Frontline plc.

Good day and thank you for standing by. Welcome to the Q1 2025 Frontline PLC Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising the hand is raised. To whisper your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lars Bartstad, CEO. Please go ahead.

Thank you very much. Dear all, thank you for dialing into Frontline's quarterly earnings call. It's encouraging to see so many joining us today. Despite all the action around us, both in respect of equity market volatility, changing policies and global trade negotiations, the tanker market has moved along in an orderly manner. To recap the first quarter of the year, the VLCC were volatile, with three to four exciting rallies and a rising floor. SUSEMAX and AFROMAX had a strong finish to the first quarter, while the LR2s struggle. We are in a situation where the inverse earnings relationship between asset classes seem to be gone, and the VLCC is taking the lead. This may also be caused by the fact that incremental export growth is finally coming from compliance sources. So before I go and give the word to Inger, I'll run through our TC numbers on slide three in the deck. In the first quarter of 2025, Frontline achieved $37,200 per day on our VLCC fleet, $31,200 per day on our SUSEMAX fleet, and $22,300 per day on our LR2 slash AFROMAX fleet. So far in the third quarter, 68% of our VLCC days are booked at $56,400 per day, 69% of our SUSE max days are booked at $44,900 per day, and 66% of our LR2 slash AFRA max days are booked at $36,100 per day. Again, all numbers in this table are on a low to discharge basis with the implications of ballast days at the end of the quarter. And I think it is worth mentioning that in particular for our LR2s in Q1, we finished the quarter with quite a few ballast days as we entered Q2. Now I'll let Inger take you through the financial highlights.

Thanks Lars, and good morning and good afternoon ladies and gentlemen. Let's then turn to slide four, proper statement, and look at some highlights. We report profits of 33.3 million or 15 cents per share and adjusted profit of 40.4 million or 18 cents per share in this quarter. Adjusted profit in the first quarter decreased by 4.7 million compared with the previous quarter and that was primarily due to a decrease in our time charter earnings from 2049 million dollars in the previous quarter to 241 million in the first quarter. That again is a result of lower TCE rates. That was also partially offset by fluctuations in other income and expenses. Let's then look at the balance sheet on slide five. The balance sheet movements this quarter are related to ordinary items. Frontline has a solid balance sheet and strong liquidity of $805 million in cash and cash equivalents, including undrawn amounts of revolver capacity, marketable securities and cash requirements for bank as per March 31st, 2025. We have no meaningful debt maturities until 2030 and no new building commitments. Let's then look at slide six. lead composition, cash break-in rates and effects. Ours, please, consists of 41 VIRSIS, 22 SUSMAC tankers, and 18 LR2 tankers, has an average age of 6.8 years, and consists of 99% ecovessels, where 56% are scrubber fitted. We estimate average cash break-even rates for the next 12 months of approximately $29,700 per day for winter seas, $24,300 per day for SUSEMAC tankers, and $23,300 per day for LR2 tankers, with a fleet average estimate of about $26,800 per day. This includes dry dock costs for 10 VLCCs, 2 SUSEMax tankers and 5 LR2 tankers. The fleet average estimate excluding dry dock costs is about $25,700 per day or $1,100 per day less. No vessels were dry docked in the first quarter and we recorded OPEX expenses of $8,400 per day for VLCCs eight thousand dollars per day for suspect tankers and eight thousand two hundred dollars per day for lr2 tankers if you want deep average plus eight thousand three hundred dollars per day lastly let's look at slide seven cash generation sometimes has a substantial cash generation potential with about 30 000 earnings days annually As you can see from the graph on the left-hand side of this slide, the cash generation potential basis of our current fleet and May 25 forward rates for TD3C for VCCs, TD20 for SUSEMAX tankers, and an average of TD25 and TC1 for AFRAMAX and LR2 tankers from the Baltic Exchange as of May 23rd is 332 million or $1.49 per share. And a 30% increase from current spot market will increase the potential cash generation with about 100%. With this, I leave the word to Lars again.

