Scorpio Tankers Inc. Q4 FY2022 Earnings Call

Hello, everyone, and welcome to the Scorpio Tankers Incorporated Commercial Update Conference Call. After today's presentation there will be an opportunity to ask questions. Please note today's event is being recorded. At this time, I'd like to turn the floor over to James Doyle, Head of Corporate Development and IR. Please go ahead, sir.

Thank you for joining us today. Welcome to the Scorpio Tankers Commercial and Market Update Call. On the call with me today are Emanuele Lauro, Chief Executive Officer; Robert Bugbee, President; Cameron Mackey, Chief Operating Officer; Lars Dencker Nielsen, Commercial Director. Earlier today, we issued a press release, which is available on our website, scorpiotankers.com. The information discussed on this call is based on information as of today, December 14, 2022, and may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the press release as well as the Scorpio Tankers' SEC filings. 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. We will be giving a short presentation today. That presentation is available at scorpiotankers.com on the investor relations page under reports and presentations. The slides will also be available on the webcast. After the presentation, we will go to Q&A. For those asking questions, please limit the number of questions to two. For any modeling questions, please reach out to Brian or me after the call. And with that, I would like to turn it over to our President, Robert Bugbee.

Hi, thank you ever so much. First of all, thank you to our shareholders, and thank you to the supporting analysts that we have. I think that, look, we entered the holiday season with good cheer. I think that for all of you who have been good this year and own STNG, you are going to have lots of presents at the end of the year. And I think that those few of you who have been a little bit naughty and are short STNG or don't own STNG, clearly are not going to be receiving as many presents. I'd like to look at the actual press release itself and just go through the table related to rates quickly. I think it's very important. On the left-hand side, we see the rates that we have booked so far this quarter, and those by themselves are really a confirmation of what we were saying in October. They are solid. They are going to beat most analysts' expectations and beat consensus, but they may not by themselves show what is actually going on out there in the market right now, and what could happen. As we can see that basically, there's about 10% of open days left. And on the right-hand side, up until, let's say, last Friday, these are the fixtures between December 1 and last Friday. We can see a tremendous gain in rates. But right now those rates themselves, up until Friday, have been surpassed by what we're fixing in the market and what we're seeing in the market. So that last 10% could have quite a high delta. And that could be so high that it could materially affect those bookings for the fourth quarter, even though the actual fixtures that we're doing at this time of year are starting to really be put in the book for the first quarter. So what you have here is a market that's strengthening beyond what we've got here on the table, and we have a market and we have fixtures that are closing fourth quarter higher than the averages you're seeing here, and opening the first quarter at simply extraordinary outstanding numbers that we are already at all-time highs. And these numbers that are coming in for the first quarter right now are huge. There's no other way to say that, and which you'll see through the presentation, we don't see this market backing off at the moment. We're in a real seasonal strength. We've got real cold coming into the Northern Hemisphere and we have very strong underlying fundamentals that are being respected by increases in the time charter rates. The one-year charter rates have moved very strongly. And that's how I'd like to introduce this, pass it to James to start going through the details and then we'll get into some Q&A with Lars. Thank you very much.

