we saw in particular Iran hiking their exports in October, making basically the Asian markets quite well supplied with molecules into Q4. This is obviously material not benefiting the compliant tanker fleet. We continue to see Q4 muted new ordering. But we also saw that the delivery window for any kind of asset you want to build moved firmly into 2028. Maintaining the three-year lead time in order to get the vessel on water. The average fleet age for tankers is, at this day, 13.7 years. This is the highest since 2001, 16. the regulatory framework compliant ship owners are actually facing. If you look at the asset classes frontline operating, we also see SUSEMAX and LR2-AFRAMAX, 46% of the vessels are over 15 years now, meaning that they will be up for replacement over the next five years. And as we speak, 20% are above 20 years. shows us that an order book of 15% is manageable in this scenario. Basically, what we're trying to argue is that if you see beyond the noisy tariff and sanctions narrative and all the unrest around us, which we don't expect to hurt the demand materially, the only effect we may see is that trade efficiency will be reduced and we'll basically have have kind of a more or even increased inefficiency in how the ships sail and then longer trade lanes. The backdrop remains quite good for tankers. I think it was a good reminder of our listeners that, you know, kind of beyond everything else, there is actually normal market functioning. So we're also going to spend an entire slide on talking about sanctions and tariffs. These are questions that we receive every day from various investors, journalists, what not, basically on all the headlines that are coming out as we speak. So let's first have a look at tariffs on Mexico, Canada, China and EU. Depending on the outcomes, and this is always a big question, what will actually come to effect in the end? These tariffs also incur a material energy exposure. U.S. imports around 4 million barrels of crude oil from Canada every day. China only imports a very modest volume from U.S., which may come as a surprise to some. This is around 200,000 barrels per day. Mexico export in total 800,000 barrels per day. Half goes to US, so around 400,000 barrels per day. Then again, US export to Mexico 600,000 barrels per day. So meaning that if oil and energy gets weaponized in this tariff discussion between these countries, it can actually become quite interesting to see how that plays out for the tanker industry. Then we have the more recent U.S. trade representative, or USTR, $1.5 million fee on Chinese-built tonnage. So 22% of global tanker fleets is built in China. Frontline are exposed on Suez, Eritrea, and Afra, but all our VOCCs are built either in Korea or Japan, and we have no vessels on order in China. kind of out being heard. It's not been put in law or no legislation has been created yet. It will be interesting to watch. But again, it's kind of the only outcome here, you know, would be for altering trade lines and then more inefficiency on the half-ships trade. Then you have maximum pressure on Iran or a solution on Iran. So let's look at those, you know, the two scenarios here. The first one, maximum pressure, would potentially remove oil from Iranian oil's access to the market. This means that this oil needs to be replaced and likely potentially from OPEC. But that would be compliant oil that needs compliant ships. And again, beneficial for us that operate in the compliant market. If a solution is found and suddenly Iranian barrels stops to be sanctioned, that will, well, sorry, the previous one would also incur floating storage needs as Iranian oil would back up. Look at the other side of this, the removal of sanctions altogether would even be potentially more bullish for tankers or for compliant tankers. As Iranian oil would become compliant, And compliant oil needs compliant tankers. Then you have Russian sanctions, whether if they're increased or the pressure is heightened, or the other side of it, if it's removed. So the increased sanction pressure, I think we're already seeing the beginning or the results of that. We see, not on the export side, because we actually see the barrels still move, but on the import side we already see in the statistics that not only Russian, also Iranian and to some degree Venezuelan oil imports globally are falling. So basically floating storage must be building. But anyway, an increased sanction pressure further makes kind of the trade around those barrels more complicated. And it's tying up more