Teekay Tankers Ltd. (TNK) Q1 2013 Earnings Report, Transcript and Summary

Welcome to Teekay Tankers Ltd's. First Quarter 2013 Earnings Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the call over to Mr. Bruce Chan, Teekay Tankers Ltd's. Chief Executive Officer. Please go ahead, sir.

Before Mr. Chan begins, I would like to direct all participants to our website at www.teekaytankers.com, where you'll find a copy of the first quarter 2013 earnings presentation. Mr. Chan will review this presentation during today's conference call. Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the first quarter 2013 earnings release and earnings presentation available on our website. I will now turn the call over to Mr. Chan to begin.

Thank you, Ryan. Good day, everyone, and thank you for joining us. With me here in Vancouver is Vince Lok, Teekay Tankers' Chief Financial Officer; Brian Fortier, Corporate Controller of Teekay Corporation; and Peter Evensen, Teekay Corporation's Chief Executive Officer. During today's call, I will be taking you through Teekay Tankers first quarter earnings results presentation, which could be found in our website. Beginning with our recent highlights on Slide 3 of the presentation, Teekay Tankers generated cash available for distribution of $0.10 per share in the first quarter, down slightly from the $0.13 per share generated in the fourth quarter, mainly due to the change in employment of certain vessels from fixed rates to lower spot rates upon expiry of their time-charter-out contracts. We reported an adjusted net loss of $0.04 per share, an improvement from our adjusted net loss of $0.09 per share reported in the fourth quarter of 2012. Although the spot tanker market remains at challenging cyclically low levels, our spot fleet successfully outperformed industry benchmarks during the quarter, supported by Teekay Corporation's commercial pools, namely, Taurus Tankers, Gemini and the Teekay Aframax RSA. The beneficial relationship we enjoy with our sponsor, has enabled us to utilize Teekay's extensive customer and chartering relationships to secure favorable spot rate employment for our vessels, allowing us to outperform the market. The company declared a dividend of $0.03 per share for the first quarter. Teekay Tankers' 22nd consecutive quarterly dividend, which we paid out on May 28 to all shareholders of record on May 20. This quarter marks the commencement of the fixed dividend policy change we announced last quarter. Teekay Tankers' dividend is currently set at an annual dividend of $0.12 payable quarterly. We believe this dividend policy allows Teekay Tankers to retain operating cash flow in a recovering tanker market to fund attractive growth opportunities. Given the challenging rate environment, we continue to be focused on managing our fleet employment mix to ensure we preserve cover from fixed-rate charters to support and provide stability for our cash available for distribution and our dividend as we enter the seasonally weaker summer months. In addition, by extending our time-charter-in of the Star Lady for another 6 months at a below market rate, we successfully gained short-term spot exposure at a favorable spread while limiting the risk associated with a longer charter commitment. Finally, as announced in April, Teekay Tankers entered into an agreement with STX Offshore & Shipbuilding of Korea to order 4 fuel-efficient, long range or LR2 product tanker newbuildings. This order is a reflection of our positive view of the developing long-haul product tanker market fundamentals. In addition, because LR2s are essentially Aframax size tankers with epoxy coated tanks, they will have the flexibility to trade in both refined product or crude oil cargoes. At an attractive fully built-up cost of approximately $47 million per vessel, these newbuildings will provide good value for Teekay Tankers as they deliver into an expected improving tanker market in late 2015 and into early 2016. Turning to Slide 4. We have provided an updated overview of Teekay Tankers' fleet employment mix and fixed rate coverage. Including our recent LR2 newbuilding order, the current fleet consists of 31 owned vessels, as well as 2 time-chartered-in Aframax and one 50% owned VLCC newbuilding, to be named The Hong Kong Spirit, scheduled to be delivered in the second quarter on to a 5-year charter. As I noted a moment ago, in the current weak spot tanker rate environment, locking in fixed cover continues to be a focus as we expect the current spot market weakness and volatility to continue for at least the near term. Recently, we successfully time-chartered out the Aframax tanker, Everest Spirit, for a 3-year period, at a rate of $15,500 per day, increasing our fixed cover percentage to 40% for the 12-month period from March 31, 2013. Turning to Slide 5. I want to take a moment to review Teekay Tankers' performance against the challenging first quarter market backdrop. Demand for crude oil tankers has been weak through the early part of 2013, particularly for the larger vessel classes. A steady increase in non-OPEC oil production, primarily due to the ramp-up in U.S. shale oil production, has led to a reduction in OPEC crude supply. This is negative for large tankers as OPEC barrels are generally ton-mile intensive. In addition, a heavy spring refinery maintenance schedule, particularly in Asia, has impacted demand for crude tankers in recent weeks. Though