Scorpio Tankers Inc. (STNG) Q2 2026 Earnings Report, Transcript and Summary

Hello, and welcome to the Scorpio Tankers Inc. Second Quarter 2026 Conference Call. I would now like to turn the call over to James Doyle, Head of Corporate Development and Investor Relations. Please go ahead, sir.

Thank you for joining us today. Welcome to the Scorpio Tankers Second Quarter 2026 Earnings Conference Call. On the call with me today are Emanuele Lauro, Chief Executive Officer; Robert Bugbee, President; Cameron Mackey, Chief Operating Officer; Chris Avella, Chief Financial Officer; Lars Dencker Nielsen, Chief Commercial Officer. Earlier today, we issued our second quarter earnings press release, which is available on our website, scorpiotankers.com. The information discussed on this call is based on information as of today, July 30, 2026, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.com and sec.gov. Call participants are advised that the audio of this conference call is being broadcasted live on the Internet and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days. We will be giving a short presentation today. The presentation is available at scorpiotankers.com on the Investor Relations page under Reports & Presentations. The slides will also be available on the webcast. After the presentation, we will go to Q&A. [Operator Instructions] Now I'd like to introduce our Chief Executive Officer, Emanuele Lauro.

Thank you, James, and good morning or good afternoon to all. So last quarter, I spoke about our focus on the things that we can control, like strengthening our balance sheet, lowering our cost of capital, reducing our cash breakevens, optimizing our fleet, securing attractive time charter contracts and returning capital to shareholders. That approach has not changed. And during the second quarter, we continued to execute against each of these priorities. Financially, the results speak for themselves. The second quarter was the strongest in Scorpio Tankers history, generating adjusted EBITDA in excess of $300 million and adjusted net income of $243.7 million. We continue to strengthen our financial position. Today, our cash position stands at more than $1.9 billion. During the quarter, we completed one of the most attractive financing transactions in the company's history. We've issued $605 million of convertible bonds at a yield to maturity of approximately 1%. We also repaid at the same time, $589 million of debt, which was carrying an interest rate between 5% and 7.5%. So replacing our highest cost of capital -- that, with our lowest cost of capital further improved our balance sheet and reduced our cost of funding while preserving significant financial flexibility. As a result, our daily cash breakeven remains approximately $11,000 per day, which is one of the lowest in the industry. We also continued during the second quarter to optimize our fleet. Since the beginning of the year, we have sold 19 vessels, most of them 11 or 12 years old, at prices above what we originally paid for them more than a decade ago. As a point of reference, the last 4 sales, which were all LR2s, were completed at prices above the cost of the LR2 newbuildings we currently have on order. Tomorrow, we will welcome the STI Moxie, our first MR newbuilding is delivering into the fleet tomorrow, as I said. This brings our orderbook down to 13 vessels. This reflects our philosophy on fleet renewal, realizing attractive values from older assets while reinvesting in more fuel-efficient vessels that will strengthen the fleet for many years to come. Returning capital to shareholders also remains a priority. During the quarter, we purchased approximately 2 million shares for $155 million. And today, our Board declared a quarterly dividend of $0.45 per share. These actions combined represent more than $175 million returned to shareholders during the second quarter. On the commercial side, we entered into charter agreements for 3 MR vessels for a minimum period of 3 years. These vessels are expected to enter the TC contracts in December of this year, allowing us to benefit on the current strong spot environment that we are experiencing. Customers do not commit to multiyear charters without confidence in the market, and we view these agreements as another encouraging indication of the long-term fundamentals of our business. While freight rates have moderated from the exceptional levels we've experienced early in the year, they remain at levels that continue to generate meaningful free cash flow for us. At the same time, geopolitical developments, particularly in the Middle East, continue to create uncertainty. We do not pretend to know how or when events will evolve. Shipping has always been and will remain a cyclical business. Markets rise and fall and geopolitical events introduce uncertainty that no one can really predict with precision. Our job is not to predict the cycle. Our job is to be prepared for it, and this is what we're doing. That is why we continue to strengthen our balance sheet, lower our cost of capital, reduce our cash breakevens, optimize our fleet, renew our asset base and maintain sustainable liquidity. We believe these decisions position Scorpio Tankers to generate meaningful cash flow when markets are strong, while giving us the resilience and financial flexibility to capitalize opportunities when conditions inevitably change. The philosophy has served us for many years, and it will continue to guide us in the years ahead. My opening remarks are over, and I would like to turn the call back to James, please. Thank you.

