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Scorpio Tankers Inc
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Hello and welcome to the Scorpio Tankers Inc. Third Quarter 2021 Conference Call. I would now like to turn the call over to Mr. Brian Lee, Chief Financial Officer. Please go ahead, sir.
Thank you. And thank, everyone, for joining us today. Welcome to the Scorpio Tankers third quarter earnings conference call. On the call with me are: Emanuele Lauro, our Chief Executive Officer; Robert Bugbee, President; Cameron Mackey, Chief Operating Officer; Lars Dencker Nielsen, Commercial Director; James Doyle, Senior Financial Analyst. Earlier today, we issued our third quarter earnings press release, which is available on our website, scorpiotankers.com.
The information discussed on the call is based on information as of today, November 11, 2021 and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release that we issued today, 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 available on the Investor Relations page of our website for approximately 14 days. There are slides available on scorpiotankers.com on the Investor Relations page under Reports and Presentations. For those asking questions, please limit the number of your questions so everyone has a chance. If you have any specific modeling questions, you can contact me later and discuss offline. Now, I'd like to introduce, Emanuele.
Thank you, Brian. And welcome to our third quarter results call, everybody. Over the quarter, the market weakness caused by the pandemic has disappointingly continued. We continue to believe that the recovery has been deferred rather than canceled. And the reasons for these convictions are the following readings. 1. World refined products consumption is normalizing the Diesel, Gasoline, and NAFTA demand are already back at 2019 levels. Jet fuel is lagging a bit behind, but with signs of improvement as we are seeing the U.S. and European travels, for example now, flowing freely since earlier this week. Asia should follow suit soon with key strategic locations like Singapore, where it eases the proper restrictions.
Second, the seaborne ton mile demand per barrel consumed is higher as a result of an acceleration of refinery shutdowns from the pandemic and new refineries who have opened and come online. We expect ton mile demand to exceed 2019 levels over the next few months due to refinery closures and seaborne exports of refined products is expected to increase by over 5 % in 2022, meaning that we will exceed pre-Covid levels soon. Third reason is the steel values have inflated significantly and at Scorpio Tankers, we have a very high gearing to this. Despite cash losses in the quarter, our equity NAV per share may have increased actually. The asset values on the 5-year-old MR have increased by 8 % year-to-date. 5-year-old LR2 s have increased by more than 20 % year-to-date, and those new building prices on MR s and LR2 s are year-to-date up more than 20 %.
Fourth reason: scrapping has picked up, and yards are full, meaning supply will remain constrained for several years. Product Tankers scrapped year-to-date hit 32 MR s, which is the largest number of MR s scrapped on record. In addition, there have been 3 LR1s and 8 LR2s which have also been scrapped so far this year. And lastly, with our ECO and scrubber-fitted vessels, we are well-positioned in an environment of rising fuel prices and widening spreads between grades of fuel. The spread between the scrubber suitable HSFO, and the LSO is $150 per ton at present and it is growing.
Because of our investment in scrubber, this means that at these current $150 per ton spread, the Company would generate an additional $70 million in TC in 2022. To sum up, our modern stock exposed fleet remains very well-positioned. We have continued to focus on sensible balance sheet management and liquidity management, ahead of the normalization of tone-mile demand. And ahead of the upswing in rates, which we are finally experiencing now. With that, I will turn the call to Lars, please.
Thanks Emanuele. Let me first say that, much of the world, excluding China perhaps continues to roll back COVID-19 related restrictions. The predominant trend towards reopening as a realization of COVID-19, as an endemic issue and restricting movements through a lockdown is not a viable long-term solution. Nevertheless, the widespread vaccination roll-out continues to be a keystone, solidifying the clean tanker recovery. During the second quarter 2021 earnings call, we stated that we would only expect a meaningful rally at the back end of 2021. This prediction is maintained and we can now see several green shoots developing in various product tanker segments.
The demand picture is improving by the day. In the last call I stated that, the U.S. have recovered to near pre - Covid demand levels. Still we looked for Latin America demand to recover as a critical market determinant. We can now note that South American mobility indices are up by 33 % year-on-year through October with the vital product import regional Mexico well in recovery mode. Argentina is the first major South American economy to post gasoline demand at pre -pandemic levels. An overlay that with the closure of the Limetree Bay refinery in Caribbean at the ton mile exposure to supply Latin America will be compelling for the products trade. And we have now subsequently seen a material rise in the U.S. gulf MR market index.