Thank you very much, Inger. Let's look at slide 8 and have a discussion on the various market themes. So I mentioned initially that it's been a lot of noise around us. We've had paralyzing US policy changes, likely limited impact on the energy complex so far, and for tankers in general. But this is, in total, quite worrying for global growth prospects. And as we proceed, we will learn how kind of big these impacts may be. We've had a very positive development on sanctions, both by way of scope widening. The various agencies are literally adding new vessels to the sanction list and new operators on a day-to-day basis. But we've also seen that there is a bit more will in enforcement of the same sanctions. But I think most importantly is the behavioral changes. specifically by India and China on the way they operate with or towards OFAK-listed vessels. And so far, both Russia and India, sorry, China and India seem to be shunning vessels that are on the OFAK list. There are some excitement around Russia and the Ukraine ceasefire discussions. There is also a parallel discussion ongoing in respect of a nuclear deal with Iran. Both outcomes can have pivotal changes for tanker market dynamics, and I'm going to come to that later. We're also seeing some positive movements on OPEC stance and OPEC policy. They seem, at least until now, quite eager on returning oil to the market, which is positive for compliant factory utilization. I'm also going to come into or pop into old school demand, supply and inventory movements. It's quite funny. This chart was a recurring theme in our presentations kind of early in 2020 and 2021 and so forth. But it's been out of the deck for a while. But there are some interesting moves happening. And also, again, I said the same after the Q4 report, the active trading fleet has stopped growing. And despite the deliveries we're going to see in 2025, and to some extent, 2026 as well, the overall trading fleet looks to continue to reduce. I would very much like to draw your attention to the chart on the top right-hand side, and this is kind of mind-boggling. If you look at vessels that are either sanctioned, not sanctioned yet, but have been lifting Iranian, Russian, or Venezuelan barrels during the last year, or are older than 20 years, that population of vessels makes up 25% of the VLCC fleet. It makes up 46% of the SUSEMAX fleet and 52% of the AFRA LR2 fleet. Of course, a reversal of sanctions will make a material amount of particularly SUSEMAXs and AFRA MAXs return to the market. A lot of these guys that are lifting Russian barrels are doing so in accordance with the price cap. So they are, of course, perfectly allowed to do that. But any tightening on sanctions could suddenly make them move from the gray side to the more dark side. There is also an increasing demand for non-ofake-listed vessels, in particular the Russian market. And this fleet, or this portion of the fleet, is gradually growing. But it also exemplifies how sensitive our market is to sanctions. and changes in sanctions, basically due to the amount of tonnage that is in play. So let's move to slide nine and look at the old school market logics. The chart on the left, you know, it looks a bit extreme, but it's obviously post-COVID development in oil demand and supply. So, you know, quite a steep rising curve there in the beginning, but now it's more normalized. If you look at the gray area, which represents EIA latest forecast, we're actually moving into an overall supply and demand around 106 million barrels by the end of 2026. What's more interesting is that supply, and this is obviously motivated by OPEX increase, but also are fueled by OPEX increase. but also to some extent by expected production growth in a special Guiana and some in Brazil, we're going to end up in an oversupplied position in the oil markets. Historically, and this is the chart on the right, if you look at the ebb and flows of inventory bills and draws, they correlate quite strongly to the performance of the overall tanking market. This is pretty easy to explain, and this is not due to utilization by way of floating storage. You don't need a carry strong enough in order to achieve this in the market. It's simply the incremental volume that ends up being transported. That's not going directly for consumption. It's going for storages, either in China, Japan, Korea, or even in the US. And I don't think I need to remind the audience that we are at years low inventory around the globe. Let's move to slide 10 and just go through some of the headlines affecting tankers these days. So on