Thanks, Emanuele. Slide 7, please. In the second quarter, rates reached record highs. Records by definition aren't meant to last. We've seen geopolitical events drive rates to high levels before. What's more important is not the peak, it's the floor. Today, product tanker rates remain above $30,000 per day despite lower seaborne volumes in what is typically the seasonally slower part of the year. At these levels, the company generates significant free cash flow. As Emanuele said, we don't pretend to know how or when the conflict in the Middle East will be resolved. But what we do know is that global inventories, commercial, strategic and floating have been drawn down meaningfully. We also know the refinery dislocation is structural. Refining capacity has shifted farther from the consumer, and that isn't something that reverses quickly. Looking ahead, we believe the product tanker market is well positioned. A global inventory restocking, combined with the recovery in underlying demand should support higher seaborne exports, ton miles and rates. Slide 8, please. After the MOU was signed in mid-June, tanker flows through the Strait of Hormuz rose to 12.6 million barrels per day and closer to 17 million, including Saudi Arabia's Yanbu exports. But the region is fragile. Last week, the Houthis attacked 2 commercial vessels in the Red Sea. We've seen this before. In 2024, rising risk in the Bab-el-Mandeb pushed owners to reroute around the Cape of Good Hope, in some cases, more than doubling sailing distances. If that pattern repeats, it would mean incremental ton-mile demand from rerouting alone, adding further support to freight rates. Slide 9, please. Ton-mile demand has been the defining factor behind today's freight market. In June, seaborne refined product exports declined by 2.3 million barrels per day or 11% year-over-year. However, longer voyage distances have largely offset that decline, tightening effective supply and supporting a strong freight market despite lower volumes. Refinery dislocation has been a key component in driving ton-mile demand, one we expect to continue. Slide 10, please. Refining margins have reached record levels. Geopolitical disruptions have exacerbated a dislocated refinery system. Since 2019, refined product demand has grown almost 4.5 million barrels per day compared to 1.8 million barrels per day of net capacity additions. Compounding that, much of the new capacity that has come online sits in the Middle East and China, farther from the end consumer. Slide 11, please. As flows normalize, demand for refined products could increase by more than 3 million barrels per day through year-end. Global visible inventories are down over 400 million barrels since the start of the conflict. So much of that demand will need to be met by increasing refinery runs rather than inventory draws. And given the refinery dislocation, that production increasingly has to be shipped, creating a constructive backdrop for product tankers. Slide 12, please. The Aframax/LR2 crude tanker market is benefiting from 2 forces at once: disruption in the Middle East, and rising crude production from the United States, Canada and Latin America. Together, they have pushed seaborne volumes up by nearly 1 million barrels per day and spot rates above $100,000 per day. Given the spread, we've moved a few of our LR2s into the crude market to capture the higher earnings. Slide 13. This is particularly important when looking at the orderbook. While the orderbook is 20% of the fleet, more than half the orderbook is LR2s. Today, 66% of the LR2 fleet is trading crude oil, and we expect this to continue. As a result, the effective product tanker orderbook is smaller than it appears, reinforcing the view that fleet growth will be more moderate than expected. Slide 14, please. As you can see on the left, 21% of the product tanker fleet is already over 20 years old. By 2028, it will be 31%. On the right, roughly 25% of the Aframax/LR2 fleet and 9% of the MR/Handy fleet are sanctioned with average ages of 19 to 21 years old. In a normal market, much of this older tonnage would have already exited the fleet. The combination of an aging fleet and a meaningful share of sanctioned tonnage points to further tightening of effective supply. Slide 15, please. When you adjust for aging vessels, sanctioned capacity and LR2 crossover, effective supply growth is lower than the headline orderbook implies. We expect fleet growth to average roughly 3% to 4% over the next 3 years and potentially lower. As refinery utilization and seaborne flows increase to support demand and global restocking, the market should tighten further. Near-term, that means higher refinery runs and seaborne exports. Longer-term refining capacity stays constrained while the fleet ages. We expect ton-mile demand to outpace fleet growth. With that, I'd like to turn it over to Chris.

