Hafnia Ltd

OSE:HAFNI

Earnings Call Transcript 2022-Q3

[Operator]

Welcome to Hafnia's Third Quarter 2022 Financial Results Presentation. We will begin shortly. You will be brought through the presentation by Hafnia CEO, Mikael Skov, CFO, Perry Van Echtelt, EVP Commercial, Jens Christophersen and EVP, Head of Investor Relations, Thomas Andersen. [Operator Instructions]

Certain statements in this conference call may constitute forward-looking statements based upon management's current expectations and include known and unknown risks, uncertainties and other factors, many of which Hafnia is unable to predict or control that may cause Hafnia's actual results, performance or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. In addition, nothing in this conference call constitutes an offer to purchase or sell or a solicitation of an offer to purchase or sell any securities. With that, I am pleased to turn the call over to Hafnia CEO, Mikael Skov.

[Mikael Opstun Skov, executive]

Thank you. My name is Mikael Skov, and I am the CEO of Hafnia. Let me welcome you to Hafnia's Third Quarter 2022 Conference Call. With me here today, I have our CFO, Perry Van Echtelt; our EVP Commercial, Jens Christophersen and EVT and Head of Investor Relations, Thomas Andersen. The 4 of us will present Hafnia's third quarter 2022 financials. Today's presentation agenda consists of 4 key areas. We will begin with an overview and key highlights of the quarter, followed by the financials for the third quarter of 2022. Next, we will provide commercial updates and an outlook on the product tanker market and finally conclude the presentation with Hafnia's ESG governance.

Moving on to Slide #2. You should all be aware and take note of the mandatory disclaimer. Slide #3. Let me begin by giving an overview of Hafnia and key updates in the third quarter. Hafnia is one of the world's leading tanker owners and operators within the product and Chemical Tanker markets. We are a fully integrated shipping platform with our own in-house technical management and chartering teams in Asia, Europe, the Middle East and the U.S.A. Our technical management team ensures that the highest safety and environmental standards are maintained on board while our commercial team manages more than 110 third-party vessels in the pools. Our business model is also robust with diversified revenue streams, such as our bundling team who are now buying bumpers for more than 1,000 vessels for our pre-platform and third-party owners.

At the end of the third quarter, Hafnia commercially operates a fleet of over 240 vessels. We own and have chartered in a diversified portfolio of 129 vessels. Our own vessels have an average broker valuation of $4 billion, giving Hafnia a net asset value of around $2.9 billion. Being the largest operator of product and Chemical Tankers in the world, Hafnia's fleet low average age of 7.6 years and scale enables better utilization and improved earnings capability. With improving market fundamentals and a strong winter market approaching, the outlook for the product tanker market remains strong on the back of lower inventories and changing trade flows leading to increased ton miles. Lastly, we also have a clear ESG profile with the growing impact of environmental regulations and increasing demand for social and governance focus, Hafnia is well positioned and takes all responsibilities seriously to minimize our carbon footprint as well as ensure the most optimal working environment per organization.

Moving to Slide #5. Moving on, Hafnia today provides a much wider and deeper value proposition. This has been achieved through thoughtful consolidations and understanding the market and the needs of all of our stakeholders. Since our listing in late 2019, we have grown significantly and are now the world's leading product in Chemical Tanker company. Over the last couple of years, Hafnia has concluded 2 key strategic acquisitions and 2 joint ventures, cementing our firm foothold in the market. We also continue to expand our adjacent businesses by extending our offering across our [indiscernible] platforms. We now manage pools in every product segment and in the chemical segment as well. This allows us to operate on a larger scale and unlock synergies across our different business units.

With a volatile global environment in the last couple of years, we had to navigate through them cautiously. The various acquisitions have increased the overall leverage of Hafnia, raising our cash flow breakeven levels. As a result, we have been actively working on our capital structure by reducing our leverage through refinancing deals and capital raising. We have reduced our overall leverage, allowing us to take advantage of future opportunities. These various factors underscore Hafnia's commitment to growing our platform to maximize stakeholder value and exhibit that we follow through on our intentions.