tariffs, there was a 90-day delay on the enforcement of the Liberation Day tariffs, and the tariffs themselves are being eased. Also on the tariff side, energy is to a large extent exempt, so we don't really fear this will affect global trading patterns that much. On the USTR, the recent proposal from USTR shows a softening stand or softening wording with the key exceptions for oil and energy. The final proposal is expected by the end of May after the more recent hearing. But so far, it looks like exports from the U.S. is exempt. And oil discharge into the U.S. is not a material exposure to frontline. And also, half of our fleet is non-Chinese. So we may still be able to serve that market. Overall, the U.S. accounts for around 17% of the global oil market. So it's not an absolute disaster if the latest communication from the USTR remains as we saw it last. We have maximum pressure on Iran 2.0 or a nuclear deal. This is back in the headlines. in the middle of this trade war. Negotiations are ongoing, but in the case of making a nuclear deal with Iran, for them, lifting of sanctions is a red line. And if the audience can imagine what will happen then. So 1.4 to 1.6 million barrels per day of export capacity that can grow quite rapidly. will then all of a sudden become a compliant barrel. And as I've said repetitively, compliant barrels need compliant ships. Yes, you might see some vessels being able to return to the compliant market, but in general terms, most of the vessels that are engaged in Iranian trade right now have absolutely no chance to come back into the compliant market. The actors in the compliance market have extremely strict rules and regulations around the ships they want to engage. And these ships are also carrying an environmental risk cargo worth, for a VLC, around $120 million. So it's not something a charter is going to kind of take a light on. Then we have Russian sanctions expansion. There is a peace or a ceasefire discussion going on between Russia and Ukraine. On the table, there will for sure be sanctions, either lifting or tightening. By the looks of it right now, it's more likely that we're going to see tightening rather than easing. EU lastly added 168 or thereabouts vessels to their sanction list. The UK added 100 about a week and a half ago, and it seems like OFAC is going to continue their pursuit to find sanctions breakers around the Russian trade. There is also a discussion coming up whether if the oil price cap is going to reduce from 60 to 50 dollars. So a lot of excitement on that. Vencella exemptions removal, there was formerly a situation where you could export equity barrels out of Vencella. So typically Chevron were allowed to take the oil that they actually own in Vencella. This has to a large degree now been removed and it's only on a case-by-case basis we see Chevron being able to take oil out of Vencella. This means that their export which actually grew to 800,000 barrels per day in the last cycle, is now going dark. And then we have this, as I also touched upon earlier, the Shandong Port Authority and India OFA compliance. This is extremely welcoming because it's actually the only way sanctions can work, is that the receivers or the actors self-sanctioning using these vessels. We have the Red Sea Israel Namaz, and I should add a US to this, There is now a ceasefire between US and the Houthis. This has not materially changed our position on trading the Red Sea area, and it has not materially altered the traffic lanes yet. But it's also so that it's quite a fluid situation, and any kind of action that happens around this conflict could suddenly trigger an attack. So, so far, we do not want to risk the lives of our seafarers by trading through the Red Sea. But then finally, we have OPEC+, which is almost disappearing in all these other narratives that have said that they might potentially kind of return their voluntary cuts back to the market by October. It's going to be exciting to see what comes out of the next meeting, and there's already signals that they might add 411,000 barrels per day in July as well. What we've seen, the initial production rises have not really given us that many more molecules into the market. I think this is primarily due to the fact that it's more a paper exercise to catch up to the overproduction that's already present in OPEC. But from June onwards, the volumes that might come will be real molecules coming into the market. I'd like to draw your attention to the right-hand side on this slide. And you've all seen the fleet development with the orange line being vessels just