Hello, and welcome to the Scorpio Tankers Inc. Second Quarter 2021 Conference Call. I would now like to turn the call over to Brian Lee, Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and thank you, everyone, for joining us today. Welcome to the Scorpio Tankers second 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 second quarter earnings press release, which is available on our website, scorpiotankers.com. The information discussed on the call is based on the information as of today, August 5, 2021, and may contain forward-looking statements that involve risks 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, as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.com and at sec.gov. Call participants are advised that the audio of this conference call is being broadcast live on the Internet and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days. There are slides at scorpiotankers.com on the Investor Relations page under Reports and Presentations. Those asking questions, please limit the number of questions, so everyone has a chance. If you have any specific financial modeling questions, you can contact me later and discuss offline. I'd now like to introduce Emanuele Lauro.

Thank you, Brian. Welcome everybody from myself as well. Welcome to our second quarter 2021 results call. Before I start with my opening remarks just wanted to make everybody aware that Robert Bugbee had a very last minute personal issue and may not be with us for the first 30 minutes of the call. We will play it by ear as we go along. As far as the remarks are concerned, instead we've seen market weakness caused by the pandemic, which disappointingly continued in the quarter. Despite that, we believe with increasing conviction that the recovery has been deferred rather than cancelled. I am pleased that the value of our incumbent position has continued to increase with vessel prices that have risen and very low supply growth, which continued over the quarter. Our modern, spot-exposed fleet remains very well positioned. We have continued to focus on sensible balance sheet management and liquidity management ahead of the normalization of ton-mile demand and the upswing in rates, which we anticipate in the final part of the year. Concerns over variants of COVID-19 are dominating or have dominated and unfortunately still are dominating global markets. Restricted government policies have led to a delay in recovery in many sectors and the transportation sector specifically was hit as well. This means that for the product space, ton-mile demand, although stronger than a year ago, is still running well below 2019 levels. Indeed, in the Southern Hemisphere some developed nations have recently entered a form of lockdown for the first time and this is another negative to the transportation sector specifically. As far as we are concerned, as I've mentioned, we continue to manage our liquidity actively to ensure that the business remains on the front foot. This quarter, we have upsized our 2025 convertible bond. We tapped the baby bond market and negotiated that facility, which I would describe as innovative and climate-linked. Against the backdrop in rates which we've experienced and are experiencing, inventories are low, crude prices have recently stabilized, setting the theme for an enduring recovery, which we believe will follow the usual seasonal pattern in the second half of the year. We have seen OPEC, mid-last month, reflect the progressive reduction in the current supply cuts. These cuts should be eliminated entirely by the third quarter of 2022, and this is a sensible trajectory to use for the anticipated demand recovery. The tanker market recoveries, therefore, as I've mentioned before, are deferred rather than canceled, but we remain increasingly confident in our position. I should also add that against the backdrop of the weak market, the outlook of premium which can be achieved really by our ECO and scrubber-equipped vessels continues to increase, and we expect this spread to continue to widen in the quarters to come similar to what we've experienced in the first quarter of 2020 and the last quarter of 2019 actually. In similarity with other spaces, product tanker values have continued to improve. Input prices are increasing as well and yard availability remains low. There is demand for new tonnage in other sectors that continues to be very strong and this, of course, positively impacts the product tanker supply side. We believe this increase in asset values is a precursor to an improvement in cash earnings. Quietly but steadily, our incumbency position has become more and more valuable throughout this point of the cycle, and we have seen this year how richly patience can be rewarded in shipping sectors. And we see no reason why the move up in tanker rates should differ in terms of the recovery path going forward. Many of the same variables, particularly constrained supply, are evident and are here to stay. We remain optimally positioned to capture this upswing as the world continues to normalize. And I will now pass the word to Lars Dencker Nielsen, who is going to walk us through market overview. Lars?