this will likely improve as refineries come back online in the coming months. The Aframax sector, which is less influenced by long haul oil trades and more by regional factors, has also been weak since the start of the year. However, at times, seasonal factors have resulted in short-lived rate spikes. This was particularly evident in the Atlantic where some late-season ice in Northern Europe and bad weather in the U.S. Gulf region led to an increase in rate volatility during March and April. Aside from these one-off events, Aframax rates remain under pressure from a relatively weak demand environment, though an expected contraction in the Aframax fleet size should offer some relief during the second half of the year. In the LR2 sector, rates fell during the early part of Q1, having reached 3-year highs of approximately $20,000 per day during December 2012. In recent weeks, rates have steadily improved, aided by high levels of naphtha arbitrage movements from Europe to Asia to make up for a shortfall in local supply. In fact, naphtha movements from the West into Asia have averaged around 1 million tons per month this year, more than 60% higher than the 2012 monthly average. As noted in the table on the slide, Teekay Tankers outperformed industry benchmarks across all its major vessel classes during the first quarter. This highlights the benefits of our participation in the Teekay managed commercial tonnage pools, including greater scale economies and fleet utilization that enables Teekay Tankers to earn relatively stronger rates even in a challenging rate environment. Turning to Slide 6. We have provided our medium-term outlook for the tanker market. On the chart on the slide, the dark blue bars show tanker demand growth, while the light blue bars show tanker supply growth. The green area shows overall tanker fleet utilization, which is simply total tanker supply divided by total tanker demand. As shown on the chart, tanker demand and supply growth, at approximately 3.5% each, are expected to offset each other during 2013, meaning little change in expected tanker fleet utilization this year. However, in 2014, the outlook is for an improvement in utilization based on reduced tanker supply growth and improved demand fundamentals. On the supply side, the tanker order book has shrunk to a current level of just 54 million deadweight, the lowest level since 2001. Put another way, the tanker order book currently equates to just 11% of the size of the existing fleet, the lowest level since the second quarter of 1997. For 2014, we expect the tanker fleet will grow by less than 3%, the lowest rate of fleet growth since 2002. The majority of the growth will be in the VLCC and MR segments, with low fleet growth expected in the Suezmax, Aframax and LR2 segments. For Suezmaxes, this marks the end of a long period of aggressive fleet expansion, which should enable fleet utilization to recover as ton-mile demand improves. Looking at demand, most international forecasting agencies are expecting an improvement in the global economy during 2014, and therefore, an improvement in oil demand although the overall health of the global economy remains an uncertain part of the equation. We have assumed that global oil demand will return to growth of between 1 million and 1.5 million barrels per day in 2014, spurred by demand growth in the non-OECD and China in particular. This is expected to translate into tanker demand growth of between 4% and 5%, similar to or slightly better than demand growth seen in 2012. When taken together, we expect an improvement in tanker fleet utilization of around 2 percentage points during 2014, bringing with it improved spot market rates and an expected accelerated recovery through 2015 and beyond. Moving to Slide 7. We have provided a summary of our recent LR2 newbuilding order with STX Offshore & Shipbuilding. In April, we announced our firm order for 4 fuel-efficient LR2 product tanker new buildings, at an attractive fully built-up cost of approximately $47 million per vessel. These vessels will deliver in late-2015 through early 2016, which we believe is well-timed to benefit from an improving rate environment for refined products shipping, which I'll talk about more in a moment. With fuel-efficient design features including a hydrodynamic hull profile, new generation G-type engine and propeller efficiencies, these vessels are expected to save between 20% and 30% or roughly $7,000 per day in fuel consumption when laden, compared to vessels in the existing global LR2 fleet and will be especially attractive to our customers. In addition with epoxy coated tanks, we have the ability to trade these vessels clean or dirty, which provides us with the greater flexibility in a recovering tanker market. In addition to the 4 firm newbuildings, the order with STX includes an attractive fixed price option stream, which provides further upside potential in a recovering tanker market. These options allow us to order up to 4 additional LR2 product tankers at each 6-month interval over the next 18 months, for a potential total of 12 additional vessels. Importantly, the option stream is noncontingent, which means we still maintain the subsequent options in the event market conditions are not favorable to declaring the earlier options. This effectively preserves our optionality for as long as possible as we monitor market developments into late 2014. Lastly, we have negotiated