Slide #6. Let me continue by focusing on Hafnia's creation of shareholder value. Even in challenging markets, Hafnia has always demonstrated the ability to produce shareholder value. Hafnia has a very transparent dividend policy of 50% net profit. We have consistently been paying dividends of 50% of net profit and have a total shareholder return of over 250% since the start of 2021. Relying on our ability to deliver strong shareholder returns, I'm pleased to announce a 50% dividend payout of $28.01 per share or $140.1 million this quarter. With that, including the share buyback in 2020, Hafnia has a total shareholder distribution of $357 million, representing an industry high payout ratio of 57%.

Hafnia's peers in general, have only started shareholder distributions this year through a combination of dividends and share buybacks. With the acquisition of CTI and 12 LR1s in early 2022, we increased our leverage and cash flow breakeven, Hafnia has taken full advantage of the upturn in the tanker market. Year-to-date, net profit from the acquired fleet has been above $110 million, including the gain from the sale of the stainless steel vessels of $11.7 million. The acquired fleet value has also increased greatly since. Based on the third quarter average broker valuation, the acquired fleet has increased by 27%, with a chemical fleet increasing by $176 million and to 12 LR1s, increasing by $116 million. I would like to take this opportunity to thank our team at Hafnia and our trusted partners who have open instrumental in these record-breaking results. Looking ahead, we will seek to build on this momentum to produce even greater results. Our robust business model, active management strategy and expansion in 2022, contributing to our modernized fleet can only flow is within these favorable market conditions.

Slide #7. Moving on, improving market conditions has allowed Hafnia to pursue our delevering objectives successfully. We remain committed to enhancing our shareholder returns. And with that, we have adjusted our dividend payout ratio upwards from the existing 50% with higher rates and increased in valuations, Hafnia liquidity and net loan-to-value have improved greatly since the acquisitions in early 2022. As we continue coping with the rising interest rate environment and lowering our cash flow breakeven, we have revised our dividend payout ratio subject to meeting our net loan-to-value ratios.

From the fourth quarter of 2022, Hafnia has initiated an updated dividend policy with the dividend payout ratio to be adjusted according to quarter end net loan-to-value. Should our net loan-to-value ratio will be 40% or below, our dividend payout ratio will increase to 60% from the existing 50%. If it reaches 30% or below, our dividend payout ratio will increase to 70% and 80% if net loan-to-value ratio goes to 20% or below. This ensures Hafnia can pursue our objective of delevering and reducing our cash flow breakeven and at the same time, create a clear commitment to shareholder return.

Slide #8. So let me move on by providing an ESG update. On top of excellent commercial performance and notable consolidation efforts Hafnia also has a strong focus on ESG. I'm pleased to announce that as part of our contribution to the decarbonization of the shipping sector, we have collaborated with clean hydrogen works to explore the development of a new global scale, clean hydrogen, ammonia production and export project. Named Ascension Clean Energy, this project will also aim to capture up to 98% of the carbon dioxide emissions from its processors, providing a cost-effective and scalable pathway to supply carbon free energy. This marks a strategic step in shaping the future of the Hafnia transfer portfolio, utilizing purpose-built vessels against long-standing contracts in the cellular carbon space.

For 2021, across Hafnia's own fleet, our carbon intensity, as measured by the annual efficiency ratio was 5.22 grams per ton mile, which is 10.9% better than the present IMO baseline. We're working hard to reduce our current fleet carbon intensity to 0.35 grams per ton mile by 2028, leading the IMO's 2030 target, 2 years in advance, and we are well on track to achieve that. In addition, Hafnia is constantly looking out for vessel optimization initiatives to reduce our emissions into the year. You can also see from the graph, the various initiatives we have [indiscernible] and the respective carbon reductions over dry dock and segue. We are always looking for potential partnership opportunities to accelerate our environmental initiatives and improve our vessel efficiency. By that, I will hand it over to Perry, who will take us through the financials.