The daily earning rates increasing from $6 to between $16,000 and $20,000 per day over the last 2 weeks, led by the strong Latin American and Mexican demand. This increase in implied product demand immediately impacts the U.S. product export markets and has had immediate positive earnings impact on the MR and LR1 sectors. Furthermore, we can see from the mobility data the vehicle utilization is recovering well within India plus 82 % a year-on-year, the Eurozone, plus 42 % year-on-year, and of course, North America with plus 35 % year-on-year. These mobility trends should continue to see further recovery, but the positive inertia remains and is translating in rates improving daily. It is evident from the data that the world is in recovery mode and it is encouraging.
The global refinery runs have now exceeded 80 million barrels per day for the first time since pre-Covid. We've also already seen a return of 8 million barrels in refinery runs since November of last year. The new easing of U.S. travel restrictions will add at least 250,000 barrels a day of crude demand through increased jet fuel consumption. Whilst jet holds the promise of an eminent, albeit more gradual product recovery, the EIA has reported that U.S. gasoline and distillate consumption has finally return to the 5-year pre -pandemic seasonal averages. Conversely, stocks are drawing at pace. The tail end of refinery maintenance, the backward dated price structure, and rising consumption have reduced stocks to the lowest since November, 2017.
And with the U.S. East Coast gasoline inventories at the lowest in nearly 7 years. U.S. jet inventories last week alone, posted a 1.79-billion-barrel stock draw. The market fundamentals here on in, will be supportive for the trans-Atlantic arb opportunities and product markets. According to the energy aspects, global commercial crude stocks are now at 34 million barrels below October 19 levels, which constitutes a very material and rapid draw of 600 million barrels from May of 2020. The much-discussed global overhang has disappeared and today offers minimal slack in the crude supply chain. Refinery margins remain positive and will underpin higher run rates globally.
As the market is emerging from the seasonal refinery maintenance period, we anticipate a robust end of the fourth quarter with firmer raised across all product segments. Put simply, in October, refinery maintenance generated a decrease of 8.7 million barrels of refine product per day globally. For November, approximately 4 million barrels per day capacity comes back on stream at a further 2 million barrels per day in December. Thus, we anticipate 7 million barrels per day global refining capacity will return by the end of January. A substantial return of volume into a market with low stocks facing a high refinery margin environment, where whether delays and increased ton miles, will add to bottlenecks and logistical complexities. This confluence of factors is, bullish rate.
Ton miles have also shown growth signs led by an increase in long-haul trade of naphtha going east, and Gasol middle distance moving west. And as various refinery closures, they have all had a positive contribution to the ton mile dynamic over the year, whilst volumes have steadily increased. And on the back of these increased volumes and long-haul rates and nature of the trades, LR2 have not moved substantially by $300,000 to $500,000 on both east and west destination. This again has moved up spot earnings from the mid-teens to $25,000 per day. Furthermore, we anticipate that Australia, having now close half of its refining capacity will see a dramatic increase in import volumes as that region emerges from their extended lockdown and product demand invariably returns.
Going back to basics; given that demand is up, stocks are down, refinery utilization continuously north of 90 %, suppliers inelastic with a benign order book, we expect to see a material upturn in market pricing. The growing pains of logistical chains trying to adapt to a post-COVID world will provide a lot of positive market volatility over the next couple of quarters. The fleet continues to age with 7 % of the world fleet over 20, scrapping is accelerating, and so far over 150 tankers have now left for the breakers. In addition, as Emanuele said, newbuild prices have increased 20 %, 25 % this year. And tanker new build birth capacity, is taken up by containers, bunkers and gas. So we feel well-positioned, as the larger product tanker owners with a modern eco -fleet, to take advantage of the next market cycle. Thank you very much.
Thank you, Lars, very much indeed. I think we'll just go straight to questions, please.
Thank you, sir. At this time, we would like to take any questions you might have for us today. [Operator Instructions ] We have our first question from the line of Omar Nokta with Clarksons Security, please go ahead.