Thanks, Robert. Well, not as exciting as LR2s at $90,000 per day, but it's been an exciting year for the company, and we wanted to provide a brief update on recent events before the commercial discussion. So if we could please go to Slide 6. Strong cash flows are transforming the balance sheet of the company and improving the quality of Scorpio Tankers as an investment. In December, we gave notice to exercise purchase options on six more vessels under sale leaseback. In total, since August, we have given notice to exercise the purchase option on 29 vessels under sale leaseback financing, which when completed will reduce debt by close to $500 million. So far, lease repurchases have been financed with cash flow, but with two new credit facilities for up to $166.5 million that were announced today, we can accelerate the repurchasing of more expensive lease financing and replace it with less expensive commercial bank financing. The new facilities bear interest at SOFR plus a margin of 1.9% to 1.925%, which is substantially lower than the 3.2% to 5.4% lease financing it's replacing. In December, we repurchased $28.6 million of the company's shares at an average price of $51.20. Since July, we have repurchased $3.7 million of the company's shares for approximately $149.3 million. Lastly, we entered into a time charter agreement for an LR2 at $37,500 per day, which is subject to final customer approval but reflects the continued improvement in outlook and rates from our customers. Slide 7, please. With the conversion of the convertible bond and six additional lease repurchases, the company will reduce its indebtedness by approximately $1.3 billion this year. The last time the company's debt was below $2 billion was December 2017 with a fleet of 78 owned vessels. So we're very excited with the progress we're making. Slide 8, please. In the fourth quarter, the fleet has booked an average TCE rate of over $45,000 a day. On an annual basis, this would equate to $1.3 billion in free cash flow or a little over $22 a share. Despite extending this sensitivity churn to $60,000 per day, current rates are well above that. If rates averaged $60,000 for the year, the company would generate almost $2 billion in free cash or $39 per share. Slide 10, please. Since March, the refined product tanker market has been resilient. Rates have oscillated between $30,000 and $60,000 per day, even during seasonally weaker periods such as refinery maintenance. Recently, we've seen a substantial increase in rates. The confluence of factors and the degree to which those factors are impacting our markets is unprecedented. Slide 11, please. Global inventories remain at record lows with demand continuing to outpace supply. Over the last two years, the U.S. has drawn over 471 million barrels of crude oil and refined products. At the same time, globally, distillate inventories have decreased over 240 million barrels. Post-refinery maintenance runs have increased. Over the last two weeks, U.S. Gulf refineries have operated at 98.2% and 97.3% utilization, and these barrels are very much needed. Higher refinery runs are needed both now, as winter approaches, as Robert mentioned, but also next year with demand expected to increase through 2023. Slide 12, please. Seaborne refined product exports have reached record levels. Product exports are averaging 25.3 million barrels per day over the first two weeks of December. With inventories near historic lows, refining capacity closures, and demand increasing, product tankers now more than ever are being used to supply more immediate demand and from further afar. The impact of refinery closures in places like Europe and Australia is apparent. Both regions are experiencing record levels of refined product imports. Since lifting its export quotas, China's refined product exports have increased significantly. However, as COVID restrictions ease and domestic demand increases, it's unclear if China will be able to maintain the current levels. What is clear is that the barrels are needed. Trade routes are changing, exports are at record levels, and ton miles are increasing. The incremental barrel continues to become more difficult to find. Next year, new Middle Eastern refining capacity additions will be critical to meet incremental demand, especially if there's an impact from changes in Russian refined product flows. Slide 13, please. Last week, the EU implemented its Russian crude oil import ban, stating that any vessel transporting Russian crude sold at a price above the $60 price cap is prohibited from European insurance and finance. While one week is a small sample size so far, seaborne Russian crude exports have declined by almost 50%. China and India have been the incremental buyers since the invasion of Ukraine. On February 5, the EU will implement a similar ban on refined products. So far, we have yet to see a major shift in refined product flows. Over the last two months, Russian product exports have increased, and most of the imports have gone to Europe. In the event Russian exports are rerouted to different regions after February 5, there would be a substantial increase in ton-mile demand. If Russian exports decline, refined products will need to be sourced from further afield, leading to a substantial increase in ton-mile demand. Every replacement scenario requires sending a barrel a longer distance, tightening vessel supply and increasing ton miles. Slide 14, please. Next year, we expect yearly quarter-over-quarter increases in refined product demand, driven by increases in gasoline, jet fuel, and naphtha with regional imbalances expected to persist due to refinery dislocation, demand increasing, and the potential impacts from Russia's invasion of Ukraine. Seaborne product exports are expected to increase by almost 1 million barrels a day and ton-mile demand over 9% next year. Since 2000, seaborne exports of refined products have increased in 19 of the last 22 years, even during the global financial crisis. Lower freight rate environments have typically been due to oversupply. Today, this is much different. Supply could be the most attractive part of the equation. Slide 15, please. The order book is at a record low with 4.8% of the fleet on order. Yards are booked until 2025 and using minimal scrapping assumptions, the fleet will grow less than 1% over the next three years. Using higher scrapping assumptions due to the fleet age and upcoming environmental regulations, the fleet will shrink over the next three years. Seaborne exports and ton-mile demand are expected to increase by 3.6% and 9.7% next year, outpacing fleet growth. The confluence of factors in today's market are constructed individually: historically low inventories, increasing demand exports and ton miles, structural dislocation in the refinery system, potential changes to Russian product flows, limited fleet growth and upcoming environmental regulations. However, collectively, together, they are unprecedented. With that, I'd like to turn it over to Q&A.