[Perry Van Echtelt, executive]

Thanks, Mikael. If we move to Page 10. Spot market in the third quarter started strong on the back of an already solid second quarter. We saw a growth in global oil demand and higher utilization of the worldwide product tanker fleet as it continued to be influenced by lower inventories. As a result, we are pleased to announce that Hafnia has delivered the best quarterly results in our company's history for the second quarter in a row. The third quarter generated a TCE income of $407.6 million, bringing our year-to-date TCE income to $919.3 million.

Building on that, we've recorded a net profit of $280.3 million for the third quarter and $487.8 million for the first 9 months of the year. The recent increase in activities and rates has benefited our fee focused business, such as the management of third-party vessels and buying bunkers on behalf of third-party clients, resulting in $12.1 million for the quarter and $26.6 million of revenues for the first 9 months. This strong result enables us to distribute $140.1 million in total dividends or $28.01 per share to our shareholders, the highest distribution in our company's history. This represents a payout ratio of 50% for the quarter and brings our total dividend payout for the year to $243.7 million. For the quarter, we also saw a return on equity of 74.8%.

And if we move on to the next slide. As you can see, the balance sheet remains strong. We have a cash position of $151.5 million and total liquidity of more than $400 million. With the increase of interest rates for U.S. dollar financing, we have gradually increased our interest rate hedging position earlier in the year to 62.5% at the end of the third quarter at a weighted average hedge rate of 1.69% to lock in the rates to match the tenor of our debt profile. With higher asset prices and healthy cash generation on the back of a strong increase in rates, we have also noted a significant decrease in our net leverage ratio down from 55.7% to 43%.

Cash flow from operations from the strong quarter has been allocated towards reducing drawn amounts on our revolving credit facilities as they have the highest flexibility in the long term. We are also constantly working on refinancing part of our balance sheet to reduce our funding cost and cash flow breakeven so that we build both market resilience and enjoy significant operating leverage in these rising markets.

And if you move to the next page, we can look at the TCE breakdown. For the third quarter, we achieved an average TCE of $36,367 per day per vessel, more than tripling the rate a year ago. As of 16 November '22, 67% of the total earning days in Q4 '22 were covered at an average of $35,916 per day. The coverage rates for the fourth quarter remained strong, and we can expect the high rates to continue amidst the longer trading rounds as the West will continue to replenish their inventories and replace imports from Russia as the EU sanctions come into effect. For the week beginning of the 7th of November, Hafnia's pools earned an average for the following segments. So, $78,084 per day for the LR2 vessels, $39,609 per day for the LR1s, $34,513 per day for the MR vessels, 29,527 per day for the Handy vessels. And then moving to the chemicals that was 47,868 per day for the chemical MR vessels and $44,400 per day for the chemical Handy vessels.

And if we move to the next page, on OpEx, which includes our vessel running costs and technical management fees was on the basis of 10,334 calendar days, resulting in an average of $7,350 per day. All in G&A expense per day for the quarter remains low and was $739 per day. Our operating cash flow breakeven for the full fleet in the third quarter was $14,975 per day. The acquisitions in early '22 have increased our leverage levels, while the increase in base interest rates, LIBOR and SOFR has also added to this. Our traditional industry low breakeven levels and access to funding have enabled us to execute these strategic transactions, which played a huge role in the strong results we published today.

As mentioned earlier by Mikael, the net profit from the acquired fleet has been above $110 million for the first 9 months of the year. Looking forward, we will continue our focus on bringing back our cash flow breakeven across the fleet to position ourselves strongly for the future. We're also constantly benchmarking our performance against our peers, and I'm pleased with the relative performance. This comes from a keen understanding of market conditions and the quality of daily commercial decision-making.