Thanks, Emanuele, and good morning, everybody. During the last earnings call, we were excited about the rising number of vaccinations in the U.S. and in Europe, and the impact that vaccinations would have on refined product demand. And I think many of us have just received or are getting their first vaccination. Based on the initial data we saw, vaccinations would increase personal mobility and be the key driver in recovering demand for refined products. We still believe that, in fact, even more so. However, we have also been experiencing a significant refinery maintenance season and our expectation was that refining capacity coming back online would translate to increased seaborne volume. The short of it, refinery maintenance turned out to be more significant than we expected. And when capacity returned, we encountered an asymmetric spread of the Delta variant in key regions, which delayed the widespread recovery, especially jet fuel. Also, a weak crude oil tanker market increased the number of VLCCs carrying distillate on their maiden voyages from Asia to the west, displacing product tankers and discounting rates, particularly on the LR2, LR1 backhaul voyages. Now, while the recovery deviated from our expectation, robust economic growth, rising vaccination rates, increasing mobility levels and the easing of social distancing will underpin stronger global oil demand in the second half of this year. We are now starting to see arbitrage barrels moving longer-haul, specifically an increase in transpacific voyages lately, which has helped to improve rates over the last few weeks. Two of our vessels have been loaded in Asia bound for South America and New York. And in the same vein, Trans-Atlantic MRs have moved out of the lows of the second quarter and we are now seeing some positive volatility that otherwise has been lacking in the last eight weeks. This shift reflects the general rebound in gasoline and diesel demand in the Americas with resurging Latin America posting almost 2 million barrels per day of imports in July. Refinery utilization has increased and the U.S. averaged 92% refinery utilization in June and July, the highest level since COVID started. And looking forward, I think we will also continue to see global refinery rationalization led by the closure of uncompetitive refineries. This conversely will lead to increased ton-miles as emerging geographical dislocations will require products to travel further to market. And even as refinery utilization has increased, the significant draw we have seen in global inventories and rising demand leave these inventories now within or below five-year historical bands. We have seen though a recovery in jet fuel demand, though there is still room to go. Now while global commercial flights are at 89% compared to 2019 levels, global jet demand is only at 70% of 2019 levels. On the supply side, things have improved. High steel prices combined with an older fleet profile has finally seen a meaningful increase in scrapping. This year the number of MR scrapped is likely to be the highest ever. We continue to have a benign vessel supply outlook. The historically low product tanker order book and the constrained shipyard capacity focusing on the higher valued container, LNG and bulk owners have pushed newbuild slots out to 2024 and either way are leading to substantial increases in the newbuild contract price as Emanuele mentioned are being negotiated currently. We remain patient and constructive and confident that we are embarking on a full multi-fleet sustained recovery. It is a question of time when the remaining cylinders on the engine fire up. We have maintained that we anticipate a second half recovery for a long while, and this view continued to hold. However, we are now probably looking more at the back end of the second half before we can expect to see a meaningful rally. These factors at play, including the young Scorpio fleet, mean Scorpio is well positioned to take advantage of the market opportunities as they materialize. With that, I think, operator, we can now go to questions. Thank you very much.

Thank you. Your first question comes from the line of Omar Nokta with Clarksons Securities.

Hey guys. Good morning. Good afternoon. You guys have obviously been pretty busy here, obviously looking at things in the near term, at the dual-fuel opportunities. I guess, my first question I have is actually on the investment that you've made here that you discussed in the Dual Fuel Tankers. I know it was a small minority stake, small capital outlay of $7 million, but can you maybe give just a perspective on what drove you to this investment and is this sort of like a — is this the kind of getting your feet wet type of thing in terms of dual-fuel propulsion?

Hi, Omar. It's Cam here. I think that's the right way to look at it. It is a modest amount of money. We do expect it to be a very positive IRR investment, but the real rationale here is, as you say, starting to get engaged in the benefit of dual-fuel and the trajectory of methanol over the next one to two decades. If you were to look back at our investment in our first ECO tankers that delivered in 2012, it was a period of about two years of R&D and designing and constructing that first asset, which then has transpired into where we are today notwithstanding the market. We are in a far more competitive position because of that work versus our peers. Similarly with an investment like scrubbers, that took a fair bit of time and investment in research, not something you could do in spreadsheets or on the Internet, but really getting engaged in order to translate into, again, something that makes us far more competitive than our peer group. So I would draw a line through those initiatives to this one saying, look, it's not something we expect to be transformative in the near-term, but it is modest. It is going to be a positive return and it allows us to get seriously engaged in positioning the company to be as competitive as possible and stay ahead of the pack for the rest of this decade.