Thank you. Hey, guys, good morning. Lars got a pretty -- I saw a pretty good overview of what's going on in the market and you discussed the outlook. I wanted to maybe dive into that just a little bit deeper. And this is perhaps maybe a bit bigger picture. If there's one thing, or if there's a scene that appears to have taken shape here this earnings season is that pretty much after a bunch of difficult quarters for the tanker market. The third quarter is becoming increasingly viewed, I think, as perhaps the trough. We've seen the low rates in 3Q, but everyone is now showing guidance that's suggest 4Q is going to be quite a bit healthier and obviously spot rates they've improved.
And you're showing that in your guidance as well. The -- I want to ask you, do you feel that the way things are shaping up at the moment that fourth quarter is sort of potential to pivot to a stronger market in '22? And do you agree that indeed 3Q can be viewed as the low point, and that this improvement that's currently underway is the one that has legs for recovery?
Omar, was that a questions for me?
Yeah.
Yes. Okay. I mean -- I think Q3 has been for a number of years been the -- considered to be the trough and there's always been some discussion about, is the market going to pick up by thanksgiving? And clearly it has certainly done so, way in advance of thanksgiving. And there's obviously a lot of different things that, are playing into this particular thing. Be at the high flat price, be it the low stocks that we talked about, refining margins, being healthy across-the-board, the run rates now moving up. And we haven't even talked about, all of this stuff about the energy substitution effect, because of the issues around naphtha and stuff like that. Or the high pricing on propane and what that means, for people wanting to crack naphtha, etc.
There's a lot of things that are playing into this thing, exactly at the same time and it's not really a surprise to me that we have seen when suddenly all of these things come into play at one go, that markets churn through the position list that have been long and elongated for a while and then suddenly you see, "Wow, there's no further ships available. " We saw that in the U.S. Gulf last week and the week before where suddenly, boom, it moved up very quickly. We could see all the data. We've been talking about the data for a while and somebody says, "Okay, here we go. Now, the market has moved. " I'm confident to say that it is based on these elements that are playing in. We just got to generate and digest through the positions that have been building up.
And then use obviously a much more balanced market. And the same thing is going on right now in the Middle East with the distance moving west has been going on for a while obviously. There's no substitution to the crude carriers because they're not being delivered from the new building yards, so now it's coming into the more natural environment. Naphtha has been moving very strongly throughout the year. And that really has not changed, and is not going to change according to the reports that we're seeing, for what we're seeing here is that the different markets are moving now in unison. And that really is important because someday you can start seeing that the utilization levels are increasing pass the particular point where volatility really plays in.
So rates, west to east as I think I mentioned in my prepared remarks, they moved up from last Friday to yesterday, I think, by $500,000 in one go. And that's material. But it's not surprising to us, and I don't think it's surprising to a lot of the bigger players in the market to see this actually playing out. I think -- Omar, I think that one thing to add here is, it's just so significant. It's very difficult to get it across when a market is coming off a very bad market. But, what Lars is talking about, this real drive forward, the gapping of the LR2 rates, how they've slowly, slowly creeped up, taking weeks and weeks to get up to 20,000, and then in a matter of 2 or 3 trading sessions, just went straight to 25.
That is a very, very important thing. I think that's also amazingly encouraging. This is happening at least 2.5 weeks before Thanksgiving. So it's coming early, very early in the season, on top of what has been a record warm October. The market still hasn't had
this location, it hasn't had cold weather, none of these other things for it. So this is, as Lars saying is, truly supportive of this change and what you are saying, this confidence now that we've moved past the low point as it were.
Thanks, Robert. Yes. It definitely feels like we're getting the confluence now of the seasonality and the cyclicality coming together.
And it's -- going to -- so it's comping in all markets. You're seeing a little bit of tightening here in the Aframax market, Suezmax market too. So, that's helpful.
Yes. Quiet it's a broad-based. And just a follow-up, Lars. You discussed the LR2s. I think you gave a pretty good run down of what's going on in the MR market in Latin America, but especially the LR2s, they've been gapping up, as you say, Robert till 25. Anything in particular has been driving that --
Omar, it's not really just what we're saying. This is in your report itself this morning.
Okay.
We're already sort of echoing what you have already published this morning.