And if we move to the next page. With the strong upturn in the product tanker market this year, we can expect '22 to record the strongest net profit in our company's history and '23 will continue to be strong. The combination of the recent fleet acquisitions and large exposure to the spot market enable Hafnia to take full advantage of the strong rates. Looking at the various scenarios here on the page, where we apply recently realized rates into our forecast and the consensus of the various analysts that cover us, you can see the strong earnings potential that Hafnia has for 2022 and 2023. Jens, why don't you take the next few pages?

[Jens Christophersen, executive]

Thank you for that, Perry. The next few pages show the global oil outlook and our expectations for the product tanker market. Despite the slowdown of the global economy and higher commodity prices, global oil demand is according to IEA expected to increase by 2.1 million barrels a day in 2022, reaching a demand of 10.7 million barrels in Q4 2022 and growing by 2.3 million barrels to 103.0 million barrels by the end of 2023. The OPEC+ alliance has disrupted global oil supply with its recently announced cut of 2 million barrels daily. This, combined with an EU ban on Russian crude and refined oil products coming into effect, is set to redraw the global trade lanes positively.

We remain very bullish on the product tanker market. We can see the level of product tanker deadweight ton deliveries in the last 5 years are at a low. And with the expected growth in oil demand, we can envisage utilization of product tankers to increase. On the graph to the right, we can see that clean petroleum product tankers with cargo in October have trailed off from the peak in August and September, but are still at very high levels. Going into November, we can see increasing utilization. As the EU sanctions on Russian products come into effect, utilization is expected to increase further and reach levels like in May 2020.

Slide 17. Global oil trade routes are being withdrawn because of EU sanctions and self-sanctioning, leading to longer trading routes. Volumes of clean petroleum products loaded daily worldwide have increased by 9% from Q1 to Q4 2022 and the increase originates outside Russia. Whilst the impact on tankers' earnings appears to be significant now, the daily volumes of clean petroleum products loaded in Russia on tankers destined for the EU continue to be about 0.7 million barrels per day for the 4 main Hafnia segments, Handy, MR, LR1 and LR2.

With less than 3 months before the EU embargo and refined Russian products, EU countries have yet to diversify more than half of their pre-war import levels from Russia. By February 2023, the EU will have to buy that cargo volume from the U.S. Gulf or the Middle East, resulting in significantly longer transportation distances for oil going into the EU. We expect these volumes to the EU to continue dropping before the embargo comes into effect. This drop in Russia's export volume will be compensated by a similar increase to regions outside of the EU, again, with significant ton miles gain on the horizon.

Slide 18. In the third quarter, the product tanker market experienced a decrease in latent distance. This was despite an increase in cargo volumes, hence resulting in reduced ton-miles. However, this was partially offset by an increase in balanced distances. The fourth quarter has seen latent distance increasing again to levels higher than the second quarter, not attributed to the seasonal spike typically experienced in the first quarter. We also noticed an unusual ballast duration spike in the fourth quarter as tonnage trading Russia do not triangulate. And generally, we've seen tonnage ballasting longer distances towards the strongest both markets, examples given from the West to the East at the end of Q3, early Q4.

Slide 19. Moving on to the refining sector. Global refinery runs in October have fallen to 80.4 million barrels a day, mainly attributed to declines in the Atlantic Basin, but offset by higher runs east of Suez. Looking at October's export levels, we are still waiting for new refineries in the Middle East to operate at full capacity. Saudi Aramco's [indiscernible] refinery reached 125,000 barrels per day in October, reaching 30% of its 400,000 barrels capacity and is expected to reach full capacity by the end of the year. Meanwhile, Kuwait Petroleum Company, [indiscernible] refinery is close to its first diesel exports. 2 of the 3 refinery units are running today and the entire complex with a capacity of 600,000 barrels a day could be up and running in January 2023. This will help Europe in diesel imports as they are increasingly looking to refiners in the regions, such as the Middle East to meet a potential shortfall of diesel as inventory levels have been dropping and sanctions on Russian products are coming into effect soon.