Thanks Cam. That's helpful to understand the backdrop. And there's been obviously a lot of talk about LNG dual-fuel, at least on the larger ships, and then maybe perhaps ammonia years down the line. Is methanol seemingly probably the — is that what’s sort of gaining traction here for the mid-sized vessels going forward?

Yes. I think that's well noted Omar and LNG, every alternative has its pros and cons between the infrastructure that may or may not exist and the pure volumes that are available. So LNG, say the easiest bridging fuel, but further down the line, people are talking about hydrogen or ammonia, which I would describe as more aspirational fuels for shipping. Methanol falls right in the sweet spot, where there is a fair bit of infrastructure already in place. There's a fair bit of industrial demand and production already in place. What's interesting to us about methanol is not just that aspect, but also the fungibility between what one calls black or grey methanol and the blue, green or even eMethanol that people are discussing in the near future. And notwithstanding the lower energy density of methanol versus conventional fuels, the transition of our fleet into dual-fuel tankers or at some point in the future, the time where we have to think about fleet renewal is very interesting in this respect.

Got it. Thanks Cam for that color. Maybe just one small follow-up. I know it's a small investment, but is there potential to grow that stake for instance in dual-fuel tankers? Is that something you're interested in? Or is it more negligible at this point?

No. I'm sort of limited in how I can respond to that. I'd say, of course, it's interesting to us, but we have many other priorities to manage at the moment. So again, I would just say this is a foot in the door or a toe in the water. We'll see how it goes if things go well. There is a fair bit of opportunity there, but our expectations right now are just modest and focused on getting engaged in the trade and understanding the technology thoroughly.

Yes, understood. Will be interesting to see how things develop there on that front. I'll turn it over. Thanks Cam.

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

Hey. Good morning. So can you talk about your vessel age? You used to be the youngest, but now you're starting to age with – you've got five vessels nine years old, another five eight years old. How do you think about fleet renewal? Or do you come up against any point of pressure on rates as the fleet starts to age? Or are you still viewed as peak age in the market?

Maybe I can — do you want to go Emanuele? Go right ahead.

No. It's fine. I was going to start and then you can chime in. I was saying, in general, fleet under 15 years is treated in very similar ways. The features that differentiate the vessels are the technology, the engines and the design. So as Cam has alluded to in answering the question before, our first generation ECO design vessels, despite being eight or nine years old, still are ECO design vessels. So we do not get any issue and they operate in the same way in the same markets as the rest of the fleet. That's a fact. As far as thinking about fleet renewal, I think that we are to an extent in a luxurious position because we do not have to at this stage think about fleet renewal. In terms of the technological shift that is happening to dual-fuel, et cetera, it's something that we can — again, as Cam described just a few minutes ago, start looking at and working on without taking a big position because we have today the ability to actually watch what is going to happen, whether LNG is going to be the next step or whether alternative fuels like ammonia or hydrogen are going to come sooner than expected. And sooner than expected doesn't mean one or two years by all means, it means maybe five, seven, ten years from now. And so we still have a bit of time before we start thinking about fleet renewal in a more active way, in a more strategic way, even though we are always weighing all the options ahead of us, and the methanol investment is a testament to that.

Thanks. That's helpful. So let me — I guess, maybe Brian, I think on cash. You've lost money now, 16 of the past 20 quarters. It looks like you pushed out some of the scrubber installs. I guess you've got a couple left in the fourth quarter, eight next year, some of the water ballast treatment you've pushed out. Maybe talk about your capital commitments to come — obviously, you've done a lot of debt work this quarter, you still have $210 million due over the next three quarters and $215 million in 2022. So I mean, it's just a question of we keep pushing off that recovery, it seems like it's constantly on the call. Maybe talk about, one, what gives you the confidence that — you talked about the rebound in the fourth quarter — later fourth quarter, the confidence in that. But in the interim your ability to handle those capital commitments in the interim on the debt side.