tonnage. Basically taking tonnage out of the compliant market into the gray or the dark markets. If you turn that around and say that you remove all the sanctions overnight, you also have to bear in mind then that it's very easy to remove sanctions on oil. That could probably be done by the stroke of a pen. But removing all the sanctions vessels from OFAC and EU lists is potentially a bit more complicated. But even if that could happen, bear in mind, and we've indicated that, on the chart on the bottom right-hand corner, close to 50% of the Russian trading fleet is above 20 years. And if you remove sanctions, that does not change the policy charters have on this 20-year cap. And as we've previously stated, that's probably to remain firm until the market becomes so expensive that our freight becomes so expensive that the charters are incentivized to us, their vetting departments, to move beyond the 20-year age cap. Also, a very important part in kind of this narrative is, are US Treasury OFAC and EU going to be aligned if sanctions are lifted or sought lifted on Russia? Then we have also recently Venezuela exemptions. So US seems to be having a new position on Venezuela and the exemptions given for lifting Venezuelan crude. This is poised to pull pressure on production expansions and exports from Venezuela. Venezuela has actually, maybe just as a surprise to some, grown their exports from 550,000 barrels to 800,000 barrels year on year, and actually on preliminary tracking data, they were able to churn out a million barrels per day in December. But then we have another part here, which is this Shandong Port Authority basically aligning themselves with OFAC and not allowing OFAC listed vessels to discharge in that province. This might change. This happened also almost simultaneously as OFAC expanded their list of sanctioned vessels by close to 160 tankers. And obviously any expansion on that OFAC list will hit this directly. But it is a game changer because when you can't actually enforce sanctions, the only hope is that somebody will self-sanction. And this is effectively what the Shandong province and a very important import hub in China has done. Further to that, India has, at least so far, seemingly followed suit, and also kind of preventing OFAC listed vessels to discharge in their ports. One small side comment there for China, this might have an alternative motive. China has an interest in evening the playground between state and private loan refineries, teapots, which are very present in this province, and which to a large degree have taken advantage of cheap feedstock coming from Iran. And then lastly, in this kind of fairly extensive list of moving parts that we as the tanker owners are exposed to, we have the Red Sea, Israel, and Hamas And of course, in relation to the Houthis and their actions in the Red Sea. We believe the risk continues. It ebb and flow with the developments in Gaza, but it's still so that as a tanker owner, we're not necessarily incentivized to go through. We don't mind taking the long way around. And also, we don't see currently any massive pressure from charters to move through the region either. the situation is still high risk, we would argue. Not necessarily because ships have been attacked in the Red Sea, which they haven't, but something might go wrong in the peace process and in the ceasefire, and then things can escalate extremely quickly. And I also wanted to make a note on this, or kind of focus here on on this slide and look at the top right-hand chart. The blue line is how the fleet development actually has been. The orange line is if we'd lived in a normal world where ships did not trade sanctioned oil and ships got recycled on or around their 20-year anniversary. Looking at this, the conventional tanker fleet, if you look at the VOCC, SUSEMAX, and AFRAMAX, actually stopped growing in 2022. Have you done that exercise for VOCC alone? It stopped growing in September, October 2021. So we've actually had negative fleet growth in the compliant or below 20-year market for close to three years now. Keep that in mind. Let's move to slide 10 and this basically is to show how much is in this How much is exposed to all these political moves and what's going on in the world around us? So let's move back to pre-Russian invasion and go back to 2019. Europe imported around 10 million barrels per day of oil. Then the war broke out and Europe lost 1 million barrels of Russian oil. They lost a little bit from Med, but the Atlantic Basin like US, Brazil, West Africa, and so forth, increased its supply into Europe by 1.2 million barrels. 