Ladies and gentlemen, at this time we will begin the question-and-answer session. Our first question today comes from Omar Nokta from Jefferies. Please go ahead with your question.

Thank you. Hey guys. Good morning. Thanks for the update. Clearly, a lot of positive things are happening, both in the market and your earnings and your balance sheet. As you highlighted, Robert, 4Q now looks to be the top quarter of the year and 1Q starting off here at an exceptional level. I wanted to ask if you could just frame what's been going on in the product market recently, especially the six weeks or so since you reported earnings. What's happened to cause rates to get to this point where LR2s are earning, as you show here, $90,000 a day and $75,000 on the MRs?

Yes. I'll give a good stab here. Hi, Omar. To be honest, the market back then was also very strong. What we have seen is just a continued improvement of this sustainable strength. One of the things that we can see now as a ship owner is that we enjoy front-haul economics even on backhauls as well. So when you look at the TC1 Index as a market, it will probably print today at $70,000, $75,000 a day. At that time, it was probably $55,000 to $60,000 a day. The fact of the matter is that because of these huge exports out of North Asia, the destination optionality has really kind of presented itself with a lot of chances and options for the owners. We are moving LR2s now out of North Asia down to Singapore at, let's call it, $100,000 a day. We're moving it at $110,000 a day or $120,000 a day into Australia. We can reload out of Australia with condensate, which is also a nifty thing for the LR2s, which with backhaul economics into the AG is also presenting itself with about $80,000 a day. What we've also seen as we moved into the back end of the fourth quarter has been an increase in exports as well coming out of the Mediterranean. There has been an active market of light ends moving from the Med back to Asia. As we have been fixing our ships with distillate into the Continental, into Mediterranean we have been able to quite successfully load vessels as well out of the Mediterranean and the Continent back to Asia. What we're seeing here is an elongation of positions. If you look at the position today on the 14th of December in the Middle East on LR2s, you are seeing probably the tightest position we have seen for a very long time. It is my view that we're going to start seeing that market react even more positively. Today, it's probably printing at Worldscale 305, trading at $85,000 on pure round voyage. But in reality, because of all this capacity, we can see in terms of triangulation, rates are going to be substantially higher from that.

Thanks Lars. Yes, it sounds like that $90,000 and $75,000 are low relative to what you're seeing today. I wanted to confirm if what we're seeing today is coming as a result of the Russian ban at least on products coming in February? Or is that still a catalyst to come?

I believe it's a catalyst that's going to really show itself as we move past the 5th of February. We have obviously seen a lot of the same molecules moving from the Baltic and the Black Sea into the same European destinations, and that is still continuing. As James said, we've seen an increase in volumes as we're ramping up the stocks as much as Europe can do up to the 5th of February. The fact of the matter is, and this is really important, is that it doesn't matter what market you're in. You can be in the Far Eastern market, you can be in the Middle Eastern market, you can be in South America or in the U.S. Gulf. All markets on all sizes are ramping up. So you don't have any weaknesses where you could say that positions are being moved from that area to another area. You've got very good markets in all areas at the moment, irrespective of what's happening with Russia. Now clearly, what we have been seeing over the last couple of months has been this increase in imports into Europe of distillates in particular. But as we go past that fifth of February deadline, replacement products will ultimately have to travel further. The ton miles will certainly increase for the LRs and also for the MR product carriers. One thing, of course, you've got refineries that are running even harder. You've got high utilization rates across the board. The potential of some of these tripping over will increase due to the way they run them so hard, which will also increase the dislocations and the arbitrages starting to move up even further. So there's certainly plenty of product that we've seen to move. We can see an increase in volumes both in China and also in the Middle East and also products out of West Coast India, all of it going long-haul and it's not necessarily only going to Europe. We're seeing also stuff going to West Africa, to South America and so on. Again, we're seeing this optionality on destination, which certainly for a ship owner who wishes to triangulate very effectively is very good news.

Got it. Yes. Thanks for that additional color, Lars. One final question for me, just on the three-year charter, on the LR2, the $37,500 is the new high, at least from what we've seen in the market recently. You noted that this is on a forward delivery basis. Just wanted to get a sense from you guys, how far forward is that deployment? And any thoughts on why the charterer doesn't take that ship today?