All right. Thanks, Ken. Well, keep in mind that some of that debt that's coming due is going to be refinanced and we're working on the refinancing of that. And maybe I just explain what goes on when we refinance, and how liquidity is created from that. Our ships are refinanced with repayment profile, not a term of the loan, but the repayment profile, so that when a vessel reaches about 15, 16 years of age, the vessel is debt free, and then the vessel's useful life is 25 years. So that's 10 years of debt free on a vessel. But so to give an example, if we refinance a five-year old ship for $30 million, repayment profile is 10 years. So each year we pay $3 million. So the initial debt balance goes down by 10% each year. But under normal conditions, a five-year old vessel does not go down by 10% in value. Yes it can, but again I said normal conditions. And if we use a simple straight line of a 20-year life, the vessel value would go down by 5%, but that's not realistic. If you look at discounted cash flows, where the reduction is significantly less than that for a vessel that's between 15 years and 19 years, it's not a 5% differential, it's closer to 2%, when you do discounted cash flows again. Also keep in mind that vessel values, as Emanuele said, have increased this year. And Ken — and this is not the historic highs — it has ways to go up to the historic high. Therefore, when the refinancing comes across, we have the ability to get some liquidity out of there. So that's where we're going with that. So it's not — it's a normal transaction when — especially when you're dealing with 131 vessels, and if you say the average term is six years, we're talking anywhere between at a minimum nine vessels to up to 30 vessels that are refinanced each year. So again, that's how liquidity is replaced. And so that — repayment of debt, when you go to refinance, puts up additional cash there. So that's why we're able to do that.

Okay. And just thoughts on the timing of the water ballast and scrubber. Am I right, you've pushed some of that out? Or is there still capital coming on those that you've pushed out further? Or are we wrapping that program up?

Both those programs are being drastically reduced going forward here. I think we have like $20 million for the rest of this year. We have some next year. But going forward that's dramatically reduced. So yes.

All right. Thanks for the thoughts and time.

Your next question comes from the line of Greg Lewis with BTIG.

Thank you. Hey, good morning, everybody. And Brian, just following up a little bit on Ken's line of questioning. We saw that asset prices are moving in the right direction as you look to refinance. But maybe just to paint some broad strokes — realizing that the debt financing and asset lease financing market are fluid markets — as we kind of look around and like over the next couple of quarters, it looks like there is run rate around — you have about $280 million of debt that needs to be repaid, more amortization. Is there a kind of a rough way to think about, hey, we're paying 280 of that, but we can probably then refi, since we're paying that we can refinance 40%, 50% of that 30%. Is there any kind of way to think about that just as we try to think about what your cash commitments really are and really maybe the — I think a lot of people look at the cash on the balance sheet and say, okay, we look at the debt repayment schedule and there is a real pressure to increase cash, generate cash from operations. But just kind of any color around that I think probably would be helpful.

Well, there's no secret formula as you're pointing out, it is fluid. It's the age of the vessel that's involved. It's where it is in the loan. I don't have a magic formula to give you here. As you spoke, we have — part of my answer to Ken was to give an example of where liquidity is raised. And each one of our vessels now if we were to go out and refinance, we would get more liquidity. So it would be — the age of the vessel is there. I think we've been transparent in every quarter saying what we're working on, and we've tried to be realistic and somewhat conservative in what we've said. So I think we will continue to do that. And as we say right now is what $59 million for 13 vessels that we're working on. And again, some of those debt repayments that we're looking at here will be refinanced just in a matter of time when it comes across and that's why we're showing it that way.

Okay. And so, like, as I think about advance rates from leasing houses, is there kind of like — how have those trended? Where are we today? If we're looking to refinance a vessel, what type of advance rate do we get on an asset? And does it differ if the vessel is under five years old versus over five years old?