Yes. The -- could you give maybe just a flavor of what you've seen? Is it a particular type of cargo, you mentioned naphtha or is it just as you also just said, it's kind of this broad-based churning out of
I'll try and put some color around it. We're seeing LR2 is moving from the continent down to West Africa. We're seeing LR2's out of the U.S. Gulf going east. We have seen obviously the usual stuff out of the UK continent and the Mediterranean, which has been the staple trade on light ends. Naphtha primarily going long-haul into Asia. The TC1 East runs AG East have picked up again. There have been some turnarounds in the Middle East as well that they have completed. But what we've also seen, which is interesting, is a lot of product moving into Australia on big ships as well. So it doesn't take very much to move the whole supply dynamics into the owner's favor
because you're really stretching out that position as they are now doing a lot of different types of business. So it's quite clear to me that we're seeing an increase in the diversity of cargo base.
Great. Very good. Thanks, Lars. And thanks, Robert.
Thank you.
Thank you. Our next question comes from the line of Jon Chappell with Evercore, please go ahead.
Thank you. Good morning, everyone. Or good afternoon. Lars, starting with you again, and maybe a bit of a follow-up to Omar. We've had a bit of fits in start with this recovery that, everyone has been calling for some time, myself included. And the LR2 momentum recently seems to be giving a bit more confidence, at this time it's real. So maybe 2 parter here, 1. Does the LR2 market tend to be a leading indicator to the rest, given some of the dynamics you just laid out, and 2. What could go wrong that causes us to be another head-take?
Well, we've had some fits and starts as you said, Jon. Obviously as the market had moved up the first time around, we -- maybe we're seeing that this was coming. One of the things that we -- unfortunately we're seeing a short-term pain in the past was the immense stock draw that was taking place in pretty much all regions. The second thing, we also, you're seeing, is that the front-end pricing was so strong as product was required that the backwardated structure meant that people weren't obviously doing any storage, anything like that. I think when it comes to the LR2 market, it is obviously a very important market in the part trade together with the MR markets being the 2 primary things that -- they sometimes work in unison, and sometimes they don't work in unison.
And right now we're seeing it in the west it's moving very strongly. We are seeing it very strongly having moved up before the LR2s in the Middle East. Suddenly now the LR2s have come up, and just before LR2s we saw a very big jump up on the LR1 as the positions in general try to get into the sweet spot. I think it's fair to say that when suddenly you have an LR2 market, which now is moving across-the-board in a positive direction, meaning both in the stuff going on the Westside I was talking about, strong activity out of the Middle East, not only with the TC1 East runs, but also now with the [Indiscernible] moving west, you're seeing also exports coming out of China, going long -haul on the LR2s. It really, really soaks up a lot of the vessels.
This then benefits the LR1 s, and they will come afterwards. The MRs tend to operate in a kind of a different market environment, they surely are correlations. But because of the logistical constraints in terms of size and stuff like that, they tend to sometimes also operated in a different way. But if you look at over a longer time period, it's quite clear to me that, the general trend is upwards across.
Okay. That's fair. Robert and maybe Brian, we know the market is all that matters, but with Scorpio specifically, there is this immense focus on liquidity. You laid out pretty well in the presentation the path to $280 million. And of course you have a little over $70 million of quarterly debt amortization with limited CapEx. So listen, based on everything that Lars has laid out for us, there's going to be cash flow generation in the very immediate future. But if there isn't and it's another headache, what's the plan B on bridging the gap through the debt amortization for next year including the convert with the liquidity situation today?
Well, at first private con I would say Jon, that you can see from the announcement as you can see at this, as well laid out. You've still got a lot of time here. For us, it's -- the primary strategy this moment has been, to allow ourselves the liquidity to play for time, that's the primary strategy. And we're seeing the world itself continue to improve in all of its dynamics, whether its people vaccinated, or etc. etc. And so that's the primary position you have got. If that changes, you start forward view changes that the world is fundamentally improving, then you still have various -- you have a lot of leavers related to that. In the sense, for the year you are paying down amortization, so you can still refinance things along the way, that you have got a brand-new fleet.
As Emanuele indicated is desired, the number of ships, it's an order of Ray low. The time charter market is strong, so I know you're with a Company that is trading above NAV, there wouldn't be any part below NAV. Substantially, there won't be any issues in that strategy long-term to sell assets either. That is where we are at the moment. And we're not going to act related to some Doomsday scenario, you're correct. Lars has said yes, you may have something terrible happen in the world, but that's a beast and there is no reason to -- for us to right now to think that way. It's best just to carry on doing what we've been doing. I've done a product like to add to that.