I think that one is still a subject position. I think we’d just say for the first quarter somewhere first quarter. The 'why' is not the charterer; the 'why' is partly too as well. Obviously when the market is hot, you're not necessarily, even if it's a great rate like $37,500 for three years, you're still not anxious to fix our tonnage out. We've got a very high spot position. We're very confident in the present market. I would leave it at that.

I think I'll just add to that, Omar, that in terms of activity in the time charter market and the inquiry levels that we're seeing in our project department, it certainly has not abated. I mean there's plenty of interest from top-tier customers wanting to take long-term charters going forward.

Very good. Well, thanks guys. I will turn it over.

Our next question comes from Frode Morkedal from Clarksons Securities. Please go ahead with your question.

Thank you. Hi guys. The market's really strong. Yes, it is strong. Yes, it is strong, yes. So $90,000 per day for LR2s in December. Considering that the market is improving by the day, could you tell me what's the outlook in the near future?

I just want to mention that Lars has indicated he's set me higher than $90,000 and is now looking at $100,000 for the LR2s. I know you took a risk by suggesting a while back, during a time of controversy, that we would see rates of $150,000 and $200,000 a day for LR2s this winter. I want to point out that we are likely to witness those rates, but it's probable we will see them first on Handysize vessels. This will validate your earlier prediction that some considered to be quite bold. Lars, do you want to add anything to that?

It would not surprise me that this winter, we will see over $100,000 on Handies or MRs or LR2s, which obviously LRs are already doing. I think all segments are on fire.

Perfect. That's great. I guess my next question is, in order to explain this because February 5 hasn't happened yet, right? So have you seen any unusual product arbitrage movements in recent months? And in connection with that, are maybe ballast lengths increasing?

I would say, Frode, to answer your last question, ballast lengths at the moment are decreasing. We're seeing a lot more triangulation on LR2s than we've ever seen. We're seeing a lot of triangulations on MRs as well. So it certainly is not increasing. When it comes to the first part of the question, we're seeing a lot of product, as I mentioned earlier, coming out of the Middle East. They're certainly ramping up in Jizan. They're ramping up in Azure. They've also increased their production in West Coast India. Of course, with the high processing that we've seen in China, I think the exports going to Europe have tripled just this year alone. So we're seeing a lot of volume. It's not only going to Europe; a lot of it is also going to Australia, as we mentioned before, and a lot of it is also going to South America. We're seeing volumes going long-haul, longer than we've seen before going into Western Africa as well. This is not only determined by preparing ourselves for the ban post 5th of February, but it is fundamentals around the globe that are pushing this market into this great strength.

Yes. That's good color. I guess on the ballast length, I guess at least the Russian products could be argued to have to be moved on a more inefficient round voyage basis. What do you think?

On February 5th, we expect the dark fleet will start transporting this product to more remote locations. Since they will only be handling Russian shipments, they will be returning empty. This results in inefficient use of that fleet, which will likely lead to an increase in utilization of the regular fleet and a general contraction in overall supply.

Perfect. Thank you. That's all.

Our next question comes from Ben Nolan from Stifel. Please go ahead with your question.

Hey, guys. Good update. Appreciate it. Robert, you had mentioned that at this point, you guys are already beginning to fix spot into 1Q. Just curious if you can maybe frame in how much of 1Q you already have booked, and are they the kind of the rate levels that you laid out in the press release there?

We haven't provided guidance on the rate, so I can't specify that. However, we can infer that many of the fixtures completed from December 1 up until last Friday were at average rates of $90,000, $75,000, and $55,000, which could represent the starting rates for Q1. This week, for an LR2 vessel suitable for longer voyages, we are starting to book fixes that aren't included in those previous calculations, which only went up to last Friday. As Lars mentioned, some of these new fixes are coming in at over $100,000. Each week, more voyages will be pushed into Q1. By the end of December this year, we anticipate having the first three weeks of Q1 booked. At current rates, those three weeks could potentially yield as much as we earned in the third and fourth quarters combined. By January 10, we expect to have 33% to 35% of the entire first quarter booked. This is exciting because the high rates have a direct impact on our earnings and cash position. If we're at 33% by January 10, we can estimate the bookings backward by accounting for a 7% to 8% reduction for the previous weeks as we go further back.