a favorable tail weighted payment profile with STX, which will result in the majority of the purchase price being paid on delivery. This will limit the near term impact on Teekay Tankers' liquidity and provide sufficient time to arrange longer-term financing. Slide 8 provides an overview of the outlook for the LR2 product tanker market and supports our view that the sector has some of the best fundamentals in the tanker space. The global refining industry is currently undergoing some significant changes, which are expected to result in considerable changes to the way in which refined products are traded. In the OECD, refining capacity has been shrinking rapidly as old relatively unsophisticated refinery capacity has been unable to maintain competitiveness given high crude feedstock prices and increasing competition from cheaper refineries in the East. This is particularly evident in places like Europe which has seen 1.8 million barrels per day of refining capacity shut since 2009, and Australia, which plans to close approximately 40% of its refining capacity by the end of 2014. At the same time, refining capacity in the Middle East and Asia is expanding rapidly to meet both domestic demand and the export market. As this occurs, the net result is that refined products will start to move longer haul on larger vessels, creating significant demand for LR2 tankers, which are the largest class of tanker currently carrying refined products. On the supply side, the LR2 sector has favorable fleet fundamentals, with just 26 vessels on order out to 2015. When combined with the positive demand outlook, we expect LR2 fleet utilization to recover from the 2012 low of just under 80% towards 90% by 2015. As a reminder, 90% is considered to be full fleet utilization. With this positive outlook, the option stream on our new LR2 order could provide significant upside should vessel values begin to rise over the next 18 months. In the table at the bottom of the slide, we have provided an illustrative calculation of the intrinsic value that these new building options would provide on a per share basis for each $1 million increase in the market value of vessels above our fixed option price with STX. As you can see, with up to 12 vessel options available, this option stream could provide significant upside in a rising newbuilding price environment. Turning to Slide 9. I will take a moment to provide an update on our investment in 2 term loans. In July 2010, we invested in 2 $57.5 million, 3-year, first priority mortgages, secured by 2 2010-built VLCC tankers. Since our initial investment, these ship mortgage investments have generated approximately $30 million of income for Teekay Tankers. Unfortunately, the borrower is currently facing financial difficulty and has defaulted on its interest payment obligations since January 2013. However, we estimate that the current value of our security interests in the 2 VLCCs are still sufficient to cover all amounts currently owed by the borrower, including our original principal amount and accrued interest to the expiry of the loan agreement in mid-July 2013. To protect our security interest in the vessels, we have agreed to taking over technical and commercial management of the 2 vessels. By taking control of chartering and having Teekay crews operate these vessels, we will be in a better position to work with the borrower to realize the full value of our investments. Turning to Slide 10. Teekay Tankers remains financially strong and well-positioned for growth in the tanker market recovery. With total current liquidity of approximately $294 million, we are more than capable of servicing the shipyard installment payments on our 4 LR2 newbuildings without the need to issue additional equity. In addition, our move to a fixed dividend policy will allow us to retain additional cash from operations for future growth as the tanker market improves, while still enabling us to pay a sustainable dividend based on our existing fleet size and employment mix. Realizing the value of the term loans discussed on the previous slide, will also add to Teekay Tankers' available liquidity. Teekay Tankers' covenant-light debt facilities mean we have no financial covenant concerns like many of our shipping peers. And lastly, our favorable debt amortization profile requires low principal repayments through 2016, enabling us to retain a greater portion of our operating cash flow for future growth. Wrapping up on Slide 11, we provide a cash available for distribution outlook matrix for the second quarter of 2013 based on our expected fleet employment profile. Based on a weighted average of approximately 40% of spot revenue days booked for Suezmax and Aframaxes, and 2/3 of spot revenue days booked for LR2s, our second quarter spot rates have averaged approximately $12,300 per day, $13,800 per day and $14,900 per day, respectively. We have continued to include our cash available for distribution matrix in the earnings presentation as we believe this measure continues to reflect Teekay Tankers' cash equity return even though the company has moved to a fixed dividend policy. Even in a low spot rate environment, Teekay Tankers generates positive cash available for distribution, allowing us to pay a fixed quarterly dividend from vessel earnings, while retaining operating cash flow for future growth opportunities. With that, operator, we are now available to take questions.