Again, vessel values have continued to increase here, refinancing each time has added to liquidity. We have availability to sell or to refinance ships and add liquidity.
Okay. That's what I wanted to hear. Thank you, Brian. Thanks, Robert. Thanks, Lars.
Thank you.
Sure, Jon.
Thank you. Our next question comes from the line of Randy Giveans with Jefferies. Your line is now open.
Howdy, gentlemen. How's it going?
All right, Randy. How are you?
Quite good. Thank you, Randy.
Good, good. 2 questions from me. First, let's just look at the fuel spread. You mentioned that a $150 fuel spread will resulting in, I believe, $77 million in cash savings for '22. Is that just a random number or why use 150? Is a ford curve there or is that what your expectation is? And if so, are you able or willing to hedge some of that spread?
James?
A couple of things, Randy, I'll give it a shot. The $150 simply, because that's what the spread is today. So we conservatively, that number rather than assuming that it's increase -- that will increase like we expect. So that's that. On the hedging, we -- the short answer is we haven't looked at it. It would be arguably a speculative move rather than not. So we are -- we haven't discussed it, to tell you the truth. So you shouldn't expect us to hedge it.
But your expectation is that 150, I think you used the word conservative, is that right?
That's right. We see it increasing, but since we are -- given that the oil market dynamics, but since we are at 150 now, we pick the 150 that we're experiencing now and projected it for 2022 just to show a number of the impact that that would have in 22 weeks if the conditions or the assumptions stay the same.
Got it.
So maybe we should have used the phrase that we expect the spread to widen. But at present, it's only 150.
Yup.
But if it does remain at 150, we will make $77 million on sales. So we pull out based for that.
No. Just asking the question. No, problem. You can use whatever estimate you want. Our second question, obviously, no Scorpio call would be complete without multiple questions on your liquidity. Let me follow up with some more. Looking at the liquidity you continue to raise liquidity with the sale leasebacks, boosting your cash position for sure. But how does this impact your weighted interest rates, and maybe your break-evens now?
Our breakeven have gone down over the past year-and-a-half because interest rates have gone down. So with tech, we've got some savings there. But also, you got to look at -- again, the reason why we're able to do these is vessel values have gone up. So we're able to do that because of that. So yes, that has gone up, but overall leverage into a market value hasn't gone up that much. And don't forget when you repay debt, you're repaying it based upon the vessel's amortization profile of 15 years, 0 to 15. So that'd be debt is repaid by the time the vessel gets to 15 years of age. So if you got a 5-year-old vessel and refinance it, you're paying off that debt over a 10-year of amortization payments to go to zero.
That's not the term of the loan, but that's the profile you're dealing with. And you still have 10 more years after that of the vessels lives. You're paying off 10 %, but also only 5 % of the vessel life is being depreciated, and the present value of that, is not going down by 5 % in the first year, if you do a discounted cash flow amount. So that's where you get these refinancing liquidity events.
Okay.
And Randy, I think we so that -- I think you have to put this in the TTC as this is a new fleet. It's the strategy it wouldn't work on a middle-aged fleet and it will be totally and possible on an older fleet. And we just very strongly believe that this market is improving. Those we indicated, that's what the customers are doing. Lars right now is with a whole bunch of customers. We're not -- there's no guessing that this market is improving and what we've indicated right now. Today is the day when we're actually making positive cash flow, right now. So this is can swing very, very fast with the leverage -- the operating leverage this Company has, if we just have moderately good.
Sure. Yeah, there's definitely a lot of operating and financial leverage in the system here. So, [Indiscernible], just to clarify, the increased liquidity is not coming at a cost, meaning having raised $30 million, $50 million, $60 million liquidity, what is that? 12 %.
You're correct, and that's a great point. It's not coming at a cost. Obviously, it's not coming -- it hasn't come at an equity cost. You're definitely correct in pointing out that an actual base raw interest cost, it's not as if we're paying a distressed rate due interest. So, yes, your point is very well made.
Got it, all right. That's all I want to clarify. That's it. Thank you so much.
Thank you.
Thank you.
Thanks, Randy.