Thank you, James. Good morning, good afternoon, everyone. Slide 17, please. This quarter, we generated $300.5 million in adjusted EBITDA and $388 million in net income on an IFRS basis. This includes $154 million gain on the sale of 10 vessels during the quarter. Additionally, we declared a $0.45 per share dividend and repurchased $155 million of our common stock, thus returning an aggregate of over $175 million to shareholders. The chart on the right shows the evolution of our net debt position since December of 2021. Our capital allocation policy over this period has been headlined by debt reduction. As you can see, this approach has resulted in the reduction of our net debt position by $4.2 billion from a net debt position of $2.9 billion at the end of 2021, to a net cash position of $1.3 billion as of today. To put this balance sheet transformation into context, our net cash position is worth approximately $26 per share as of today. This balance sheet strength provides the company with considerable optionality, particularly in the market environment defined by elevated volatility and geopolitical uncertainty. Slide 18, please. The chart on the left shows our outstanding debt by type since December of 2021. Over the course of 4 years, we transformed our balance sheet by transitioning out of expensive lease financing into more flexible, lower-cost secured debt. However, our efforts didn't end there. During the second quarter of this year and into July, we executed on a series of transactions that further transformed and strengthened our balance sheet. In April, we closed on an offering of $375 million in aggregate principal amount of 5-year senior unsecured convertible notes, bearing a 1.75% coupon rate and a conversion price of approximately $100 per share. Upon conversion, we have the option to settle the convertible notes in cash, shares of our common stock or a combination thereof. In May, we executed a follow-on offering of the same convertible notes at a price of over $110 to par for gross proceeds of over $253 million. When taking this premium into account, the yield to maturity on the combined issuances is below 1%. We also closed on the sales of 15 vessels, all at cyclically high prices. We earned the highest average daily TCE rate in the company's history. We announced 2 new secured credit facilities with 7-year tenors and bearing margins of 120 basis points. We repaid $389 million of legacy secured debt, all of which was due to mature in 2028. We redeemed our $200 million 7.5% coupon rate senior unsecured notes. So as of today, we have $655 million of debt, $605 million of which consists of convertible debt. The chart on the right shows the trend in the weighted average margins on our secured debt. As I mentioned, in the second quarter of this year, we continue to focus on lowering our cost of debt by repaying over $389 million of debt across 5 credit facilities, all of which were scheduled to mature in 2028, and carried margins of between 170 and 197.5 basis points. And our efforts to lower our cost of capital didn't end there, as can be seen with our recently executed $50 million credit facility with Bank of America and recently announced $90 million credit facility commitment from Standard Chartered and DekaBank. Each of these credit facilities carry margins of just 120 basis points and have 7-year tenors. Slide 19, please. The chart on the left shows our liquidity profile. We had $2.2 billion in cash as of July 28, and an additional $483 million in availability under revolving credit facilities for a total of $2.4 billion in available liquidity. We've entered into agreements or letters of intent to purchase 14 newbuilding vessels and to contribute equity for the minority interest in a joint venture of 8 VLCCs. The chart on the right is a waterfall reflecting the commitments under these agreements or letters of intent. Our remaining newbuilding and joint venture commitments totaled just over $978 million as of today, excluding any potential financing. Our disciplined allocation of capital over the past 3 years has afforded us the financial flexibility to enter into these agreements. As shown in the payment waterfall on the top right, these payment obligations are spread out over the next 4 years. But hypothetically speaking, we could pay for all of these vessels today in cash without having to raise any additional capital. Slide 20, please. Our cash breakeven rate, which includes vessel operating costs, cash G&A, cash interest payments and commitment fees and any scheduled loan amortization is below $11,000 per day and is at the lowest level in the company's history. This rate continued to decline given the cash interest savings resulting from our Q2 repayment of $389 million in secured debt, along with the July redemption of our senior unsecured notes of $200 million. To illustrate our cash generation potential at these cash breakeven levels at $20,000 per day, the company can generate up to $246 million in cash flow per year. And at $30,000 per day, the company can generate up to $520 million in cash flow per year. This concludes our presentation for today. On behalf of the management team, we'd like to thank you for your time and attention. And now we'd like to turn the call over to Q&A.

[Operator Instructions] Thank you. Your first question comes from Omar Nokta with Clarksons Securities.