388 incremental barrels were sold from the North Sea, and others amounted to 208,000 barrels per day. At the end, or in 2024, Europe has consumed 10.8 million barrels per day. This is not like a massive growth. It's a small incremental growth. But if you look at the volume changes here, they're quite remarkable. And for a shipper, we don't necessarily want Europe to source its oil from the Atlantic Basin. That oil we want to move east. And that oil has traditionally moved east, but obviously as Russia has taken market share in the eastern market, Atlantic Basin has been locked inside the Atlantic Basin. Then move to Asia. Pre-invasion, Asia had 21.7 million barrels per oil of imports. The war broke out. They lost 600,000 barrels from the Atlantic basin. They further lost almost all that went into or stayed in Europe, 300,000 barrels from the North Sea. They lost 170,000 barrels from the Med. In came 1.4 million barrels per day from Russia. Iran managed to increase their exports by almost half a million barrels, and Middle East contributed with half a million barrels. And as we came into or finished off 2024, Asia is importing 23 million barrels. And it's interesting to see that that growth in that two-year period has predominantly come from Russia and Iran. This is obviously oil that is not available to a compliant shipowner, to the frontline fleet, and it's basically benefited the growth of this dark trade. A reversal of this trading pattern would be hugely beneficial for the markets we operate in and would further change the trade lanes back to the more normal. Russian stays local where it's supposed to go. And Atlantic Basin replaces the lack of Russian oil going long east. So let's move to page 11 and look at the order books. So we have actually added a column here, which we call OFAC. And it's quite interesting. So basically, just so you get a measure of how many ships are actually on the OFAC list. And I'll tell you. People say kind of casually whether this ship is on a no-fuck list or this company is on a no-fuck list. Well, you don't want to be on a no-fuck list. It basically gives the U.S. a free card to go and grab your money. If you have a U.S.-dominated account, they can just go and take it, and people don't necessarily want to have that hanging over them. But basically, the VLCC fleet now is estimated to be around 884 vessels. 40% of that is above 15 years, and 18% is above 20 years. Order book stands at 9.8% of the existing fleet. And there's 100 or very close to 100 ships on the fact list. Suisse Max, again, the fleet is 614 vessels. 44.3% of those vessels are above 15. This is why I previously mentioned that the overall average of the age of the fleet is 13.7. It starts to kind of make sense. You got 21.2% of that fleet above 20 years currently, and order book stands at 97 or 15.8. And then we have the LR2 and the Afromax. On the LR2 side, as we mentioned before, the order book looks very chunky. But then again, with the modest Afromax, order book and the way these kind of interact and the way they trade or switch between clean and dirty. We're not about that order book either. Quite interesting to see that 60% of the Afromax fleet is about 15 years and 30% is about 20 years currently. That kind of puts some perspective into that on first glance looking quite chunky order book. So let's move to slide 12 and see if we can sum it up. I put that headline up there called Tending Bull Market. I know that investors and ourselves, of course, would like kind of any action happening out on a headline or in the political world to quickly translate into $100,000 per day on the VLCC. Regretfully, that's not always the way it happens. It kind of takes a bit of time. Oil supply and demand, we argue, remains stable, but trade patterns are being challenged. We see that demand for compliant tonnage is growing. We see key Asian importers seeking other supply predominantly than West Africa and Brazil, and to some extent the US. The effective tanking fleet growth will remain muted also for 2025. especially if you consider the aging of the fleet. Right now, policy changes create more questions than answers, and outcomes are difficult to analyze. We admit that. World oil trade, and this is an interesting kind of discussion to have, but world oil trade is now serviced by the oldest fleet in more than two decades. Frontline, we retain our material upside, with our modern spot-exposed fleet. And with that, we open up for questions.

Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 1-1 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star 1-1 again. Please stand by, we'll compile the current narrow studies. We'll take a few moments. Once again, if you wish to ask a question, please press star 1-1. And now we're going to take our first question. And it comes from the line of Jonathan Chappell from Evercore ISI. Your line is open. Please ask your question.

Thank you. Good afternoon. Lars, I hate to ask a somewhat open-ended question. I understand that there's a lot of moving parts and no one really knows the outcomes, which you said at the start. And then you gave us a super thorough, you know, different set of all the different moving parts geopolitically. But Instead of kind of speculating on what could happen, maybe you can just kind of catch us up on what has happened. All of these events have come out. Some of them are headlines. Some of them are real as far as sanctions are concerned. We saw a spike in the market as soon as the Chinese sanctions were announced. It seems to have pulled back since then. Has there been real change in chartering? Have you seen a reluctance to use ships that may be on sanctions lists that you feel that some of these moves have real teeth to them and could be sustainable in the market?

Yes. I think it's a short answer. Kind of with, you know, the game changer was the Shandong province kind of message. You know, that created a huge spike in Afromaxis that were willing to lift Russian barrels out of, and were not OFAC listed. to lift oil out of the Expo crude coming out kind of northeast of Russia. For those vessels that were willing to do that trade, they saw rates north of half a million dollars per day for a short period of time. We have seen Iranian crude backing up. So basically, you know, Iranian crude is now being exported to Malaysia and staying there instead of being rebranded and going elsewhere. So, you know, I actually don't have the number right here with me, but we've seen, is it 30 million barrels per day of Iranian? We last saw 25 to 30 million barrels of Iranian oil. sitting on ships in that area, which is normally the SDS region for this material. We've also seen a very kind of big move, particularly around the Middle East trade, where – or also West Africa, of course, where it's the Western charters that charter in vessels, but it's basically for selling compliant oil into the Asian refiners. And this has been a complete step move or step change. But then again, like it is in our industry, this moves in waves. We've seen rates appreciate, then pull back and appreciate again, pulling back. We hope that we are in some sort of pattern that will kind of grind northbound gradually. You know, I think kind of the overall complex is too big. And also the market has become a bit more efficient over the years, you know, with everybody and their mother having AAS and ability to track and whatnot. So basically you, well, regretfully for us, you avoid these panic moves where rates move to $100,000 a day in an instant. And it's more like a kind of a steady grind until... sentiment and the realization of the change kind of comes into play. But I would say, yes, that we have seen, you know, like material changes. And also, mind you, we also sense, you know, much larger interest from Russian or Russian, you know, Russian trade enablers to buy older tonnage, particularly so on the Afro-Mex side.

Okay, that's very helpful. Second question is just two areas of clarification for Inger. On the PowerPoint presentation on the break-evens, you said two dry docks for VLC season one for Suezmax. Is that it for the year, just three ships? And then the other thing is... Yeah, okay.

And then the other thing is... That's the only thing for 25 years.

Okay, great. And then the other one is the administrative expenses. Obviously, it was kind of inflated, it looks like, in 23, and the first half of 24 took a step down, and 3Q took a massive step down in 4Q, 1.7 million. I think that's the lowest quarterly number in history. Can you just give us a sense for what administrative expenses may look like on a more normalized basis for 25 and going forward?

Yeah. This quarter, you saw that the admin expenses was 1.7 million recorded. And the reason for that was that we recorded a gain on our synthetic option program. It's a kind of revaluation gain that you have to do in the balance sheet, which we then adjusted away from the results this quarter due to that the program has fully vested during the quarter. And that cost was about $8 million. So if you add that back to the 1.7, you will come to about close to 10 million. So a normalized DNA going forward would be about 9 to 10 million dollars a quarter.

Great. Thanks Inger. Thanks Lars.

Thank you. Thank you. And now we're going to take our next question. Just give us a moment. And the question comes to the line of Omar Nocta from Jefferies. Your line is open. Please ask your question.

Thank you. Hey, Lars and Inger, I appreciate the comments. And as John said, it was a nice thorough kind of deep dive into kind of the macro landscape. And it seems that the floodgates at some point are there to be opened. I did have maybe just a couple of maybe frontline specific questions. Maybe just first, as we look at the one-two figures, They're decent and above what the final 4Q numbers were. We know that discharge accounting, as you were saying earlier in the call, maybe overstates it a bit due to the end quarter ballast days. But I guess just on the final portion, you have 80% of the VLCCs booked, 77% of the SUEZs, and 64% for the LR2s. Just on that, what portion can we assume for the remainder of the quarter is going to be basically ballast and non-earnings?

Well, I think it's difficult in a way to be absolutely precise on what will be the remaining part of the quarter. We don't really know in a way. So, sorry to say, but I guess what you can do in a way is that if you look at the The pattern, historic pattern of what we come in at as actual compared to what we guide at for the quarter, that can be a rule of thumb in a way for this quarter as well, if you get what I mean.

Okay. Yeah, so it seems perhaps then that maybe the final portion of the VLCCs are probably all zero, but then there's a bit more on the Suez Max and LR2s.

Yeah, because if you look at, let's say, usually what we have as actual rates compared to what we guide for that quarter, for the UCCs, for instance, it's probably around 80 to 85% of the guiding in a way. That's more or less where we end in a way. It can vary a bit. That's why I'm saying 80 to 85, depending upon how large portion you have covered in the guidance that they're giving in a way. Because the guidance that we give now is for 80% covered, while we for the previous quarter, I think we had 70 something. So it really matters in a way how many days you have covered in your guidance. Then obviously the reduction is less for the rest of the quarter in a way, if you have high percentage coverage in a way. You can see what I mean.