It can make a difference there, but generally, also the valuation is going to change. So it's not going to be significantly different. So if you're looking at a finance lease, you're probably looking up until 85% depending on what you're doing, and then regular banks, you can go up to 65%. Now we're seeing in some places, we're seeing bank markets come back as well at the same time.

Okay, great. And then just Cam, just kind of more on the follow-up on Omar's questions around the methanol. At a certain point, it seems like with all these alternative fuels it's going to be real — infrastructure is what's going to be required. Where do we stand in terms of the methanol infrastructure right now, realizing the methanol trade that you have vessels that transport methanol used? What does that infrastructure look like right now?

Thanks for the question. And I would say it's — obviously a fraction of the infrastructure of conventional fuel. a) it exists, b) it piggybacks off of the existing sort of oil major dominated and refinery dominated fuel infrastructure, and c) at the end of the day, we're talking about dual-fuel, which implies switching capability for the vessel. And so if you look at where is the most feasible place to go from here? It is some sort of dual fuel propulsion system, not ammonia or hydrogen. Those things aren't even conceived as far as both their infrastructure requirements at this time. So the nice thing is that there is infrastructure that exists for methanol. Obviously, it hasn't developed or matured yet, but there is a clear path by which it can develop and can develop easily and pragmatically. So that’s part of the reason we're so drawn to this as an area of further study.

Perfect. Thank you for the thoughts everybody.

Your next question comes from the line of Jon Chappell with Evercore ISI.

Thank you. Good morning, good afternoon. Emanuele, if I can start with you, you mentioned the secondhand values are really strong and it's something that we notice, basically weekly. And it seems like the disconnect between the underlying rates in the market and the asset values is widening, probably on the path that Lars laid out and the optimism around it. In prior cycles, you guys have used sale leasebacks to kind of refinance and keep the liquidity elevated, which is just another way of adding that. With 131 vessels, a ton of operating leverage already, and this widening disconnect, have you considered maybe just monetizing some of those ships in the strong secondhand market in order to retain substantial operating leverage, but also boosting liquidity without adding more debts?

Thanks for the question. I think that we are always open and considering whether we should buy or sell whilst we are running our ships. It is difficult to pinpoint the time in which you're going to strike and sell some of the vessels or go the other way and add to it. As far as selling ships, selling a couple of vessels today wouldn't really change anything strategically. We are and remain optimistic and are happy with the positioning of the company. And whilst we've sold in the past opportunistically, some of the vessels, which we had at the time where we perceived that specific pricing being at a premium to market for which we would not consider selling it any time, really, when there is a premium paid and the deal makes sense. I do not think that at this stage, we are in a position to let go of some of our assets because we think that the opportunity is in front of us and we would be selling prior to the cash generation of the assets actually following up the asset appreciation itself. It is right, however, Jon, if we were going to go down the liquidity generation idea, we would need to sell a number of ships, and I don't know how many buyers there would be for a large number of vessels. So we actually have taken since many months now a different approach and not only focused on sale leasebacks, but also on refinancing and green refinancing, green loans and went through that process refinancing or replacing facilities which we had inherited from previous acquisitions, where we had sale leasebacks and we actually converted them into conventional financing and still we were able to generate cash. So it's a little bit as well how at which specific point the facilities which are maturing are coming to maturity. But I take your point. I hope I've answered your question.

Right. I guess that's the time value of money. If you can realize that cash and the asset immediately instead of waiting for recovery that continues to get pushed to the right, just maybe it's a less overbearing method of adding liquidity versus sale leasebacks. Just wondering about that. And then…

It is a fair point, Jon. If we were going to sell to generate liquidity we would consider it, but there are also practical market considerations around how many vessels you could sell without impacting sale prices and the availability of buyers for that scale.