[Operator Instructions] And our first question comes from Justin Yagerman from Deutsche Bank. Please go ahead, Ken Hoexter from -- sorry, from Bank of America Merrill Lynch.

It's actually Wilson Chen sitting in for Ken. I had a couple of questions to follow-up about the VLCC loan notes. I mean, could give us a little bit of color around who the borrower was and maybe indication for how long you'll be managing the 2 VLCCs. If I recall correctly, the loan comes off in 2Q '13. So how does exactly does that process work if you're in the process of managing the ship? Anything along those lines would be great.

Sure, I mean the VLCC loans were made to a Taiwanese-based company and who was in some financial difficulty. So we've been able to take over commercial and technical, again allowing us to have full control, making sure the assets are being maintained and that we can maximize the revenues during this period. The cash flow breakeven number is pretty low, I mean, we just got to cover OpEx and anything above that is going to go towards paying off us as the first priority mortgagor. And so we will continue that through to at the right time and then best way forward is to realize on that security. And It'll just be a trade-off of the market availability of being able to sell that ship versus the incremental cash flow that we can earn during the period, but we're not intending on trading those over the long term. It's really to protect our interest and ensure that we are able to recover all amounts owed to us.

And there was a common view that Teekay could make more money trading the ships so that's why it was agreed we should take over commercial and technical management.

Got you. If you could remind me, about the parent, are there typically VLCCs that are managed there as well? Because I know that in tankers you've traditionally operated mostly in the Suez and Aframax.

That's right. We haven't operated VLCC recently, but we have owned and commercially managed spot VLCCs in the past. And the customer base and the contacts are the same. So our desk is fully capable of finding employment for those vessels

Sure. And then if I can switch over to the LR2 side. Can I get a sense for how -- well, at least have you had any initial indications from kind of counterparties looking to perhaps charter the vessels out even if it's 3 years out? I mean, it sounds like the backdrop for the LR2s sector seems much more conducive to demand kind of exceeding supply over the next couple of years? And so, have you had initial conversations around that? And if not, when would you expect some of them to begin or would you have to actively market 4 vessels like this?

We are -- certainly have been in discussion with customers, especially after the announcement of the ships. From their perspective, customers are looking to potentially charter -- although as you say, 3 years out is a little bit out there for them to commit to some fixed cover, although it is certainly interesting for them. So we are in discussion although as shown on our various slides, our outlook is for improved utilization. And as you say, improved demand for those ships. And, therefore, it's a trade-off of locking in rates today or using the next little while to see how that market develops and if it improves as we expect it to, to be in a position to take advantage of the spot rates more than locking in.