Thank you. Our next question comes from the line of Ken Hoexter with Bank of America. Your line is now open.
Hey, good morning and good afternoon. So just agree with Lars, great update. Noted, I just want to get on the MR for really quick, because you noted different markets move different prices. So if newbuild prices are up to the extent you're talking about, I just want to understand, MR is more muted in terms of the -- their 4Q guidance in bookings. Just -- is there a reason for that disconnect relative to the other groups as you were kind of highlighting?
Muted in -- I'm sorry, Ken. What do you mean by muted?
I'm just looking at your 4Q bookings, your rates to date where you've got obviously bigger moves in some of those groups. You highlighted the LR2s step-up, but the 4Q outlook rates seem to be flat with -- flat on your outlook.
Well, obviously the guidance given is obviously from the 1st of October and obviously as we went through October, it was still very much in the trough, so a lot of bookings were taking place. What we're seeing now over the last couple of weeks is exactly what we anticipated, also what we talked about on the last call, what we expected to happen. I believe very much this is what's going on right now. I think it's really a case-in-point about what happens in Latin America, because that was the thing that we were missing out on during the last quarter. The U.S. was coming back very nicely; we had very good vehicles tons traveled, we had good inland jet demand, etc., etc.
We could see of course, because of the backwardation, the stocks were still drawing. What we're missing out, which is a very big important part of the whole Atlantic Basin picture is what goes on in South America. During the last quarter of course, we had lockdown -- severe lockdowns, and particularly in Argentina, Brazil as well, and Mexico. All of those countries are now back on track. You look at Chile as well. Chile is now importing more than they've done in the past because of the issues around the hydroelectric issues that they had. We're seeing this continue through the fourth quarter and the first quarter. So you look at demand balances on these things.
And you know, these are the markets where you primarily would use L -- MR s primarily, and to some extent also LR1s. That at some point, they will be a flick of a switch. It suddenly happened two weeks ago, and this market is now going very strongly. And doing exactly as what we anticipated and what the data would some suggest. So that's moving well. Then you could then say, well, it's going to another layer of the onion here. Why has the TC2 market, which is the market moving from the continent over to the states not moved. Well, that's also because, the stocks in Europe are very much down and you've got a closed ARP to some extent, but at some point it's going to force the issue and we're starting to see this -- the balance or from the normally, that we're up on the AC not moving over to the continent. They're not moving to the Gulf.
They're being absorbed. You've got a naphtha that's open out of U.S. Gulf. So you have all of these different things that are happening at the same time, as we had anticipated will. And when it does, it moves. And that's what we're seeing. And that's also exactly what we're seeing when it comes to the market in the Middle East on the LR2s, and to some extent also the LR1s a couple of weeks before. But particularly LR2 has been the case in point and for us being as big as we are in that market. We can really see that the markets in the West have moved strongly and they have continued to do so. The markets in the AG have started to move big time. When those two markets summing move in unison, you suddenly have a market. And that's what we're seeing. Then, you add on the issues that, we talked about with cargos moving out of China, moving long-haul.
You don't have the cannibalization of the VLCC s and Suezmax, because they're not being delivered in November and December. They're going to be waiting for January and February, and at that point in time, I would imagine that, you're starting to see the OPEC crude increase is starting to filter in as those markets are coming back to life. We're seeing the Aframax has moved nicely in the Mediterranean and in the western general. Both on the continent and also in the U.S. Gulf. Suezmax 's, which have been very, let's say, a hit by the lockdowns and so on have started to get a life again and then I'm moving up. And it's not going to take very much for them to start moving as well. And then suddenly it's across the whole battle. And then if -- we really got ourselves to market.
We're doing a lot of volumes right now on condensates out of Australia, that usually is an Aframax market. But since I was -- as I was saying before we're moving, a lot of products on LR2s into Australia. We're now doing the condensate out of Australia and back into Asia. So that's -- we're doing late voyages both ways, which of course adds to the earning capacity of the LR2.
Quick question on that then. So, if you get this pricing gap that moves up, is there any move to reopen any shuttered refining capacity in Australia? Just wondering back to the question of does anything impact this rebound? And then same vein, is there any thoughts on -- is there a potential impact of a reestablishment of the U.S. crude export ban?