That's helpful information. Regarding the market and the potential impact of the February sanctions, which may act as a catalyst or create inefficiencies leading to a reduction in the fleet size, how should we approach next year's refinery maintenance season or turnaround season, especially since it coincides with the sanctions? How do we reconcile all these factors and understand how they will function together?

If we look at 2022 in terms of what that seasonality meant, when it comes to refinery turnarounds, we had full steam ahead in the second quarter, third quarter, which tends to be the strongest part of the refinery maintenance period. I think we're down to 2.2 million barrels out in December for this month compared to October was 7.6%. In October, the market was also just as strong. The underlying element of what we're seeing today with capacity utilization, theoretically is so high now that with no kind of extenuating type of bottlenecks, this is structural. In terms of saying that there's a refiner that has to go into turnaround, they will have to supply them with a smaller fleet of ships available to them and take that further afield. I only see that this market will ride through any kind of seasonality in terms of refinery maintenance and maintain its strength.

Okay, all right. Appreciate. Thanks Lars.

Our next question comes from Ken Hoexter from Bank of America Merrill Lynch. Please go ahead with your question.

Hey, congratulations on reaching this stage after what has been a longer downturn than anticipated. Robert, with the significant interest in time charter outs and the continued upward trend in rates, do you think this will eventually translate into orders from the major players? Can you discuss the details regarding the costs of new builds? I realize the order book is limited, but what is the current status of the market? From our analytical perspective, when conditions seem overly positive, there’s often a downside.

Yes, I think that's a great question. At the moment, it’s in a reasonable position. They’re managing to take advantage of the discounts in the time charter rates, whether it’s one year or longer. For instance, the one-year LR2 rate is currently around $50,000 to $55,000 per day. In these scenarios, the charterer is able to profit from the initial part of the contract, which is reassuring for securing tonnage for a period while benefiting from a strong market. They can achieve coverage when they are short on tonnage while generating some cash flow. In contrast, if they opted for newbuilding, they wouldn't be getting any ships for years, which does not address their current needs, and they would also have significant cash outflow. As they go further down the curve, uncertainty increases, and they are left vulnerable upfront. From my experience with a major, the current strategy is to pursue a three-year charter if possible. Why would we place an order at record prices for future delivery when it doesn’t resolve the immediate and stressed situation we face?

Yes, that makes a lot of sense. James, you mentioned the opportunity to reduce debt more quickly. You initially had something like $300 million, and now you're talking about cash flow being up to $1.3 billion. Are there any limitations you foresee for next year regarding how much you can pay down? Additionally, Robert, you always advise us to wait until Thanksgiving to assess the situation with rates. This year's outlook looks quite different from a typical calendar. Is there anything upcoming that might seasonally alter this, or is it simply related to the refinery maintenance you just mentioned? What factors affect the seasonal operations?

James, if you want to go first and Lars and I play the second…?

Sure. So Ken, we did six more leases for the end of this year. We still have probably 60 vessels or more that are under leases. So there's definitely more to do. Recently, we've been doing it through cash flow. Over the next year, we'll have new loans as these vessels are unencumbered, and we can draw down on those loans and then accelerate those repurchases. Obviously, the financing in terms of the commercial bank loans are really attractive. We're going to continue to look to do that. At some point next year, you'll start to see the impact on kind of lower interest and principal breakevens, which we're really looking forward to.

When I consider the current rates, it's challenging to predict their trajectory. There are factors that could drive rates even higher, like the situation on February 5. In the product market, the dynamics can be even more unpredictable than in crude oil because there isn't a significant dark fleet for products. Even the dark fleet is unlikely to transport products to China or India like it does for crude oil; instead, it will focus on South America or parts of Africa, leading to long distances. These aspects can create even more optimistic scenarios, but as we're discussing now, the market is already strong. It has transitioned from being simply bullish to extremely bullish, even reaching a red hot state. It's difficult to describe something that has moved beyond that. Currently, we do have winter in the Northern Hemisphere, which complicates things. We’ve noticed attempts at building inventories and gas accumulation, along with some complacency about energy despite low global inventories. Now, an unexpected shock of extreme cold is arriving, unrelated to geopolitical issues like Russia. Given the season and the current supply capacity, it seems unlikely that this market will weaken during its normal seasonal period, which typically extends until early to mid-June, aside from some minor interruptions from refinery maintenance.