Understood. And if I could just -- the last question on the options. I'm not as familiar with how some of the options -- ship options work. But are you able to monetize that in some way if you were to sell it or is the deal structured so that only you can have access to that price for the ships?

So those are real asset options. I mean, it's not as easy, obviously, as a financial option to sell on, but there are ways in which you can monetize those.

Our next question comes in from Justin Yagerman from Deutsche Bank.

It's Josh on for Justin. I guess, maybe starting with the VLCCs, is there any concern about maybe other creditors from this borrower who is clearly in a, I guess, reportedly not having many of their ships trade at all. Are there concerns about other people trying to arrest these ships?

Well, first of all, they are ring-fenced from in a separate entity. So they're creditor-protected from other people and that's from other aspects of that company. Having said that, obviously, each ship has its own trade creditors, but given the ships are -- have been having a tough time to trade, most trade creditors have been pretty conservative in extending a lot, so we're optimistic that there won't be too much of that. And as we start trading them now ourselves, we will soon find out what kind of small amounts of trade creditors might be out of there, but that's not a very large number in terms of the overall situation. And again, the loans are $57.5 million per ship, so there is buffer in there for that type of interim payments that need to be made.

Got it. And then, I guess, sticking on those loans, sorry, just there hasn't really been very much sale and purchase activity for some of these modern VLCCs out there. So, I guess, can you talk about maybe how you come up with current values and, I guess, security? I think there's only been one ship, one new, I guess, 5-year old VLCC loan sold in the past couple years.

Yes, obviously, in the liquidity and the sale and purchase market in tankers in general is never a perfect science. As you say, there's been some recent -- there's that one that you mentioned. There was a more recent one, I think it was a shipyard sold a newbuilding for $74 million, so you can kind of triangulate around the few of them and take an estimate, but clearly liquidity is not there to be as robust as in a financial asset. But that's how we've estimated the value.

Got it. And then, I guess, proceeds from the I guess from any potential sale later this year, from those ships, would just be used to pay down your revolver?

That's right. That's right.

I guess, maybe switching topics to the product tanker market. I guess, we saw a couple of spikes in the LR2 market and LR1s too, going AG East, I guess earlier. Can you talk about maybe kind of near term seasonality expectations? We've seen a big draw of crude going into Asia, I guess, in the past couple weeks. Do you expect to see some more flows for maybe naphtha and some of the LR2 cargoes?

Yes, I mean that's really what's driven the current strength in the market is that naphtha going East and we're averaging much higher volumes than we have been last year. And so I think that's why you're seeing the rates being stronger so far this year and continuing to be pretty good with 2/3 of our LR2 days booked at close to $15,000 a day.

Our next question comes in from Jon Chappell from Evercore Partners.

Bruce, I hate to belabor this term loan question or issue, but I think we probably just need a little bit more clarity around it because I think it's clearly impacting the stock today. So just first to be completely clear on the financial impact, you had the full interest income come in, in the first quarter, $2.9 million roughly, despite your comments that they've defaulted since January 2013. So how is that working? And is that still going to be in the second quarter numbers, too? Or are you kind of taking an assumption that something is going happen with the vessels and it's going to be made up at some point?

John, you're right. We did accrue the interest in the first quarter and that's because we are entitled to that interest under the term loans. And given that there's sufficient buffer still between our loan balance and accrued interest compared to that the vessel values, we continue to accrue that and it's just really more of a timing issue as to when we'll collect that, when we monetize the asset. So for the second quarter, given that there is probably still sufficient buffer, if there is, we will continue to accrue that interest in the second quarter.

Okay and as you kind of prioritize over the next couple of months, you shifted to the technical and operational management, but should we think that your goal is to ultimately kind of rid yourself of the residual risk? If we get to mid-January, still have the issues with TMT, you're just going to try to liquidate these assets? Or would you try to hold on to them and maybe add to your leverage and then eventual recovery?

I think you mean mid-July.

Yes, mid-July?