Slide 20. With oil output set to increase in the Middle East, this will represent an increase in cargo volumes and longer voyages for product tankers. Sanctions on Russia supply have led to the recalibration of trading routes, supported by strong demand from Middle East distillate barrels in Europe and Africa. Cargo volumes and ton miles for clean and crude counterparts have already surpassed pre-pandemic levels. We expect this to continue increasing as the EU looks further to substitute their current imports from Russia.

Slide 21. Storage levels are also a significant driver for the overall tanker market. According to IEA, global oil inventories dropped by 14.2 million barrels in September as lower onshore inventories in both OECD and non-OECD countries were partially offset by a surge in oil and water. The announced cut in OPEC+ oil supply will also sharply reduce a much needed build in oil stocks through the rest of 2022 and into the first half of 2023. This leaves a significant risk for a price spike with lower supply and depleting inventories. Inventories for clean products in the West remain below the last 9-year average, while levels in the East sit above the historical average. However, it seems clear that Eastern inventory builds mirror product groups needed west of Suez. With the start-up of significant volumes in new refinery capacity in the Middle East, we can expect clean trade volumes to increase to replenish this drop. Historically, rates have been very strong when inventories are being built.

Slide 22. Looking at the supply side, we remain bullish on the tanker market with a declining order book levels and an aging fleet. The product tanker order book is at a historical low of 5% of the total fleet and the potential scrapping of older vessels, 25 years for Handy and MR, 23 years for LR1 and LR2 represents only a net addition of about 35 MI equivalents from today until the end of 2025. This paves the way for higher utilization of existing vessels to push the market levels even higher. Additionally, we do not expect to see rising orders for product tankers due to increasing newbuilding prices and fully booked yards. Mikael, over to you for the next couple of slides.

[Mikael Opstun Skov, executive]

Thank you. And we are currently on Slide 24. I would now like to talk about Hafnia's holistic approach to ESG. Focus on ESG has been gaining traction over the past decade, and our responsibility is to ensure this is clearly established within Hafnia's culture. Board and leadership group anchors our ESG strategy and is responsible for the supervision and strategic direction.

We have identified 90 material topics which we believe are most important to us and our respective stakeholders to ensure Hafnia aligned with our business priorities with a long-term focus on ESG. We have an ESG function that assists the leadership group in tracking our ESG performance and progress, ensuring everyone is accountable for executing the company's sustainability ambitions. We will also report comprehensively to ensure all stakeholders know our strategy and performance in these respective areas. This ensures that all stakeholders and employees are aligned on our ambitions, which will be key to the long-term sustainability of the company. With that, I'd like to open up the call for questions.

[Operator]

[Operator Instructions]

[Perry Van Echtelt, executive]

I think we have a question from Paul from Clarksons.

[Unknown Analyst]

Question on this embargo coming up. Last time you quantified it. And now, I guess, it's already in motion, so to speak. But do you have any updated number on that effect from here onwards?

[Jens Christophersen, executive]

This is Jens. We do not have a specific number of MI equivalents that we believe will come out of this or what we can conclude at this point in time is that the majority of the effect is yet to be seen on the market. Today, so far, Q4 year-to-date, we have about 700,000 barrels a day of fleet petroleum products that are moving by tankers from Russia into the EU and the U.K. And if we look at November, that's a loan, that number has actually grown to almost 1 million barrels a day. So, from what we are seeing today, Russia is exporting as much as they possibly can ahead of the February 5 deadline next year. So, it looks like we'll have some busy months ahead of us. And from there onwards, we will have quite a dramatic change in trade bounds.

[Unknown Analyst]

Yes, I guess. So, it's safe to assume that it's something similar to the, let's say, 7%, I think you talked about last time.

[Jens Christophersen, executive]

Yes.