The last question I can't answer. That's very much a political question that I think very few people really has a clear answer to. But if that should happen -- I don't know what to say, really. But the U.S. refineries, they're like very much the heavy crews that come out of the Middle East and so on. The light suites that come out of the U.S. are very much kind of geared for Asian refineries. And I think that there was a price spread there that talks to the logical answer of keeping the product moving. When it comes to the refinery question in Australia, I think it's not as easy as just saying, well, now you shut the refineries. It looks as if that was a bad idea because the products are going XY in February.
Just open it up. I mean, that's a long-term decision and it's quite clear to me that, ton miles, as we've been talking about the last couple of quarters, continue to increase across-the-board. And as the volumes are now increasing, as the world is opening up, it's a two-pronged effect. You've got longer hold, more product to move, and you're going to need a lot more ships and the market is going to move.
So great situation, just to wrap it up then. Any reason that the Company didn't buy stock with -- you repaid $450 million of debt, you have $200 million of cash, obviously, Mr. Bugbee 's buying stock. So any reason the Company didn't in the quarter?
Yeah, absolutely. Because the Company has stated consistently that we want to ensure that we're seeing these stop-start, we've seen these positions. We're not arrogant enough to act as if -- despite how strong we believe in what's going to happen, we're not going to act as if it's 100 %. So we've consistently said that until the markets cross over $17,000, $17,500 a day, which is when we suddenly start to really, really make real net cash and build cash that we aren't going to look at buying back stock, and that we're going to continue to focus on maintaining our liquidity until that happens.
Appreciate it. Thanks, Rob. Thanks, Lars.
And I think -- I'm just going to say about this U.S. export thing in the product market. Whatever the U.S. does on its policy of exports, which Lars is correct, we haven't got a clue. It's not going to change the demand for the products for South America or change the demand for the products elsewhere in the world. And so you can fairly quickly argue for products that, it could be a net positive products if that happened.
Agree.
Because it will just create more inefficiency and longer-term mile. Thanks, Ken. Thank you.
Thanks, Rob.
Thank you. Our next question is from the line of Gregory Lewis with BTIG. Please go ahead.
Thank you. And good morning, everybody. And good afternoon. Thanks for taking my question. Actually, I only have one and it's for Brian. Brian not to put you on the spot, but when I look at that recent, I guess, you did it earlier this month, that new sale and leaseback transaction for the 4 LR2s and the 2 Handys. You mentioned the increases in advance rates, higher asset prices, realizing that these vessels were probably rolling off lease or financing from a previous financing that was probably 1 to 3 plus years ago. Is there any way to think about the increased liquidity you're mentioning? Maybe not on a specific vessel level but maybe in terms of percentages?
You have to look at the entire fleet, where it's financed this -- it's -- which I think you can go through our 20th and see where our vessels were financed and take it from there and try to figure out that way. But it's just going to happen organically here. When vessels come up for near maturities, we're just going to refinance. And given that, we have a 131 vessels and 30 financings plus out there. We're going to have that on a regular basis. I don't think you can look at as a percentage because --
No, I was wondering if -- I was wondering if the advanced -- I was wondering if the amount able to borrow on those six ships has gone up or down?
Yeah. There's no way it definitely went up, yes. That came off some of those bank financing and went into sale leaseback, but yes. They went up and also their vessel value went up since we did the initial financing on those 2 years ago.
Okay. All right guys. Thank you very much.
Thanks Gregory.
Thank you.
Thank you. The next one, we have Magnus Fyhr with H.C. Wainwright. Please go ahead.
Hi. Good morning. I just had 2 questions. First, on the -- the rates have been really weak over the last year. Your clients have been used to getting very attractive rates. That rates have moved up in the last few weeks. Has that caught your clients by surprise? Do you see them preparing maybe to go longer on time charters?
That's very clear to me that, we're seeing a lot of our clients wanting to take long-term charter coverage now. There are people, they are looking at 1 year, 2 years, 3 years. We have people looking at wanting to do 5 years. They obviously seeing that, as we're moving out of the trough of the market, that now might be the time to go and get some cover. So that for sure is taking place and it's accelerating at the moment. And rates that have been concluded in the market, there's testament too that, they are willing to pay a lot higher than what the market had been printing on the spot to what they're willing to pay for the future. So as a leading indicator, it's clear to me that, our clients, and it's across-the-board, all believe that the market is on a rebound.