I just wanted to ask maybe a couple of perhaps maybe market-weighted questions, but also pertaining to Scorpio. I wanted to ask on LR2 specifically and how that's been developing recently. In the past, it had seemed that there was somewhat of a separation, you would say, for product players that were looking at their LR2s, keeping them clean; and then maybe crude players who owned LR2s, trade them dirty. Has that changed? Are clean owners like yourselves starting to trade the LR2s more actively in the dirty market? James, you mentioned in your presentation that you switched a few ships into the crude trade and also how 2/3 of the fleet today is also running dirty. But I guess just kind of big picture, as we think about how LR2s are trading today, are they becoming a bit more fungible, if that's the right term, in terms of moving in and out of the crude trade? And I guess I'm asking that because when I look at your performance for the third quarter so far, that $65,000 on the LR2s, it seems that that's perhaps tracking closer to the dirty Aframax average versus, say, the clean LR2s. Any color you can give on that would be helpful.

Omar, this is Lars here. To be honest, we have always been kind of dipping into the dirty market as well on the Aframaxes. And we look at it and have always looked at it from an opportunistic vessel-by-vessel perspective. There's not kind of a broad fleet strategy in terms of that. But you mentioned fungible. I mean, it has been the case for a couple of years now that the fungibility between LR2 and Aframax has been very apparent. And we have seen a lot of cross-trading for the last couple of years. And when we have seen the markets spike on the clean, we have been holding the ships in the clean. And when we have seen, as we have seen over the last period, a very strong Atlantic Basin on the Aframaxes, we decided to tap into that. And clearly, it's not only us that has been doing this. We count today about 170, maybe just over 170 clean LR2s only trading in that market. And you've got over 100 and 250, I think it is Aframaxes trading dirty. A lot of them obviously in the Atlantic Basin. The thing that's really interesting, in my view, is that even with that amount of ships coming into that market because of the ton mile that James was talking to you about before and of course, the volumes in general, that market has been strong throughout. There's no doubt in my mind as you've had that kind of low number of LR2s kind of going into the Aframax market that it wouldn't take very much before you start seeing the LR2s, as we have been seeing over the last week now, how rates in the West moving up, suddenly you see a kind of a normalization and it will be the case that you will start seeing ships moving back into clean as well. So I think -- and I've mentioned this before on these calls that you need to today look at LR2s and Aframaxes as a much closer unison unit.

Yes. That's quite helpful commentary. And then maybe just as a follow-up, you just referenced what we've seen in the Atlantic here over the past couple of weeks. Can you maybe just give a perspective on what's driving that? We've seen it, it seems like across the board, whether it's LR2s, LR1s, MRs, everything seems to be moving quite a bit higher here over the past couple of weeks relative to what we've been seeing. And it looks like rates perhaps are approaching kind of maybe not the highest yet, but it seems like they're at their highest levels in at least a few months. What's been behind this latest move?

Yes. Well, I mean, first of all, I've been doing this for a long time. I've never seen a July or August market like this, right? I mean, this is not what you would consider to be a normal kind of summer lull. I mean, first of all, you've got great refining margins, talking about the MRs. The U.S. Gulf has been running at extremely high utilization rates. And then you obviously have all the different geopolitical kind of backdrop, which obviously influences the things, Russia being one, they don't have the exports that they had. You have the issues with the Bab-el-Mandeb, you have the issues with Hormuz. You have the issues with stocks in general being low. So it's quite clear that the volatility that we have seen talking about the MRs has been profound. I mean, 2Q we know about, then we had kind of a bit of a drop. You're seeing now another resurgence, as you could see on the rate reports today, where TC14 is now moving up from their lows and have now moved north of 320, maybe we will go beyond that. So the triangulation element on the Atlantic Basin has been strong. The same, to be honest, goes also with the Aframaxes. I mean, the activity both in the Mediterranean has been strong. We have the issues around CPC talking about geopolitical issues. The dislocations tends to be, in any case, always somewhat positive for tankers in general. But the ton-mile story is valid, and we see it every day. The spreads and the arbs are opening stuff for business. And of course, the advent of more oil coming out of South America and the United States has certainly been underpinning the dirty market as well.

Your next question comes from Chris Robertson with Deutsche Bank.