Yes. Right now, the cash breakeven -- because it's drawn on the revolver and the OpEx on those ships, it's $11,000, $12,000 a day. So if we're earning more than that, that's going to be closing the gap and essentially repaying us for amounts owed. And then it will become down to a trade-off of the employment prospects for the short term versus the ability to sell it. But we will be marketing those ships. But we don't want to be put in the situation where you have to sell it in the next month or 2 so it will be trade off of an orderly sale versus generating what we hope is still some positive cash flow in the interim.

So it's possible you can operate them for a while and then if we look past July, how would that impact your finances? I mean, first of all, you've already taken technical and commercial management. So in the second quarter, is that going to change the impact of these ships on your GAAP financials? And then, I guess, if we assume you're going to keep them going forward, we would just keep the debt and then add operating expenses in the same spot market employment?

That's essentially right. The only thing that -- I mean, there's upside and downside in terms of the estimate. I mean clearly, if something were to dramatically change in vessel values or there's some unknowns costs that were to appear, then the accounting calculations could change. But barring that, what you said is exactly what would happen.

Okay. And then just regarding your liquidity and how you think about it, kind of relative to your ideal capital structure, I mean, obviously, you've done some things with the dividend payout and now you've made some orders. You still have the 2017 kind of big bullet payment. How much of that nearly $300 million of liquidity would you kind of consider available today, whether it's for new builds or maybe potential second-hand ships given kind of what you know about the 4-year road map on the capital structure?

Yes, I mean, I think with the liquidity it's certainly nice to have and with the options, what we want to be able to use that liquidity for is if we needed to monetize them. But I think what the real value here in those options is not having to commit all in right now, but still have the upside potential as the market improves. So that liquidity is there to be used if needed, but then it's because we have that greater visibility in the future when those options are needed to be exercised, whether they're actually in the money or not and so the bet of using that liquidity is a little bit safer if those options are in the money.

And then just finally, when you think about kind of the next stages for TNK, obviously retaining some cash, countercyclically investing. Should we just think that the next step is going to be exercise of the options? Or are there other things you're looking for in your traditional mid-size crude? Whether it's other new builds or potential on the water vessels that you would kind of aspire to add to the fleet?

There are certain others -- I mean, obviously, the options creates huge amount of upside without creating a use of the liquidity now. But whether it's in-charter opportunities as other owners are looking for, low, fixed cover because they need the cash flow but then provides us greater optionality to create earnings potential as the market improves. We'll certainly be looking at those types of opportunities but the new fuel-efficient options without having to commit, but still providing the upside is the preferred path that we're looking at.

And our next question comes in from Michael Webber from Wells Fargo.

A couple of my questions have already been answered. Around the new builds and STX, they've been in the news a lot recently around looking to restructure. I know that was the case when you guys placed the orders. But maybe some color around, I guess, how secure those orders are and then specifically around those options, any risk they could come back and change those to float? I mean if you're counting on option value from a company that's restructuring, it seems like you need a pretty good basis to do that.

Yes. I mean, I think there's been obviously a lot of press about STX and their situation in general. And well, it looks like they're liquidating or selling certain parts of their operations, I think that's positive because what they're doing is focusing on their core Korean shipyard, shipbuilding activities, supported by the domestic Korean banks. And so that's why we were focused when we placed that order on doing it with the Korean part of their business. So as they strengthened their balance sheet by selling some of their non-core operations, that's all positive in terms of where we're focusing. And as we know, they do have a pretty good high class order book from named -- their customer list is pretty good. So we're confident that, that's the area that they're going to focus on.

Got you. So I mean, as it stands today and, granted, things can evolve, but betting that their situation does not impact your decision to exercise those options?

No.

Fair enough. Just kind of related to the options and then to the mortgages at TMT, it's just -- I mean, is it correct to assume that -- I mean, your own [ph] near term priority is kind of getting past that from a liquidity perspective before you would look to exercise those options? I mean, there does seem to be kind of -- it does kind of fall within that window, there's more residual loss [ph] before that first expiry, the first tranche of mortgages. Is that the right way to think about it?