[Unknown Analyst]

Great. On the market, I mean, there's now a big dislocation, probably temporary, but crude Aframaxes are $100,000 per day and a lot us somewhat lower. Are you seeing any interest in darting up LR2s?

[Jens Christophersen, executive]

Yes, LR2 already started to [indiscernible]. And basically, we've heard figures between 11 ships having [indiscernible] lately, but as high as 18. And the motivation is quite clear when you look at the Aframax market in the U.S., Gulf, just to mention one, that's gone to almost $190,000 a day for early Aframax. So, the motivation to change is quite high right now. So, we expect that a trend that will continue [indiscernible].

[Unknown Analyst]

Yes. And that's good for the market, of course. Would you do the same or keep them clean?

[Jens Christophersen, executive]

I mean so far, our presence in the clean LR2 market is not massive, and we're keeping the 16, but we are always open to consider that if the right opportunity comes [indiscernible].

[Unknown Analyst]

Okay. If I may have a third question on the dividend policy. I understand the motivation of deleveraging on the way up. But is this step change in the LTV thresholds onetime thing? Or is it -- should we also see it as a permanent cyclical at one time, in a few years' time when vessel value started to fall again or you then go down on payout ratio.

[Mikael Opstun Skov, executive]

Well, I can maybe just elaborate a bit on that. I don't know, Perry if you want to add on afterwards. But obviously, I mean, the new dividend policy really reflects the fact that it would be to an interested growth period, and we feel that we don't have upcoming CapEx, newbuild programs or anything like this. So, it's really a focus about returning as much capital to shareholders as we can. But at the same time, making sure that we don't lose sight of having a competitive balance sheet. But it's not like we have made different plans or different dividend policies going forward. I mean, obviously, we hope that this will and we think this will continue for quite a while. So, this is really more about the fact that we have reached a certain size and therefore, find it more the right way to try to maximize on the dividend payout.

[Perry Van Echtelt, executive]

There is a question from Frederik Ness in the chat box. Is there any activity in Chemical Tanker time charter market? And what is the current one-year TC rates for the various chemical tech segments? And what is our charting strategy for the Chemical Tankers going forward?

[Mikael Opstun Skov, executive]

That's a good question. The Chemical Tanker segment is quite a lot smaller than the general CPP equivalent in MR and [indiscernible]. So, there's not a lot of activity in that segment. The latest move we've seen is that the carbon of traders have taken IMO 2 MRs on time charter, one year, $32,000 a day. And at the time when this was done, that was probably a rate that was a little higher than the rate for [indiscernible], MR. Our strategy is to stay in a spot market that's currently very strong and wait for the strength to build go over the winter and gradually, we'll start to engage in looking at cargo contracts that will enable us to trade these ships around the world trade going forward. So, to us, it's not too attractive to fix on time charter, we would rather build our own consensus. Having said that, yes, at some point in time, we may well time charter of some chips. Let's see. It's also a question of our money, of course.

[Operator]

We have another raised hand. I've just unmuted you. Do you still have the question? I've just unmuted you.

[Unknown Analyst]

Sorry, I muted myself as well. I have one, I guess, a bit technical question on the dividend. There's some other Norwegian shipping companies that managed to pay dividends out of capital rather than out of profits, which basically means that investors in a bunch of jurisdictions don't pay kind of the level of withholding taxes they otherwise pay. Is that something you've looked into? Is that possible to do in your structure, do you think? Or can you comment on that at all?

[Perry Van Echtelt, executive]

Yes. It's Perry. That is not something that we have looked at into detail. We'll be curious to hear what that is. So maybe we can take that offline.

[Unknown Analyst]

Yes, sure. Helpful.

[Operator]

We have another raised hand from Petter Haugen.