plainly below 20 years of age. And again, it's still so that very few charters, if any, accept a ship that's above 20 years in our industry. But if you look at the chart below here, we've looked at basically all tankers that take part in the market that are not OFAC listed, and not on long-term storage, and not kind of coastal trading tankers. And there you can see that the overall tanker fleet actually shrunk by half a percent in 2024, and including all the deliveries coming into 2025, it's not really that many, but there are some, looks to continue to shrink. Let's move to slide 11, and I'm quite happy to say that sanctions actually do work, not by way of volume, it's more or less, it's quite sticky, the volume that is coming into the market, but by way of the fleet that is actually carrying this oil. The January expansion of, in particular, overfax sanctions has and also the self-sanctioning by China and India, has made the market conditions for an OFAK-listed tanker extremely poor. As particularly the Russian crew that's been below the price cap, it's attracted a lot of compliance tonnage to come in and service this market. But this kind of fall in utilization of OFAK-listed tankers is extremely promising. On the right hand side, on the top, we've played with the scenario that sanctions are removed. And this is important because tightening sanctions and removal of sanctions will actually both yield a positive effect on our market. And there is about 7 million barrels per day of global transported oil that is exposed to one sanction or another around the world. And just imagine if all this comes back. It's not likely, but it just gives you a picture. These 7 million barrels would equate to more than 200 VLCs worth of transport needs. And looking at the feed composition, it's not very likely that we have that kind of capacity easily. I think it is, however, likely that one or maybe two of these will actually come in and become non-sanctioned barrels over the next years. Back to sanctions that do work. If you look at Iranian crude inventories, the floating storage seems to be on the rise. And this is basically due to crude struggling to find a hold. Let's move to slide 12 and look at the good old order book. There's nothing material that's changed since our Q4 report, but I'd like to draw the attention to the fact that for the veal species, there are now far more OFAC-listed veal species than there are vessels in the order book. Sue's Max, more of the same. If you're just for what's on OFAC, and mind you, OFAC-listed vessels are extremely unlikely to return to the compliance market, the order book is almost ignorable. And the same goes for Afra Maxis and LR2s. Even though the LR2 has a very high nominal order book, if we look or kind of have a look back, At the chart I showed on slide eight, with 52% of that fleet exposed to one sanction or another, we're actually not that worried about that fleet going forward. Also, the age situation for LR2s in particular, they seem to lose efficiency and become less attractive as a product trading vessel. at the age of 15. And this is still the case in the normal tanker market. So let's move to slide 13 and look at the summary. I've basically put the positive heading of pressure building, question mark. That's at least what it feels like on the floor here. So oil supply and demand suggests we approach a period with the old school inventory buildings with the utilization implications that has for the tanker market in general. Demand for compliant tonnage is growing as the sanction scope and enforcement widens. And again, the fact that certain key players in this market are actually self-sanctioning, particularly against Stofak. The effective tanker fleet growth will remain muted for 2025. We actually continue to see oil demand looking to increase. And considering the aging of the fleet, this gives us the tailwind we need further into 2025 and into 2026. Policy changes do create more questions than answers. We will get hopefully some answers by the end of this month, but the overall wording has softened. And again, I'm going to repeat this until it changes. World old trade continues to be serviced by the oldest fleet in more than two decades. And obviously, if we look at the regulatory landscape we are in, with decarbonization being a key goal for the industry, this is very contradicting. And lastly, Frontline continues to retain our material upside, as Inger pointed to. We have a modern spot-exposed fleet. ready to service the compliant oil market. Thank you for that and we can open up for questions.