Wonderful. Hey, Robert and James. Thanks so much for that. Appreciate it.

Our next question comes from Greg Lewis from BTIG. Please go ahead with your question.

Thank you, and good morning everyone. James, I have a question regarding the percentage of days fixed in the fourth quarter. Specifically, as we consider planned and unplanned days for the quarter, could you provide any guidance on total revenue days? For example, we've seen instances with ballast legs of vessels in the crude market where we might end up with zero revenue days. Any clarification on this would be really helpful.

Yes. There were some additional off-hire days and those were updated in the MRs. So those came down, and that's because the dry docks are taking a little bit longer due to COVID restrictions in China. In terms of rates generally, I think what we see, which is probably a little bit different than crude and probably mutes this a little bit more, is the triangulation. The triangulation on the MRs is obviously pretty well known, where it's very surprising now is what Lars and his team has been able to do on the LR2s. What you have is an incredible amount of distillate that needs to go from Asia to the West. It's creating some very, very nice backhauls. It’s also benefiting the MRs as well. When you look at kind of benchmark rates and where we are, how we're benefiting from that, I think if you look at what we're doing now in the current update, you're seeing the benefit of that triangulation. That’s probably the biggest difference compared to crude.

Great. I have a question regarding the MR market in the Atlantic Basin. As we see more cargoes coming from the Middle East, particularly as refinery volumes increase, can you elaborate on the logistics of fixing forward? Specifically, when we consider today's mid-December context, how far in advance is the actual loading time for a vessel that has been fixed? Is it typically 7 to 10 days ahead of the actual loading date? Would that be a reasonable way to understand it?

So Lars, why don't you discuss a little bit now?

Yes. I'll start with regarding an MR, it typically takes 7 to 10 days. This timeframe can vary slightly depending on whether it's in the east, west, or the U.S. Gulf, with the U.S. Gulf generally being shorter at about 3 to 5 days. For MR2s, the timeframe is usually between two to three weeks, depending on the loading port, particularly in the Middle East where it tends to be about two to three weeks out. For North Asia, it is usually around two weeks, but loading from Australia with condensates can be more complicated and may require more time, ensuring there are enough ships available to handle the later shipments. That’s a general overview.

Okay. Great. And then I just did have one other question, just as we think about it, everybody is seeing the impact of the crude oil embargo in the Turkish rates and locking up or I guess the authorities are trying to prove out where that crude on those vessels was originated from. As we think about the product market and the upcoming embargo of that's taking hold in early February. Everyone knows the headline numbers of Russian refined products, seaborne exports. Any kind of rough guidance or you could talk about in terms of what's coming from that region as opposed to what's coming out of the Baltic?

First of all, there's more product coming out of the Baltic than out of the Black Sea. My first point — at least to my knowledge, now has been sorted out here with the P&I clubs with a wording that has been adapted or adopted by the different players, and ships are now transiting through. The funny thing is, it was more because of the vessels loading out of kind of CPC with the Kazakh crude, which, of course, is not sanctioned, making sure that that P&I coverage was in place. We have seen now that, that has now sorted out. When it comes to the volumes out of the Black Sea, post 5th of February, it's a very, very good question. It certainly is all down to what supply of ships is available in the dark fleet to move it because they were trying to do whatever they can to maximize that, but I think they're going to have an issue with finding enough ships to do so.

Okay, super helpful everybody. Thanks, and if you are on port you have a great holiday.

Thank you.

Ladies and gentlemen, with that, we'll conclude today's question-and-answer session. I'd like to turn the floor back over to Robert Bugbee for closing remarks.

Thank you very much, everyone. I want to discuss something that we haven't touched on yet. We've maintained a bullish outlook and mentioned during the last conference call our expectation for an $82 NAV by the end of March. It seems we may have underestimated our optimism. With the colder weather approaching and various government policies continuing to deplete inventories without actions like implementing driving speed limits, we are witnessing a significantly constrained market. That $82 per share NAV is no longer just an optimistic forecast; it's quickly becoming a reality. While we haven't focused much on it during this call, it's important to recognize that there are two factors at play: earnings and value. We're in a strong position. We wish you all a wonderful holiday season, and thank you for your continued support and trust. Thank you.

Ladies and gentlemen, that will conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.