Yes. I appreciate that. Second question for Lars. I think we're so focused on the western world and the pace of vaccinations here and TSA numbers and driving numbers in the U.S. and Europe. But it seems like this latest variant is really starting to hit Asia and causing more lockdowns there, whether that's related to travel, like in China or whether it's related to manufacturing in Vietnam or Malaysia, Indonesia. I'm not asking you to time a recovery of demand in Asia, but I think the question is more along the lines of what does that do to the fleet, not just your fleet, the MR product tanker fleet, or the LR2 product tanker fleet in causing disconnects across basins and impeding trade in really dampening the magnitude or timing of any recovery, even though up until last week, most of the headlines around our areas of the world were pretty positive towards the demand recovery.

Thanks, Jon. I think that when you look at India, which was the cause of concern a little while back, the V-shaped recovery that you've seen in gasoline consumption has been quite astounding, and it's impressive how that actually can turn around. You look at the immediate numbers on Chinese consumption at the moment with what's going on in China with the Delta variant and the two kind of lockdowns in Nanjing and in Beijing as well, where you look at the numbers from the energy aspects, it doesn't seem to have had that big of a shift. So it's a good question. Who knows what's going to happen. When it comes to Malaysia and Indonesia and Thailand, of course, they've been hit. But when we then look at our ships and what's going on right now, and we take a snapshot as of August 5, the markets in MRs and the LRs in the Asian markets rocketed 30, 40 points over the last couple of days. The LR2 market is starting to move up. The arbitrage volume that I referred to in my prepared notes, we started to see a lot of that volume moving further afield, increasing ton-miles. A lot of transpacific cargoes are now taking place not only with gasoline and distillate, but we've seen jet fuel now moving from North Asia and going to the U.S. West Coast. We are seeing products moving into Peru. We've done business from Asia on MRs into New York Harbor, which is something we haven't seen for 18 months. So there's a lot of different kinds of volumes that are moving around in different ways, which I find very interesting. And these things, obviously they're connected to each other. If I drill down a bit more, what's going on in the Arabian Gulf at the moment, you're seeing a very strong MR market. And then suddenly you see in the LR1 market that has been so quiet for such a long time suddenly move up as well, and that goes into the LR2s. Before we would have one market move and the other two would start kind of substituting into the other, but two kinds of cargos together, or they split the cargos up depending on where they can see the weakness. Suddenly you are seeing three markets — albeit in early doors here — start moving in unison. The thing that's the biggest problem that we have been facing in the first half of the year has been the very weak crude market where the newbuildings on the VLCCs in particular have been kind of taking a lot of the business that otherwise would have been done on LR2s and LR1s primarily. And that really has depressed the backhaul market and the long-haul market going to Europe. So when you then look at and say, well, what does it look like in the second half? Do you believe that OPEC plus with its opening up is going to support the crude markets? The argument would be to the risk of the upside of that. You will start seeing as well that much fewer newbuildings coming out in the second half of the year. That's historically always the case. So you can start saying, well, things might dynamically change as we move forward. So I am constructive when suddenly I see this volatility happen as quickly — everybody thinks, oh my gosh, this is not so good with the lockdowns that take place, but then you drill down to it and you look at the actual numbers. And what that means to shipping somewhat changes. And Jon, I hope that answers your question.

Yes. That's very helpful, Lars. Thank you so much. Thanks Emanuele.

Your next question comes from the line of Randy Giveans with Jefferies.

Hi, gentlemen. How's it going?

Hey, Randy.

A few quick questions for me. First, on the scrubber installs for 2022, I think you have eight of them scheduled. Any opportunity to pull those forward to kind of reduce the off-hire days next year?

I don't know, Cam you want to take these otherwise…

Sure. Thank you, Emanuele. Look, the ideal way to schedule the installation of a scrubber is for that installation to coincide with an otherwise regulatory mandated drydocking. So you can do those things in parallel. Now the mandated drydocking theoretically could be moved forward, but you would do so at the expense of the tail end lifetime of the asset. It's like moving your birthday around. So we generally keep to the class-required drydocking schedule, the mandated schedule and then we do as much work at the same time concurrently while the vessel is in the dock as possible and that's what drives the scrubber schedule. So the easiest way to respond is, yes, we're thinking about the most efficient way to do this work, the most cost-effective way and the way to minimize off-hire, and that's reflected in the schedule that you see.