Thank you. As a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced. To answer your question please press star 1 1 again. We will now take the first question. From the line of Sherif El Maghabi from BTIG, please go ahead.

Hi, thanks for taking my questions. First, at a high level, when I look at BLCC fixtures over the last few weeks, activity in the Atlantic has been a bit on the quiet side. Do you think that's a reaction to OPEC's accelerated ramp? And do you have a sense of what might drive more long-haul cargoes out of the Atlantic Basin?

Yeah, it's a very good question. The ARB and basically the economics of US exports is very much an ebb and flow business. We actually find it difficult to explain the quietness in the US Gulf area as we speak, basically. In general terms, there's quite a bit of tonnage sitting on kind of oil majors and traders hands and these are fixtures you will not really see in the market they will basically be concluded in-house and the material will sail so it could be a degree of that but it could also be a degree of refinery runs in the US ahead of summer that basically kind of lessens the demand for exports or the push for exports And lastly, there is also an element around Canada who have increased their exports away from US, not materially because it's limited mostly to the TMX pipeline expansion, but it also adds to the picture. But I have to say on the same note, we've seen extremely active flows coming out of Brazil and also good kind of volume coming out of Ghana. And we've also seen an increased interest, particularly from India, on lifting West African barrels.

That's great color, Lars. And just one on, I guess, on the operating side. Operating costs were a bit higher sequentially and also year-over-year on a per-vessel basis. So could you shed some light on what's driving that?

Yeah. If you refer to this ship operating expenses this quarter, it was more like a going rate in a way. The number you had last quarter was affected by rebates on insurance and on the supplier rebates, about 4.9 million. So I think 60.3 million is more like a going rate in a way. Also, if you refer to the administrative expenses, you can't really compare these two numbers against each other. You have to adjust for this revaluation of the synthetic option liability that we are giving information about in the press release. In the Q4, you had a gain of 7.9 million, and in Q1, you have a loss of 1.6 million. So if you do those adjustments, you will see that the cost increase in Q1 on administrative expenses is only $2 million. And then you have the interest expense, which is down from previous quarter with about $6 million. So all in all, actually, we are quite good on cost development.

Thanks, Inger. I'll turn it over. Thank you.

Thank you. We will now take the next question from the line of John Chappelle from Evercore ISI. Please go ahead.

Thank you. Good afternoon. Lars, from my side of tried and true strategy, you're sticking with it. A lot of spot market exposure, 100% dividend payout ratio. You've just refinanced the balance sheet, probably arguably the strongest the capital structure has been this millennium. You've laid out a very positive industry dynamic with OPEC production increases and the older fleet and all the headlines, et cetera. And it feels for the first time that business model isn't being appreciated. It feels like it's the first time with this much of a positive outlook in the industry, your balance sheet as strong as it is, still well above cash break even, that you're trading at a discount to NAV. Yeah. Do you feel like there needs to be a strategic change, whether it's the way that you think about your leverage, whether it's the way you think about your fleet, the dividend versus buyback, anything that you think needs to be altered to get frontline back to that premium valuation at a time when the industry outlook is so favorable?

It's an extremely good question, John. You've been very long in frontline very well. The fact that we're given this kind of discount surprises us as well. Relative to Piers, Q4 was, not relative to Piers, but together with Piers, Q4 was an absolute disaster for tanker stocks. I think if you compare it to last year, this time, it was a lot more funny to be a tanker CEO and the incoming calls from large generalists globally. It was literally on a weekly basis. I think they did not appreciate the fact that the second half last year failed and have lots of alternatives in their investment universe. So it means that we basically had an outflow of shareholders in our stock, which has put it under some pressure. We also note that the short interest in frontline is an unusual high. which probably could be in connection with big investment banks having global strategies going and where a short in frontline suits that purpose. My impression is that previously investors were willing to price expectations or a 12-month forward NAV into the share, but they have a much lower inclination of doing that now, and basically want to see the proof in the pudding before they make the investment decision. So I think that's kind of, or I hope that's the key kind of reason, and not necessarily that Frontline is running the wrong strategy. We're actually trying to act quite disciplined in this market. It's tempting to engage in, say, time-sharded contracting and take away the upside. Some of our peers have done that quite extensively. We want to retain the upside because we still have a very firm belief that this market is going to give us some money back over the coming years.

Okay. Just as a quick follow-up to that and along the same lines of thinking, there's also been some asset sales in the industry at values that are still somewhat elevated, especially for older tonnage. And I understand that the sanction fleet or shadow fleet, whatever you want to call it, is under a bit more pressure. But are there opportunities for you? You still have 81 vessels, a ton of operating leverage. Are there some older vessels that you may be able to monetize now? without giving up much of your operating leverage, but maybe providing a bit of an arb on asset values versus equity value?