Fantastic job of what you guys are doing on the balance sheet and all the issues that you've raised on what you can control. So kudos to you there. Just wanted to ask maybe on the market, when the situation in the Mid East kicked off and there were some very unusual, very long distance trading patterns, at least initially during that height of the disruption -- can you comment as to -- have some of those routes been more enduring? And can you give some examples of kind of how things are trading now on some of those longer unusual routes?

Yes. I mean, if we go back when it all kicked off during the second quarter, we saw some really, really uncommon kind of voyages, which obviously, a lot of it is down to the stress factors that were in place and short-term fixes and so on. I think there was a calibration that took place after that, which meant that the long-term routing still very much is in vogue. It has also helped that we have seen a little bit of an uptick on the Chinese exports, so that suddenly there's more of a balance on these things. But it's quite clear that when you kind of overlay that with the issues with the Russian exports having dwindled and South America and other -- Africa as well have been suffering from that, you've been seeing other supply chains being created, which have increased the ton miles as well and then they are then sharing in the kind of the same supply part, if you will. So we have seen over the last couple of weeks, another kind of uptick in Asia, which has been interesting. The transpac moves has increased substantially. I mean, we haven't really seen China moving up to something that is kind of over what we had anticipated, but there has been a general kind of understanding of where oil is coming from until, I guess, the next shock comes in and we'll see something different. But it tends to be that there is somewhat of a normalization, everything underpinned still by kind of extended turmoil.

Just a follow-up question, maybe as it related to Omar's line of questions around the LR2s trading dirty. Just wanted to better understand the dynamic here just because such a great percentage of the LR2 fleet is trading dirty at the moment. Is that mostly -- in your opinion, is that mostly due to the geopolitical disruptions in the ton-mile dynamics there? And could the downside be the unwinding of geopolitical risk? Or what would keep that as a more enduring force going forward versus more transient?

I think the short answer, to be honest, Chris, is that it's all a question of time charter equivalent. You had the TD25 or the met market ramping up towards $150,000 a couple of weeks ago. You had a quietening LR2 market with all the uncertainties going around with the Hormuz and so on, which, of course, is a primary trade for clean and people were saying, well, the spreads are simply too great for us not to dip into that. What we know from the last couple of years is that if that spread flips, vessels will very quickly move into clean again. A case in point was, if you recall, a couple of years ago, you had the LR2 market out of the AG trading at, I think it was around $8 million and the Afra stroke VLCC in particular market was languishing at that point. And you saw suddenly what we had not seen before, a large number of vessels kind of cannibalizing into the clean market, which was kind of new to the industry. That kind of flip-flopping, in particular on the Aframaxes, the coated Aframaxes has been taking place over the last couple of years to a larger extent. There certainly is a lot more runs under the belt for people to understand how you should do this as efficiently as you can and cost efficiently as you can, one company being us as well and being able to do that. So we don't fear or have any issues with that kind of fungibility and I don't consider that to be transient, but to be a lot more market-related in terms of one way or the other.

Your next question comes from Ken Hoexter with Bank of America.

Emanuele and James, great rundown. You emphasized, I think, James, in your presentation, the floor is more important than the peak with rates remaining above $30,000 in this backdrop. And maybe a little bit of your thoughts on the floor in this backdrop, just given, I think, Lars, you were just mentioning never seen a July like this. So maybe thoughts on the floor, thoughts on seasonality and where we go from here.

Lars, do you want me to take that?

Well, you can start, James, and I'll follow on. I thought the question is for you...

Thanks, Ken. Yes. Look, so I mean, typically, you get through peak gasoline season end of the summer and you go into maintenance. And what we've seen is because of the longer voyage distances, the rerouting, we're seeing unique voyages, as Lars highlighted, and we think that's going to continue as disruptions and potentially rerouting as a result of Red Sea specifically, as vessels go around the Cape of Good Hope, and also disruptions with refining capacity in Russia. So Russia's export ban on gasoline and diesel. That's going to increase Atlantic Basin MR volumes for compliant ships, Africa, Latin America. And at the same time, we expect more naphtha to go from the U.S. Gulf to Asia. So I think there's a constructive dynamic there. And then Lars highlighted the strength on the LR2s and Aframaxes trading crude oil. We think that's going to pick up as you get into maintenance here because there'll be more crude volume from the Atlantic Basin that needs to go to Asia.