Got it. Okay. And then we mentioned rates and some drivers in the last few minutes here, but your third quarter quarter-to-date rates are clearly well below the second quarter quarter-to-date rates. So I guess what kind of rates are you booking today and do you have a time expectation for when you expect to see a more meaningful recovery?

I think as far as the recovery or the more meaningful recovery alluding to what I was saying before, and what Lars has said as well in his comments, it is something that we think has been delayed probably towards the second half of the year, and as Lars said, the latter part of the second half. So let's say Q4 to see a meaningful upswing in the rates. As we speak, and I'm sure as you've seen from the indices, actually in the last two, three days, we are experiencing an increase in rates. Of course, it's welcome. We welcome it when it comes. But from a structural standpoint, we see Q4 as being the period in which the market should move more strongly. Having said that, we are booking today voyages and cargos that are returning higher TCEs compared to the averages that we have outlined in the release. So today, if we had to pinpoint, we're making more money than those TCEs out there. How meaningful the spike is going to be? It's difficult to say, but that's where we are.

Got it. All right. I guess, last question. On the last call, you seemed very confident in your liquidity position. How do you kind of feel currently on that liquidity position? You mentioned you continue to exchange the converts. You're in advanced discussions for further liquidity increases. You've clearly appear to be in good shape if you're spending money on vessels and still paying a dividend, but what are your kind of comments on current liquidity position?

Hi, Randy. It's Brian. We're very confident. I think we're doing things to create liquidity when we need it, and we're not being overly aggressive. As I said about vessels that are being refinanced or when they're up, so when they come due, you're talking anywhere around 20 vessels a year have to be refinanced. And when that happens, there's cash that comes out of it. So I think we're pretty happy with our liquidity. It's the same question all the time, but it's there. And every quarter we go through this and I think we have a pretty good balance here with $280 million as of June 30 and $268 million as of today. As of December 31, we had $187 million. Now we have, again, $282 million as of June 30. So that's a significant increase and I think we're happy with that.

Got it. All right. Well, I just want to keep all the opportunity to say so. Thanks so much.

Thanks, Randy.

Thanks, Randy.

Your next question comes from the line of Ben Nolan with Stifel.

Hey guys. It's been hashed over, but let me just follow-up on that last bit on the leases, Brian. So I think you said or in the release you said $59 million is sort of what you're expecting to get out and you just said 20 ships or so a year that are available for refinancing. Sort of given where asset values are today, is there a good number where you think, okay, I don't know if it's $59 million, but annually, if we're refinancing 20 of these ships, what's a good number of cash that you could sort of annually recycle out of the existing assets relative to your current leverage position and asset values in any sense?

Yes. I haven't done the math there and that's dependent upon a few things. One, the age of the vessel, which vessels are we coming up for refinancing, and financial institutions go through waves of liquidity available for them to do lending and then they close their books and then they open it from time to time. So I couldn't really give you a proper answer right now, but I think historically we have — each quarter here, we have said what we're doing and it has come through. So whether we want to — I can't say if $60 million is a good number for each quarter or not right now, a lot of math behind that and looking at it so.

Okay. All right. Fair enough. And then on the market side, maybe this for Lars or Emanuele or whoever. You guys have talked about it and we don't know when things are going to improve, but I think one of the things that at least I've noticed, and maybe this is wrong, but at least I've noticed in the past is sort of the canary in the coal mine with respect to predicting market movements, the chartering activities of the traders. Has there been any notable changes that you've seen in terms of appetite for term contracts or durations or anything else that makes you feel like some of the market movers here are looking to take cover or be opportunistic or anything yet to this point?