Of course, but as you probably appreciate, and I don't think it's a big secret, some of the demand for the kind of more vintage tonnage is coming from counterparties that quite obviously want to engage in trades we don't like. So we're very cautious on addressing that market. However, there are also players out there that not necessarily are big owners now, but have a growth strategy for the compliant market and actually see the same opportunity in buying vessels that have five to seven years life in them or for storage projects or conversion projects. So you're right, there are opportunities out there. But we want to retain this kind of magic 30,000 earnings days per year. We have maybe one candidate out there, but it's not going to be material in our strategy to reduce the fleet here. Yeah, I understand. Thank you, Lars. Thank you, John.

Thank you. We will now take the next question from the line of Omar Nocta from Jefferies. Please go ahead.

Thank you. Hi, Lars. Hi, Inger. Good afternoon. Just a couple questions from my end, and maybe just first on the market. We've seen, obviously, VLCCs improve here into the second quarter, definitely better than what we saw second half of last year. As you said, it was a real disappointment back then. But things have improved, although they don't necessarily jump off the page when we look at where rates are. I guess from your perspective, how would you say things have been progressing? You know, we've seen the sanctions take out a big portion of the fleet. We've got the OPEC volumes now coming. How do you explain kind of the rate structure today? Is it still too early to expect a real gapping up? Have we seen the benefit yet of these sanctions fully? Or is there still more to come?

I don't think we've seen it fully. Well, first of all, just on the OPEC side, as I mentioned in the presentation, we haven't really seen the impact on cargoes that they have month over month grown materially from the Middle East OPEC producers. The only area where we've seen a significant growth is out of Kazakhstan, which might actually be the reason why OPEC decided to do this. But on the general note, what we're observing, and hopefully is a trend, is that ever since it started off, of course, Venezuela being sanctioned, Iran going back being fully sanctioned, and we saw that volume moving over to the dark side. Then came Russia, which is a big chunk coming into the dark side. Basically, the incremental barrel that comes to market now, and mind you, demand is still growing, is actually coming from compliance sources. So the market that we operate in has actually seen a gradually declining volume, particularly Iran has been able to ramp up their exports quite materially, second half last year. But now that's finished too. And I've said before that this will be solved eventually anyway, because it's not very likely that Iran, Venezuela or Russia can manage to increase their production and exports materially going forward. Then you need compliant oil exports to grow to satisfy demand. And that seems to be going on now. and further kind of amplified by the fact that the OPEC is returning barrels to the market. So this is kind of good news for the compliant fleet. And a lot of these barrels are VLCC barrels. And that's why we have, you know, we made a huge investment in VLCCs. Half of our fleet are VLCCs. We believe that maybe it can be the dawn of, you know, a proper VLCC market over the next six months.

Thanks, Lars. Yeah, and I guess maybe just a quick follow-up to that point. Over the next six months, your last comment there, how do you think the summer seasonality shakes out this year? Does that take a backseat, you think, to kind of these current dynamics that you're talking about?

I think the most exciting part around, you know, what's going to happen in the near term and over the summer, I think on... which was it now, this slide 11, where I mentioned that sanctions actually do work. You know, any action coming out of EU or US in respect of the sanctions, and it's very likely to come quickly because either you have a breakdown or a success in the nuclear talks in Iran. Or people get tired of no ceasefire being able to be negotiated between Russia and Iran. So I think we're talking weeks rather than months before you're going to see increased action either way in this respect. And since this volume is pulling now so much tonnage out of the compliant market, and also these sanctions mean so much to the utilization on the compliant fleet, I think we can have a very interesting summer if you just look at the political narrative around these two situations in particular.