[Petter Haugen, analyst]

This is Petter Haugen from ABG. A quick question on the U.S. market here. So, in the data, it seems as if exports not only of crude has risen out of the U.S. but also on the product side. So, could you share some observations and market intel on what is happening on the U.S. side of the product tanker markets? And the reason I'm asking is also because of the SBR draws, which is now supposedly coming to an end? And to what extent that has been exported in form of products or crude is, I think, a question many of us ask themselves. So, any sort of view on what the consequences of the SBR draws coming to a stock will have for the product link markets and generally intelligent sort of data observations on the U.S. markets.

[Mikael Opstun Skov, executive]

Petter, good question. Also, aware that the SBR draw that's coming to us of that will potentially protect the impact on products. Our perception was that it was accrued release to the market rather than a product release. But if we look at the product exports alone in the U.S. Gulf, we've seen a high level for a good amount of time. And last week was quite a meaningful week in the sense that we finally came to the same tipping point where the number of ships available to live cargo is just not enough. So, when you look at the U.S. Gulf market, it's typically quite an aggressive market that moves very quickly off high and also the other way, of course. Last week, started at about $20,000 a day for the usual U.S. Gulf [indiscernible] and ended the week at probably closer to $70,000 a day, and there was even a $100,000 a day fix from U.S. Gulf into East Coast Mexico. So, it was busy in the Gulf. I believe that the main reason behind this activity is simply that the U.S. refiners are enjoying quite high margins. For that reason, we are refining as much as the pate and there's plenty of offtake for it.

[Petter Haugen, analyst]

That's very helpful. And if I could follow up on the asset price side. So at least in our observations, it seems as if, in particular, the Aframaxes LR2s our pricing relatively better than MRs and other tankers in general, I would say. And one can, of course, suspect that has something to do with what type of tonnage is carrying Russian hydrocarbon out of Russia. But in terms of recent transactions in the market, what would you say is a fair price now for a resale MR and a resale LR1 and LR2.

[Mikael Opstun Skov, executive]

The latest transactions we've seen has been in the mid 75 for resale LR2s. And for modern resale MRs we haven't seen much. There's a fair amount of activity going on in the market and the latest rumor in the market is that a 2016 build MR has been transacted at $40 million. And that order shift continue to be sort of the flavor of the day. But this is on this side of the market, it's really a moving target. It moves quite quickly.

[Operator]

I think we have another question from [ Shawn Nelsen ].

[Unknown Analyst]

I had a question more on the supply side. I know all the ship owners right now are saying that supply doesn't really have any change into 25 or 26. It seems to me that in past cycles, it's a rosy outlook and then we see yards that were previously bank or coming back online. I guess I was just wondering, have you seen anything of that nature that would kind of cut back on supply rosiness?

[Mikael Opstun Skov, executive]

Thanks for that, Shawn. Well, basically, I think that's a big difference from, let's say, the previous upcycle and building cycle versus now since after 2008 and '09, we've seen a massive consolidation shipyard in general. So, the one you referred to in the older days, which is true that there was a tendency of trying to revive [indiscernible] shipyards, et cetera. That's not likely on the case at the moment. You're seeing much more consolidated shipyard groups. And the reason we are a lot more comfortable around this time is that as you probably know, I mean, the order book is filled up with a lot of different ships than tankers, mainly gas ships, VSCs for tailor ships.

And although, of course, you are going to see some options down the line and not being utilized by owners, and therefore, yards trying to sell ships you don't just convert the yard space that are building containers, VSCs or gas ships into product tankers. So those will be different cases.

So, we actually think that actually we have now where the earliest we get product tankers would be sometime in 2025, is not likely to change. And even and despite rather that prices are extremely high at the moment. So that is the self-discourage anyone from buying the product tankers. But I think it's fair to say this time around, it's different, and we don't see Golan shipyards and things appearing overnight that will disturb that balance.

[Operator]

Do we have any more questions? Any more questions in the chat?

[Perry Van Echtelt, executive]

Not that I can see.

[Operator]

We have come to the end of today's presentation. Thank you for attending Hafnia's Third Quarter 2022 Financial Results Presentation. More information on Hafnia is available online at www.hafniabw.com. Goodbye.