Yes. So I can say categorically that there is a lot of activity and interest in the markets particularly for forward positions, modern units and for medium to long-term charters. We get requests or inquiries at least on a weekly basis, if not on a daily basis. The time charter market tends to be split today into two different types: the bottom feeder that wants to go in and do the one to three months prompt position to see how cheap they can get it; and the more strategic oil company, oil trader element that can see the need in MR and LR2 and would like to have it for one, two or three years, but would like to have delivery from let's say October. Those are plentiful around that — they look at that. And then the question of course is what do they consider to be a fair market price? And everybody can see in the deals that have been done over the last quarter to maybe four months that people are willing to pay some quite hefty numbers for a forward position on a modern unit relative to what the spot market is printing today.

I guess my question is, have you noticed any change in the cadence there? Are people being more aggressive than they were maybe a month ago? Or is it still sort of where it was?

I would say it's more or less where it was. Obviously we've got the height of the summer right now. So activity is a little bit slower when people are on holiday, but certainly I would say pretty much the same and the cadence would be pretty much the same.

Okay. All right. Appreciate it. Thank you.

Your next question comes from the line of Liam Burke with B. Riley.

Yes. Thank you. Good morning. Brian, you generated — for the first half of the year, you’re basically cash flow breakeven in what was a pretty tough rate environment. Looking at improving rate environment sometime in later 2021, does that give you confidence on your refinancing ability and the ability for you to generate cash? Or how does that factor into your comfort?

No, that's definitely a factor for refinancing to generate additional liquidity because the values will increase as that happens. So values have gone up in anticipation of the market getting better. And there are fundamentals behind that — James prepared all these slides. If anybody is interested, they can go look at the fundamentals over there, including order book and what's going on at refineries. That will increase rates and then values will come on top of that, which will mean if we want to — when we refinance, getting additional liquidity. But at that point, I don't think we would have the desire to do it because we would not need it, but it's always available. So it's a very good point, Liam.

Great. And on the refinery closings throughout the world, this has been a process beginning last year. How is that factoring in the direction of rates either the second half of this quarter or into the fourth quarter?

Hey, Liam. It's James.

I mean, we talked about Australia a couple of times before, but it is a good example of what happens with some of the closed down refineries. So we can immediately see the net increase of, in particular, MRs and LRs that suddenly being kind of fixed in addition to what was done previously. Of course, we've just had the closure of the Exxon Altona refinery, and they've shut crude imports I think from end of July. That in itself, I believe would be an additional eight MRs per month that move into Australia. And all of this of course is accretive to the ton-mile picture. When suddenly you start adding in the complexity of global stocks and how they have been moving and drawn over the last time periods, pretty much since last year, you're going to see a lot of dislocations where you stop seeing products moving in smaller units, going into New York Harbor, which is one that I mentioned earlier. Stuff going into South America. The stuff that goes into Australia suddenly is not going to come from North Asia — it could come from the Middle East or other places. Last year, we were doing some of our fixtures from the U.S. Gulf into the Australia supply envelope. So the point is that as these refineries close, it's pretty clear — it's kind of logical — that they still need the product and they need to find out where it's going to come from. So the question is, how do you get this oil to market and where does it come from? It's going to mean more ton-miles and that will obviously mean that the market will start increasing as that takes capacity.

Great. Thank you.

Your next question comes from the line of Magnus Fyhr with H.C. Wainwright.

Yes. Thank you. Good morning, good afternoon. Brian, one more question on the liquidity. Of the 13 vessels that you are currently discussing, how far do they stretch out? Do they go all the way into the fourth quarter and first quarter or they just be in the third quarter?

It might go into the fourth quarter. It's probably fair to say within the next three months here, timing, paperwork and a few other things like where ships are positioned to do the refinancing — that happens, but yes.

So would it be fair to assume that you could potentially have another 10, 15 vessels between fourth quarter and second quarter?

Oh yes, absolutely. Magnus, yes.

All right. That's all I had. Thank you.

Thank you, Magnus.

And there are no further questions. I will now turn the call back over to the speakers for any closing remarks.

I want to thank everybody for joining us, and we hope to speak to you soon. Have a good day. Thank you.

This concludes today's conference call. You may now disconnect.