Also, Martin, to make it further complicated, it does actually get affected by the trading patterns at the time. Some quarters, we do a lot of long voyages on particularly the VLCCs. And then obviously, since we account for load to discharge, and for those listening in not understanding that, is that we can only account for income being generated after the ship has loaded. So it means that the ballast leg will virtually be zeroed. And, you know, if, you know, you put a large portion of your fleet into kind of China, the US Gulf trading, then suddenly these ballast lakes become quite material. And for the Zeus Maxis as well, those trading patterns change, you know, quite a lot from month to month. LR2, AFRA are predominantly shorter voyages. So that has a tendency to be more stable. Yeah.

Okay, and I appreciate you explaining it. That's helpful. And then just a second question, just following up. We noticed a bit of a widespread between the frontline shifts and the year-and-a-half vessels. It was over $11,000 per day this quarter. They had converged to much closer levels the prior two quarters. What drove that separation?

Well, it's, you know, we try to trade our vessels kind of the best way we think they're going to move. What happened was in Q4, we were just as bullish as investors and people around us, expecting a spike towards the end of the quarter. Then in order to commit to these long voyages, you know, Brazil East, US Gulf East, North Sea East, You'd rather do that on an eco-scrubber fitted vessel that gives you the best bang for the buck for these long voyages. And then you keep the non-scrubber vessels in the Middle East for these 42 to 46-day voyages where you can capture a lot more of a spike. This obviously proved wrong, but this explains a large part of that spread. I think it's also important to note that there is a limit to the amount of cargoes you can kind of take out of the US Gulf, Frontline is probably one of the largest lifters of US crude. We're also amongst the top tiers on the Brazilian crude, but with a 41 fleet, 41 vessel fleet on the VLCC, we're actually taking out kind of probably as big market share as we can get. But what I said initially is why this spread widened. We basically tried to keep the powder dry for a swing towards the end of the quarter. This never came about.

Got it. Thank you. I appreciate that, Lars and Inger. Thank you. Thank you, Omar.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad. And now we're going to take our next question. And the question comes from the line of Sherif Al-Mangabi from BTIG. Your line is open. Please ask your question. Hi.

Joining late. So I apologize if this has been asked before, but you built up a pretty substantial amount of dry powder. But, you know, a chunk of the fleet is aging out. Meanwhile, the order book or new build deliveries are – happening kind of at a slow rate, which combined you might say speaks to an increasing scarcity of sale and purchase activity. So are there any other ways you see that you can deploy capital if opportunities for on the water tonnage dry up?

Not really at this moment to be quite honest. We still want this conviction. Why our order book is empty is basically because we want to see the proof in the pudding. We have conviction, but we haven't seen the proof in the pudding yet. Resale and new building prices have not really corrected in any kind of way. kind of the capacity that's out there has been engaged by container orders and other asset classes, particularly accelerating in second half last year. So facing a $125 million ticket for a new VLCC, we need consistently $50,000 to $55,000 per day for 20 years in order to have any sensible return. And we'd rather see $50,000 plus before we get the confidence to make that investment. So that's why we decided to basically hand the little money we have, or not little actually, we do churn out a fair bit on dividends, hand it to you as an investor, and then you could choose to reinvest and deploy it either in frontline or elsewhere.

Thanks. And then, you know, because you touched on it, when it comes to new build ordering, if and when that happens, does blacklisting and sanction activity by the U.S. on Chinese yards do anything to constrain where you consider new builds or not really?

I think it's a bit too early to, you know... If you read the headlines, I would obviously not even consider ordering a Chinese vessel right now. Not that we are, but so I think kind of for the market in general, it probably puts everything a bit on the wait until we get some clarity on what the outcome will eventually be. We do question whether this is at all possible. So building capacity is an issue for the globe. The amount of goods and material and energy that transports or that sails on the seven seas is a material part of a global economy. And we know that Japan is kind of losing its ability to effectively or efficiently build ships. Korea has become like high-cost building country. China are the only ones that offer kind of capacity. So it's going to be interesting to see how this plays out. So we're basically sit and watch mode.