Yeah. Thank you. And thanks, Lars. And just a final one, maybe perhaps to you, Inger. The refinancing of the 24 VLTCs, obviously nice to have that termed out now until 2030. You did refinance, as you mentioned, the release three and a half years before maturity of the existing or prior facility, what would you say was the main driver of the refinance doing it so early? Was the margin benefit that important or was it really about extending the duration?

It was the margin reduction which was the most important. And obviously the extension was kind of benefit on top of it in a way.

Can you give a sense of what the savings were on the spread?

Well, we came from a level which was not, let's say, our norm, if you can call it that. So I wouldn't be precise on it, but we were about 200 basis points, and now we are at 170. Okay.

Okay, thank you.

Thank you. We will now take the next question. from the line of Jeffrey Scott from Scott Asset Management. Please go ahead.

Good morning. Thank you for taking my question. On page six of the presentation, in the presentation for 4Q24, it said that the dry dock for the next 12 months or for calendar 25 was going to be two Vs, and one Suex tanker. And then on today's presentation, we've upped it to 10 Vs, two Suex, and five LRs. And all we've done is slide into the first quarter of 2026. Is that just a normal, very heavy dry dock for that first quarter of 2026? or is there something else happening to the maintenance of the fleet?

Thank you. No, you're completely correct about what we mentioned, that it was two VLDCs and one ZeusMax last time we spoke, and that was for the calendar year of 2025. Then what happened now is that two VLDCs were moved from 2026 into uh q4 in 25 and then in addition to that we have added on the first quarter of 26 since this is the 12 months forward-looking cash break-even rate and that takes the total number to these 10 real disease two suspects and five lrqs because it's the kind of very many of these vessels which are going to be dry docked in 2026 are dried up in the first quarter

Okay, so it's just a heavy maintenance for the first quarter of 2026.

Yeah, yeah, yeah. And just to add, you know, this obviously follows the age and delivery of the vessel. It's not untypical that you have deliveries lumped into the first quarter of any year. And this time we have quite a few ships due in 2026.

Okay, thank you. Quick question for you, Lars. You're suggesting it's going to be a lot harder to trade OFAC ships in the future, trade restrictions plus the age, they're never coming back into the compliant market. One would think that that would drive the older ships and the OFAC ships to scrapping, and so far that has not happened. What do you think will be necessary to drive that scrapping decision, and when do you think it's likely to happen? Thank you.

It's a very, very good question, and thank you for bringing it up, because this is something that needs to come into the discussion with IMO and other regulatory institutions. offices or whatever you call it, because we actually have a big issue ahead of us. You know, if you look at, I think the last number I saw, you know, if you combine all the various sanctioned entities and ships, ships actually are the relevant ones there. We were talking about six, 700 ships being on OFAC list or EU sanction list or similar. What some of you might not know is that the recycling industry is a dollar industry and they need to do their KYC and they obviously can't buy a vessel for recycling from an actor that has broken sanctions. So this is kind of a clog in the recycling world. So there I think actually there needs to be set up some sort of rules for exemptions for recycling. And this is typically where IMO, as a UN organization, can take a strong initiative in order to find a method how we can facilitate that. Because the scary picture is that these vessels will sit somewhere in Southeast Asia with keys in and just be kind of floating environmental bombs So this is a very good point to make, and hopefully this is going to come up higher on the agenda from the regulators, hopefully higher than further decarbonization. So have that conversation first, and then we can talk on decarb later. On timing, it's regretfully so that these processes take very, very long until they sit kind of in front of you. There was this VLCC that was sitting outside Syria, and it sat there for 15 years until people were able to actually do something about it.

Okay, thank you very much. Appreciate it. Thank you.

Thank you. There are no further questions at this time. I would now like to turn the conference back to Lars Barstad for closing remarks.

Well, thank you very much for dialing in. Spring is ahead of us. Hopefully, it will be a spring in the tanker markets as well as we proceed. And obviously, every headline that comes up can be important for our markets. So with that, thank you all.

This concludes today's conference call. Thank you for participating. You may now disconnect.