No. There's not -- there's enough ceiling in our liquidity to be able to keep both; to be able to exercise options. And then I mean really, we want to make sure that we're not in a position of having to fire sale those assets, right? I mean they're good quality VLCCs, pretty modern. Now that we're trading them, we know they're going to be maintained and we've already had some success in finding customers to employ them on voyages. So I think putting that all together, we have -- we want to make sure that we have the right time and the best way to realize on the security and not be forced into doing anything rash.

And our next question comes in from Chris Combe from JPMorgan. Nishant Mani - JP Morgan Chase & Co, Research Division: It's actually Nish Mani on for Chris. Just wanted to ask you one quick follow-up question about the VLCCs. I apologize for belaboring it again, but I just want to make sure that both the revenue and the OpEx associated with it will not consolidated into your results going forward until actual vessels [ph] assumed? Is that correct?

That's correct. It's only the interest income as per the terms of the term loans that we recognize. So although we're doing commercial management and technical management, that's on behalf of the owner still. Nishant Mani - JP Morgan Chase & Co, Research Division: Right. Just an arrangement to cover the interest and principal going forward?

That's correct. Nishant Mani - JP Morgan Chase & Co, Research Division: Okay. Got it. And then just turning to kind of the CO spot market for the rest of the year for both the Aframax -- on the crude segment for both Aframax and Suezmax, I kind of want to get a sense of what you guys think explains the Suezmax rates coming off of lows at the beginning of this year and kind of firming up a bit and whether or not you think this will hold for the seasonally week Q2 and Q3 periods?

I mean, I think Suezmax is an area where that's been hurt with the aggressive fleet supply as we've said earlier and that should be better in 2014. I think what people have overly focused on potentially is the fact that U.S. imports are down and, therefore, they see the typical benchmark rate of being West Africa, U.S., East Coast being the rate that has come down. But what is not being seen as the fact that ton-mile demand for Suezmaxes is actually up because the cargoes are going east and that's a longer voyage for Suezmaxes. And so while rates are -- have been low because of the supply, ton-mile demand and the longer-term outlook for Suezmaxes in terms of ton-mile demand is actually positive. And so we really do believe that when the supply ends, and that doesn't end until the end of this year, there's still 25 Suezmaxes expected to deliver this year. But when that's through, the demand side should increase the utilization for that sector. Nishant Mani - JP Morgan Chase & Co, Research Division: Got it. That makes sense. And then just turning to the options again, do you guys -- have you guys ever flipped an order book option in the past? And if so, what kind of success was attained there?

I don't know if we've -- I'm just trying to go back in the memory bank. But there are ways. I know we have onsold shipbuilding slots before. I don't know if that's an option or one that we already have or built on behalf of other people. But there are certainly ways to enable that. Nishant Mani - JP Morgan Chase & Co, Research Division: Right. And if you, I mean, I guess, with the options already in your possession, have you had preliminary discussions with potential buyers or at least those in the market looking for new builds anyway?

We've had unsolicited offers or interest expressed potentially on whether we would be willing to onsell them. So they are at attractive prices and I wouldn't be surprised if people were -- wouldn't be interested in exercising them if we didn't. Nishant Mani - JP Morgan Chase & Co, Research Division: And can we expect, in kind of the medium-term, the release of the specific prices in which they're set and the dates? I know you guys provided some preliminary dates for the first few, but...

Oh. Well, there are -- it's 47, I mean, it's the same price, virtually. Except for the last ones are up to $1 million more so virtually the same price. And they're on 6 month intervals, any time up to the -- they expire in 6 month intervals from the contract signing through to 18 months. Nishant Mani - JP Morgan Chase & Co, Research Division: Got it. So it's just the 3 equal batches of 4?

Exactly.

And there are no further questions at this time. Please continue.

Great, thank you, everyone. We'll speak to you next quarter.

Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation. You may now disconnect your lines, and have a great day.