Lars, thanks for taking my questions. Thank you.

Thank you. Now we're going to take our next questions. And the question comes to the line of Devan Sangoi from Tej Investment. Your line is open. Please ask your question.

Hi, Lars. I just want to ask you, as the environment has become very volatile, what's the strategy you use to, you know, do forward booking or what's the strategy? Because you mentioned that you expected something in Q4 and the market behaved completely differently.

Yeah, no, it's... You know, this is the challenge you have as a ship owner is that, you know, the market we move in is not efficient, you could say. So it's not, you know, you don't have all information in front of you when you make decisions. Why we had the belief that you would get the spur of activity towards the end of Q4 is basically years of seasonality patterns. And it has to do with the cold season normally in the northern hemisphere where most people live. But there is no specific strategy I could mention to you. The ability we have is to try and tilt our fleet from doing very long distances to short distances. We obviously want to do the long distances in a high paying market. And in a struggling or a market that's challenged, we would rather just go the shortest way to have the opportunity to refix at a higher level. But there's not more science behind it by that. What we are not engaging in, so this is actually a very good question, is taking time to cover here. We believe that we're better off keeping our vessels in the spot market in the current market environment. You know, we would increase our time to recover materially if we came to a situation where the market was willing to pay us kind of what we feel is reasonable return on equity. We don't think that is the case right now. So it's... In that strategy discussion, one is how we conduct our spot business, which was the question I answered earlier on Q4. The other one is obviously how we act in taking cover.

The second thing is how the US president is supporting Russia. If there is a truce between them and the sanctions on Russia left, Does that mean that more oil can flow through, you know, or I would say the black ships will be taking tonnage reduction?

Yeah, if I got your question correctly, so if sanctions are lifted on Russia, we think we would reverse... Does that mean that the compliance fleet will have a higher market share? Yeah, well, kind of What we envision is that about half of the fleet currently servicing the Russian market will probably become compliant and still be there. But the market dynamics with that Russian oil would stay local. You know, Russian oil, its natural home is in Europe. And that will kind of alter or reversing the trading patterns to to Russia oil going into Europe and some to the US and Latin America. And then the rest of the Atlantic Basin oils would revert to going into the east. And that's long tomahawks. So we think it could be temporarily negative for Afromax and Susmax. But you need to look at the age profile of this fleet. But for the VLCCs, you know, it's natural to think that it would be beneficial.

Okay. And in the Trump 1.0, he made sure that the Iran exports were reduced to close to like one less than million barrel or one lakh tons per day. If that has to go through again in Trump 2.0, then how does it impact the demand for VLCCs or how does it change the dynamics?

You're saying if Iran and oil is sanctioned or if the export is just reduced?

No, so the export is reduced because I think in Trump 1.0 they made sure that there's no export more or less. Hardly anything.

Yeah, no, so you know, kind of Second half last year, Iran represented about 10-15% of Chinese oil imports. So China would then need to replace that crude, and that would likely be compliant crude. I would assume from OPEC or Middle East, but that oil would have to be transported on compliant vessels. So it would actually be an incremental demand for somewhere between 30 and 45 VLCCs on an annual basis. So that would be a very benefit dominantly for VLCCs I would assume.

But you have seen that happening or is it still in the transit?

We've seen it happening to some degree. Basically the interesting thing to watch is that you see Iranian and Russian and Venezuelan export hasn't really tapered off quickly here. But if you look at the other side of the equation and look at the imports of Iranian, Russian and Venezuelan crude, that has fallen quite dramatically, actually.

Okay. Thanks, Lars. Pleasure talking to you.

Thank you.

Thank you. There are no further questions for today. I would now like to hand the conference over to your speaker, Lars Bastard, for any closing remarks.

Yeah, thank you very much, and thank you very much for calling in. Well, it's extremely exciting times. I'd like to reiterate that at Frontline, we continue to fix ships every day. It's actually a quite well-functioning tanking market out there, despite all the noise. And we're always excited to see how these outcomes play out, but it's extremely difficult to analyze and put a lot of value in it.