All right. Lars, do you want to jump in or you want me to follow-up? I guess I'll throw a follow-up and anybody can jump in. But you mentioned inventories were down about 400 million barrels since the start of the conflict with much current demand needs to be met by refinery runs versus inventory draws. Maybe your thoughts on the time frame, I guess, in terms of if we're going into maintenance season, the drawdown or the ability for refineries to continue to meet that demand versus then time frame for beginning to restock?

Yes. So there was a lot of crude that was shipped in June, and it takes about 30 days for that to get to Asia, 45 days to get to Europe, and that's arriving now. And so I think runs are going to pick up in those regions, and you'll get increased regional trading, which is going to be fantastic for the medium range ships. And if you looked at refinery runs year-over-year, I think July was down about 5 million barrels per day. But out of the Middle East refining capacity, the only refinery that's actually down right now is Jizan. So as things normalize, we expect runs to pick back up here. So while you might have kind of the U.S. Gulf maintenance coming in, say, September, we expect runs throughout the rest of the world to pick up at the same time. So that's going to create a constructive dynamic for us. And also the fleet is really out of its normal positioning. So I think that's going to be constructive as well.

Your next question comes from Stephanie Moore with Jefferies.

I think maybe just continuing -- basically continuing to the last conversation here. Do you think that the events that's really we've seen over the last -- certainly the last 6 months, but maybe in the last 12 months have structurally changed really that LR2 market from anything we've historically seen? And how are you weighing maybe the supply and demand landscape over the next 12 months?

I'll start, James. What's happened over the last 6 months, it's just a good question. What's going to happen tomorrow? We don't know. I mean, what we want to look at is just the pure fundamentals in terms of what are we looking at. One thing I think is for sure is that the longer voyage distances that are in place, they certainly tighten supply. This has been a key thesis over the last number of years for the reasons that James mentioned in his prepared remarks. That has not changed. It has also not changed that the issues of the sanctioned fleet and the age of the same is certainly getting to a place where in a normal market environment, those ships will not exist. And I'm of the opinion that those sanctioned vessels will never enter into the primary trade again. So we know that crude has kind of developed in further field areas. We know where the refineries are, that's also further afield. That certainly has not changed. What certainly has changed is that there's a lot more dislocations and disruptions that take place and have been taking place over the last more than 6 months, a couple of years, I would even say that. In terms of any dislocations that we have seen, has always created a potential for product tankers and now also for the crude market. And it's clear that if you then look over the medium-term and say, well, we're in a position right now where considering the issues that we've had facing the global economy and the stock draws that have been taking place and the flat price that also kind of follows, you'd say, well, at some point in time, you're going to have to think about how you're going to get into a [ build up ] situation. So I think underlying, that's all great. And I'll just kind of reiterate James' point about what are we looking at here in terms of age profile of ships as we move over the next couple of years, what is the fleet profile coming on board over the next couple of years. And you put all those things in there and in a normal circumstance, it doesn't look scary to me. And but we are living in a very highly uncertain political environment. We've got things coming in left/right field every single day more or less. And one of the key elements that we try to do at any given time from an operational and commercial perspective is be as nimble as we can to react to these changes as they come on a very frequent basis.

Understood. Just for my follow-up here, I think following the refinancing activity, your debt profile is now heavily weighted towards the converts. So how should we think about this potential dilution conversion scenarios that may be your preferred method of settlement, especially should the stock trade meaningfully above the conversion price?

Stephanie, thanks for the question. Look, we just -- we're fresh off the convertible. So we're obviously happy with the transaction and the execution of it. One of the biggest features of the notes is that we can settle it in cash or shares. The trigger for that is 130% over the conversion price. So I think everybody here on the call would be thrilled if we get to those levels. And we will address that if it happens in terms of how we'll choose to settle it. Right now, the maximum number of shares that can be issued is 6 million shares. That's what the conversion rate is. So that's something for down the road. But right now, we're just -- we're happy with how it fits into our capital structure and in particular, the low cash costs, which have driven down our cash breakevens on the notes.

Your next question comes from Sherif Elmaghrabi with BTIG.

Just one for me today. During the quarter, one of your LR2s had its time charter extended. And just looking at the rest of the fleet, there's a handful of other tankers rolling off time charter in the next year or so. So I'm wondering if you see -- you're seeing a higher likelihood that these time charters get extended, if there's even options to do so? And maybe your thoughts on what you're seeing in the time charter market more broadly.