Okay. And maybe our rates are too low for you guys, but is there a level where you guys or you're on the stable level, but would you entertain time charter or is this the best time to do time charters because they always seem like either the charter's too high, or too low, or
Magnus, this is -- there's no supply, hardly any supply on order this year. Record, record supply low there is there. So -- we were all focused on the short-term and will this change and is this the bottom etc.? But once -- if we get this conformation over these next few weeks -- really it's going to be a few weeks, 3, 4 months. We're into a position where this -- it's very difficult then to provide a supply response in the product market. We're all focused on the demand: is it coming back? Their inventories being drawn down? When will the rates should improve? But if we start to move in with and continue in the direction that we're going, then the debate is going to swiftly turn, whether it's the customers, whether it's yourselves as analysts or investors on, wow, it's really difficult to have a supply response to this and crush this improvement short-term.
So therefore, we're going to be set out for multiyear strong markets and strong returns. And this is definitely when we're only just seeing return off the bottom. This is definitely not the time where Scorpio Tankers after going through all the pain together with our shareholders should start to avidly charter-out vessels.
Great. Thanks for the flavor Robert. Just one more question. You've been playing defense, as we said for the last year. And most of the questions has been focused on the liquidity going forward. With the market improving, maybe to look fairly to start playing offense. But you have a buyback in place, you've been paying down debt. Are you happy with your fleet now? You have a big fleet of eco -tankers. One of your competitors announced the merger today, expanding into the chemical market. So just curious that you feel like, you're well-positioned now. Or if you feel, you have the right place over the next 2, 3 years.
We have the largest product fleet in the world by dead weight and the newest public tanker, product tanker fleet in the world. And we've put into various modifications, environmental regulation changes, then we put in scrubbers and all vessels that we -- virtual vessels with now that we believe that during -- we've had the majority of our drydocking down on this week market. So we're set. We don't have any CapEx. And what we hopefully able to do is to set our stall to really provide the returns to the shareholders for this Company that is -- there's no other Company that I look at. But in the tanker land that has the leverage that this does to an improving market.
So there's certainly no need to go out and buy 1 or 2 ships to improve that, we have tremendous earnings per share, cash flow per share, leverage too and improving market. I would say we're confident that we're extremely well-positioned right now. It's not as if with -- I will just leave it at that. It's -- I can understand why others feel the requirement to do things, but we just don't feel any urgency or necessity to change the fleet we have.
Great. That's what I wanted to hear. I appreciate you answering my questions. Thank you.
Thank you. Thank you so much.
Thank you. Our next question is from the line of Liam Burke with B. Riley. Your line is now open.
Thank you and good morning. Robert, I Just want to ask a question again and I apologize. I'm taking the other side of the argument that; your cash flow is pretty respectable in low-rate environments. As the leverage kicks in, you have the assets in place, declining CapEx, accelerating cash flow. The priority after debt service, I presume, is to return cash to shareholders, because you're happy with your asset base. How would you look at returning cash to shareholders?
Well I think again, we believe we've been very consistent that we first have to get ourselves into that position, and that's what we're focused on doing. We're focused on -- we may indeed find that we're already there and -- the high probability now is that the markets are going to trade at an average above the $17, $17.5 position. And then we will look at it, and we're not going -- and we would take it in stages. When we are there, we will then decide what is the optimum thing to do. Otherwise, we're just going to stay there, we're not going to count the chickens before they hatch.
Fair enough. Just on the market side, the refinery closures have been going on since late last year through now, has that finally run its course? Or do you see an additional bump from the realignment of global refinery?
James?
Hey, Liam.
Hey, James.
I think we're definitely seeing it. Lars has mentioned the increased volumes to places like Australia, but I also think there's going to be a second pump as product demand picks up and see more export does as well. That's going to magnify or accelerate what the exclosures have done. And I think we'll see it throughout the end of this year and through next year. As these refineries close, most have, but there's still a few left, and we are going to need to replace that lost production.
Great. Thank you very much.
Thank you.
Thank you.
Thank you. There are no further questions at this time. Mr. Emanuele Lauro, please continue.
We have no further remarks. Thanks very much for attending the call today and we look forward to speaking soon. Thanks very much.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.