On that particular time charter, it was an option historically that was in place. Any time charters that we would do today would be new time charters in the market. In terms of time charter strategy, we've always been very opportunistic about it to have a balanced view on how much of our fleet would be on time charter. We have a number of ships rolling off. We have been looking and it has also been reported that a few time charters have been secured at levels that we have not seen before. It's also an interesting point, I guess, is that time charter inquiry, generally speaking, even over the summer months has been high, which is interesting. The people that are looking at time charters tend to be the oil companies and now some of the traders are coming in as well. And so there is a generally good level of demand on that. But when it comes to ourselves, very much a balanced approach as we've had for a while, but certainly dominated by a view that we would look at this opportunistically and very much so that the people that -- the counterparties that we deal with are people that we have long-standing strategic relationships that we can build around it.

[Audio Gap] Liam Burke.

Prior to the dust -- early in 2026, prior to the dust-up in the Mid East, the outlook for the product tankers was great. You had an aging fleet. You had redistribution of global capacity. Presuming that things get to normal someday, are we looking at redistribution to continue? Or are some of the traditional refiners not in the Mid East, not in China? Will they continue to refine oil? Or do you expect the process to continue?

Lars, I can take that. Liam, thanks for the question. No, we absolutely expect the refinery dislocation to continue. It takes at a minimum 7 years probably to build a new refinery and many of those refineries haven't started construction today. If you think about demand in emerging markets where we see a lot of growth, there's not refining capacity being built there. And in developed markets, Northern United States, West Coast United States, we closed capacity. So we see a scenario where ton miles are going to continue to grow over time. And if anything, what we've seen as a result of this conflict, if you look at crude price changes versus product price changes in cracks, cracks have moved meaningfully. So I think that reflects how dislocated the refining capacity system is, and we'll be happy to transport those cargoes to consuming regions.

Okay. And I guess on the supply side, we've got an aging fleet, especially on the MR side. Have extended rates going to, at the far end, extend the life of some of these older MRs? Or would you anticipate the traditional rule of once it hits a certain age, refiners don't want to use the vessel?

I think -- yes, I think it's fair to say that there is a hard stop at 20 these days for vessels. We've been seeing that even in strong markets. It's not that long ago where people were looking at 15 and people were saying, well, I don't want to time charter ship that's more than 10. That kind of has moved towards a higher level of -- in terms of age. But even during the very strong markets from a primary trade perspective, it's very, very uncommon that we've been seeing ships over 20 being traded, Bugbee being obviously the exception. But it's clear that if you look at overall from a fleet segment perspective and you look at the age profile on MRs, as you rightfully point out, but also on the Aframaxes, it is an interesting kind of picture that's being drawn over the next couple of years in terms of what that age profile is going to look like.

Your last question comes from Kristoffer Skeie with Arctic Securities.

I was just wondering if you can comment on the VLCC joint venture and the rationale behind the investment. Who are the other partners? Where are the vessels ordered and at what price typically? And what type of leverage levels you are aiming for? So in other words, what's the equity commitment there?

Thanks for the question. I think from a financial standpoint, the exposure, as you can see, is not meaningful compared to our balance sheet. So the reason why we did this investment is more strategic. The partner is the UBO of the largest private shipbuilder in China. And we have a relationship with this gentleman for many years. And this opportunity came about where he was looking for a partner in the shipping side and not only potentially in order to operate the vessels once they get delivered. And we thought that it made sense for us to get the opportunity even though as you see financially, it's not a meaningful transaction for our balance sheet. So that's the reason. On the expectations on the rates, the ships are delivering far away. We are going to take delivery of the Hanwha ships before that. And so far, I think that is too early to talk about market expectations and our guess is as good as anyone's. So we like the sector. We believe in the sector. We've been looking at getting exposure gradually. You may remember with the DHT investment. Once we divested from DHT in the latter part of 2025, we decided to get into the physical part of the investment by ordering the ships at Hanwha and this joint venture is a nice top-up with a strategic twist for us.

That concludes our question-and-answer session. I would now like to turn the call back over to Emanuele Lauro, CEO, for the closing remarks. Please go ahead.

Thank you very much, operator. I don't have any closing remarks. Just wanted to thank everybody for their time and continued support and look forward to speaking with you going forward. Thank you.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect.