Operator: Good day, and thank you for standing by. Welcome to the Q2 26 Frontline PLC Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Lars H. Barstad, CEO. Please go ahead.
Lars H. Barstad: Thank you very much. Dear all, thank you for dialing into Frontline's quarterly earnings call. Frontline is reporting its best quarter ever. Our long term strategy of growing voyage days and VLCC exposure during the slim years post COVID have come to fruition. And our shareholders are now reaping the benefits. There are lots of moving parts in this market and no playbook. The key takeaway, though, is that the prevailing situation will have long term implications. The current environment puts our lean organization to the test, and we are extremely thankful for the hard work the frontline global team is putting in keeping the propellers turning in this ocean of profits. Before I give the word to Inger I will run through our TCE numbers on slide 3 in the deck. In the second quarter of 26, Frontline achieved $153 thousand per day on our VLCC fleet $111 thousand per day on our Suezmax fleet and $92.4 thousand per day on our LR2 slash Aframax fleet. So far in the second quarter of 26, 86% of our VLCC days are booked at $157 thousand per day. 79% of our Suezmax days are booked at $117 thousand per day. And the LR twos are catching up. Having booked 70% of the days. At $81 thousand per day. Again, all numbers in this table are on the load to discharge basis. With the implications of ballast days at the end of the quarter this has. I will now let Inger take you through the financial highlights.
Inger Marie Klemp: Thanks, Lars and good morning and good afternoon. Ladies and gentlemen. Then let's turn to Slide 4 and look at the profit statement. We report profit of $659 million or $2.96 per share and adjusted profit of 580 million or $2.61 per share in the second quarter of 26. As Lars mentioned, this is the best quarterly profit and adjusted profit ever recorded by the company. The adjusted profit in the second quarter increased by $235 million compared with the previous quarter primarily due to an increase in our TCE earnings. Ship operating expenses decreased by $4.3 million from previous quarter and that was mainly due to sales of 8 VLCCs in the first quarter, and 2 Suezmax tankers in the second quarter. And an increase in supplier rebates, which is partially offset by an increase in general running costs. Administrative expenses decreased by 2.4 million from previous quarter This excludes the synthetic option revaluation gain of $5.3 million in the second quarter and the synthetic option revaluation loss of 5.8 million in the first quarter. Adjusted interest expense decreased by $4.8 million from previous quarter due to lower debt and decrease in interest rates. Lastly, depreciation decreased by $4.7 million from previous quarter due to sales of vessels. Let's then look at the balance sheet. On Slide 5. Frontline has a solid balance sheet and a very strong liquidity of SEK 1.2 billion in cash and cash equivalents. Including undrawn amounts of revolver capacity of $91 million, marketable securities, and minimum cash requirements banked as per June 30. We have no meaningful debt maturities until 2030. Remaining newbuilding commitments as per end June was 601 million and relates to the acquisition of the 9 new buildings from affiliates of Hemen. The company has secured new building financing of up to 737 million as set out in the press release. Then let's turn to Slide 6 In the second and third quarter of 26, we reduced our financing costs through a combination of margin reductions on existing facilities for the remaining tenors and a full refinancing of selected facilities reducing the weighted average interest rate margin by approximately 52 basis points from 178 basis points at the end of the first quarter of 26 to 126 basis points upon completion of the process in the third quarter of 26. The reduction was driven by amendments with 24 basis points, refinancings with 21 basis points, newbuilding financing and asset sales with 7 basis points. We have no debt maturities until 2/2028 and no meaningful maturities until 2030. Supported by increased tenure across the portfolio, as shown in the maturity chart. Then we can look at Slide 7. Fleet competition and cash breakeven rates and OpEx. Upon delivery of the remaining VLCC newbuildings and sale of 2 VLCCs, our fleet consists of 40 VLCCs, 19 Suezmax tankers and 18 Aframax/LR2 tankers, has an average age of 6.6 years, and consists of 100% eco vessels, whereof 69% are scrubber-fitted. We estimate that average cash breakeven rates for the next 12 months of approximately $23.8 thousand per day for the VLCCs, $25.7 thousand per day for the Suezmax tankers, and $22.2 thousand dollars per day for LR2 tankers. With a fleet average estimate of about $23.9 thousand per day. This includes dry dock cost for 7 VLCCs 7 Suezmax tankers and 8 LR2 tankers. The fleet average estimate excluding dry dock cost is about $22.3 thousand per day or $1.6 thousand per day less. We recorded OpEx, including dry dock, in the second quarter of $9.2 thousand per day for VLCCs. Dollars 9 thousand per day for Suezmax tankers and $13.3 thousand per day for LR2 tankers. This includes dry dock of 1 VLCC and 3 LR2 tankers. And the Q2 26 fleet average OpEx excluding dry dock was $8.7 thousand per day. Then lastly, let us look at slide 8. And the cash generation. Frontline has a substantial cash generation potential, with about 27.8 thousand earning days annually. As you can see from this slide, the cash generation potential based on current fleet TCE rates and average spot market rates, as of August 28 is $2.3 billion or approximately $10.35 per share. Providing a cash flow yield of 24%, based on the current share price. A 30% increase of these rates will increase the cash generation potential to $3.1 billion or $30.91 per share. And a 30% decrease of these rates will decrease the cash generation potential to $1.5 billion or $6.88 per share. With this, I will leave the word to Lars again.
Lars H. Barstad: Central stage. We see increasing risk in and around the Gulf area. Both in the Gulf of Oman and in the Red Sea. We also see increased risk in the Black Sea, and the Houthis have become active again. Tanker rates remain high, and inefficiencies carry the weight of the shipping market. And we also see high risk premiums from certain trades, in particular, inner AG, which is somewhat illiquid, but at least showing on the bottom left hand chart you can see how the now somewhat theoretical TD3C index is printing levels nearing $600 thousand per day. We tend to look at the TD15 and it is being dwarfed in this connection. But if you look closely on the left hand scale, it is actually showing very close to a $100 thousand per day. Oil balances are kept in check. By aggressive inventory draws. We are extremely surprised that the oil price has managed to keep in this band between say, $78 and somewhat north of $90, The US, China, and the rest of the OECD are currently key sources of this inventory growth. The question is, of course, for how long can we draw. The tanker order book, paused over the summer. Lead times from ordering to delivery is now moving into 3.5 years. So we are talking about 30 deliveries. And we see this has kind of created a bit of a vacuum in the ordering market. After a quite frantic activity in the first half of the year. The long term implications as feeds continue to age will be around the inventory refill story energy security policies, and in the case of some sort of relief or some sort of solution between US and Iran, sanctions relief could also pay a part. We are in the midst of a storm, I would say. But the long-term implications are at least easier to reap. If we move to slide 10, and try to kind of analyze a little bit what is behind us. it is actually easier to analyze the market after the fact. We have had an 82% reduction in crude oil exports from inside this Strait of Hormuz. I know this is kind of a big question mark, as a certain agencies report higher exports than what is recorded out of The Middle East. Others are lower in respect to kind of transits by ocean through the Strait of Hormuz, Frontline is among the school of thought that believe we are somewhere between 4.5 to 5.5 million barrels per day. China crude imports have created a cushion for the oil price, we believe. And it is actually reduced by 35% in the same period. what is happened is that we have seen huge growth in inefficiencies in the market to the tune of 23% increase in idling days per VLCC, But I do note that this is not waiting time or time that where owners like ourselves are fiddling around trying to figure out what to do. This is basically due to the trade itself. Where inefficiencies are creeping into every aspect of the voyage. And on the contract, I am being paid you are actually waiting. We have also seen a great increase in the trade between particularly Latin America to the East of Suez. This basically results in the effective fleet supply tightening despite a decline in volumes. The increased STS transfers off Fujairah and around Singapore and Malaysia also add to this. If you can imagine, the cargo flow that formerly used to be from inner Middle East Gulf to, say, Japan, is now, like, a 3x trip You go firstly from inner AG to Fujairah in some sort of shuttle lane traffic. Then you, by way of STS, put the oil into another ship, that takes it to Malaysia. Where you can do an STS operation before a Japanese controlled ships take it into Japan. So basically moving the same barrels in an increasingly inefficient manner. We do see, though, that there is large gaps in the tracking data, and this also confuses us and most market analysts, as a lot of vessels are sailing dark, leaving a big blind spot. The headline figures may no longer be representative of the market but what is representative of the market is the rates that we are actually collecting. If you move to the next slide, the flows from Atlantic Basin has grown both outright by way of volume but more importantly, by the way of distances, it is actually sailing. You know, in a normal market, you will have kind of almost equal volume going from say, US Gulf into Europe. Us into Asia. Now a larger part of the volume being exported out of the Atlantic Basin is actually taking the long routes. With the Houthi actions, we are also seeing some very specific, inefficiencies. For the Yanbu export that formally used to sail through the Red Sea. Where it is now to greater degree going northbound. Basically, by way of you fill up a VLCC 3 quarters full. Take you through the Suez Canal, and then load up the remaining barrels in Sidi Kerir. Which is the end of the Sumed pipeline. The supply shortage on the Middle East is further compensated by inventory draws. In virtually any or every corner of the world. With US and China being the largest contributors. Asia ex China has increased the sourcing again, adding or creating the same ton-miles. Despite the volume shortfall, as previously mentioned, the inefficiency and the growing distances yields the high tanker demand we are currently experiencing. The big question, though, and this is the question as we near winter, is how long can and we will draw on inventories as we approach the colder season in the Northern Hemisphere. If you look at the top right chart, this is OECD onshore crude inventories. We have drawn materially the total including kind of other inventories as well is actually nearing a half billion barrels. Is still a lot of barrels to draw, but there is certainly a limit to how far down the various nations are willing to go in this very insecure situation we are in? If you move to slide 12 and look at the order books, These order books continue to grow or continued, I would like to say, going into, going into Q3. Currently, looking at kind of the headline number of VLCCs, the order book is around 33 and a half percent of the existing fleet. I do, however, think that 1 should look at the efficient fleet. And as we note here, around 166 or 167 vessels are not a part of kind of the commercially traded fleet. Meaning that the VLCC order book currently is in fact very close to 40%. If you do the same kind of analysis across the asset classes, the front line is exposed to. You will get to that the current kind of order book to fleet ratio is in the mid thirties percent. We are actually closing in on what we saw in 2009. And this is or 2008, 2009. This is, of course, a concern looking forward. However, if you look at the aging of the fleet, we actually did not have to this extent back in late 2000s. The situation looks far more balanced. So if you move to slide 13, you can see that the total order book of the asset classes were involved in currently stands around 777 ships. As they deliver over the next 5 years, we will see 578 vessels moving towards the 20 year threshold. Which means that we will have a total population of 1.29 thousand vessels. Coming to age assuming no scrapping. This is, of course, dwarfing the current order book. If we have a look at the summary then from this presentation, the current market dwarfs the previous cycles. I would like to draw your attention to the orange column on the right hand side. Looking at what we thought was the strongest market we have ever seen in 2004, We are now, you know, twice that almost. The index is lying a little bit because a certain part of it is, of course, being weighed by both TC1 and TD3, which are inner AG loadings. But still, including that, we are way beyond what we have seen in previous years. And as I mentioned earlier in the presentation, constricted global oil supply yields inefficiencies and we see new trades and much longer trade lanes. Growing concern is starting to come forward for the supply cushion provided by primarily US and China. We have the Russia Ukraine situation adding fuel to the fire with increased risk in the Black Sea. We also see reduced Russian product exports. Going forward. Although this is in many cases, sanctioned barrels, it still adds to the products pool and in particular, affects the diesel supply going forward. The growth in the tanker order book is slowing. As the lead times are extending. We also see that yard expansions are stretched. There is a you know, there is been a little bit of a period now since we have heard of new births being launched, particularly in China. Energy security and inventory situation is likely to dominate the if the current situation persists into the winter. Again, from Frontline's center stage, our VLCC heavy efficient business model, And we do see that the long term period market is actually starting to price in these disruptions to last for much longer. With that, I would like to open for questions and answers.
Operator: Thank you. To ask a question, you will need to press star 1 on your telephone, and wait for your name to be announced. To withdraw your question, please press star 1 again. We are going to take our first question. 1 moment. And this question comes from Jonathan Chappell from Evercore ISI. Please go ahead.
Jonathan Chappell: Thank you. Good afternoon. Lars, last quarter, you spoke to, I think, was 5% of the fleet. That you were estimated was sitting outside of the strait, and that was part of the inefficiencies. Did not mention that today. Obviously, you had a lot of other data, but do you have an update on that? As it relates to that, is that just right outside of the Strait, or is there a much greater geographical area that we are talking to where a lot of ships are idling and, you know, basically adding to the inefficiencies.
Lars H. Barstad: You know, surprisingly, you know, we are actually observing that there, that kind of number of ships that are idling. Outside of Omar, you could say, or the Gulf of Oman. Stretching basically all down the Indian Coast has actually increased But this is increased with the, growing kind of volume coming out of the Middle East by way of STS. So firstly, you have the pipeline. Coming into Fajira and the kind of the Oman coast outside. But secondly, now you have a kind of an increased or have had at least an increased traffic vessels coming out for STS business. The timing of this is somewhat difficult to nail down. So it means that if you are a charter and you book to ship, you are not exactly gonna know the dates that STS ship is gonna be ready. For you. This creates a lot of delays. So this is why we see actually the population sitting in that region in particular. Is actually growing, completely illogical, to be quite honest, in the current market situation. Okay. Second 1, more strategic. Obviously, a generational market right now as you laid out in the last slide, and I think Frontline's track record and business model has been clear for the last 30 years. But you are doing some things that you have not really done before with the time charters and like the 3 year time charters, special dividend. Could this be an opportunity to really change the capital structure? I know Inger has done a lot with taking the cost of debt down and pushing all the maturities out. But could you use some of this generational upside to take the leverage down, or is that just something that is not part of the DNA? No. I would say it is not really a part of our DNA. As I think I have said many times, you know, we have kind of an informal strategy of trying to cover kind of 1/3 of our revenues as well as covering 1/3 of our key costs. You know, being fuel or interest rates interest rates. Currently, the market conditions have kinda prompted us to secure some of our revenues on VLCCs. And we are actually a little bit above 30% right now as we wait for the last newbuildings to deliver. But I do not think it is really changed kind of the way we look at the capital allocation. You know, kind of our proposition to investors is continues to be is to pay everything out and then leave to the investor to decide whether if he wants to reinvest. That will only kind of-- and it is never really gonna disturb our dividends. But I think the special dividends which you pointed to which came from selling 2 ships, You know, why we decided to just pay it out was basically due to the fact that we did not really see much of kind of upside in reinvesting it in the market in the current kind of price environment we are in? So I think kind of frontline will just continue as we always done. We pay the money to our shareholders. The leverage that we have now is comfortable. Considering the current market and where we are on asset values and so forth. So I think I you know, 1 should kind of keep that in mind going forward. Mhmm. Alright. Very helpful. Thank you, Lars.
Operator: Thank you. Thank you. We are now going to take our next question. And this 1 comes from Greg Lewis from BTIG. Please go ahead.
Greg Lewis: Thank you, and good afternoon, everybody, and thanks for taking my questions. I did want to just if you could follow-up Lars more on thoughts around to Jonathan's question around the decision to do the longer term time charters. But really, I am kind of curious, these were obviously opportunistic. You know, historically, we have seen a lot of 1-year You can-- it seems like, hey,. The price is the price at the time, but 1-year the time charters in the VLCC market are available. I am kinda curious how you know, you alluded to it. How is the actual depth of the 2-, 3- and potentially longer time charter market for VLCCs as we kind of sit here looking at the back half of the year. Is there really customer demand for these that we could actually see maybe not frontline, but a real increase. Of these types of these term deals going forward?
Lars H. Barstad: Or was this kind of more of a 1-off? No. The it is a very good question. You know, at the time when kind of these 2 time charters, the 2 year and the 3 year were concluded, I would say that was somewhat limited But, as we kind of got over the summer, currently, it is quite deep. And this is what we alluded to in our presentation a little bit as well. It seems like kind of you know, what is deemed, intelligent, money is now increasingly interested in, getting kind of, longer term contracts on. So we are talking about oil majors and the big kind of operators. So, you know, we could easily today do 3-year time charters now kind of if we were willing to accept the current levels, which is well, it is still south of $80 thousand per day, but closing in. And it could actually be north of $80 thousand depending on the position you can deliver the ship in. So as I would I would say this is-- you know, we do not have a crystal ball in this market. Right? So this is why of course, you tend to end up fixing a little bit too early in retrospect. But, I must say that the liquidity was not really there either. So you basically just to make a decision But, but now, I think the game has changed a little bit. And we see know, I think a good indicator is looking at the FFA market. You know, right now, you know, exclusive of The Middle East, so exclusive of TD3C, the TD22, which is US Gulf to Asia, kind of marker, That paper is trading kind of close to a $100 thousand per day for 2028. When there is a 115 VLCCs being delivered. So I think I think the market is starting to potentially price in some of the tailwinds that we have been discussing. That, you know, in the event well, first of all, expectation is the situation to prevail for a while. Which is just gonna add further draws to the inventory, which is further gonna strengthen the tailwinds coming out of this ordeal at some point. So I am actually happy to say that right now, that market is pretty deep. I would like to add 1 comment, though, which I probably should have mentioned. We did, you know, we did the 2 time charters, but we also sold 2 ships. This is actually our way of being able to capture the inner AG profits. Because the actor that was willing to pay so you know, that kind of money for almost 10-year-old ship was he had a reason for that. Basically, because it would enable him to get full control of the logistical chain of transporting oil through the Strait of Hormuz because owners are actually starting even the more kind of a bonkers owners are starting to be a little bit reluctant to sail through the Strait of Hormuz. Meaning that if you are a Middle East or an inner-AG exporter,, you are much better off basically just paying $135 million for a 10-year-old ship and controlling the entire logistical chain themselves. But for us, since we do not trade into the AG, at least not currently, that was the way for us to capture that premium. And hence, why we also just paid the proceeds out to shareholders. Okay. Okay. Super helpful. And then I did have a question on, you know, I just was looking for some clarity on slide 12 where you kind of laid out your view of the VLCC fleet, the 900 ships, Just as we think about those and I think you mentioned that there is maybe 170 ships that are not really part of the active fleet. You know, maybe they are doing infrastructure or other types of issues. Is that the sanction fleet? Or Is that-- is that outside? Is that other vessels because the sanction fleet and then I would think is trading Like, how do we think about what-- where the saying and then I am also curious as we think about that sanction fleet is a good way to think about it of those 170-ish sanctioned ships, those are all 15-plus-year-old vessels? Or is it kind of more broad across the I guess, the fleet age profile? No, I think-- no, it is more you know, it is more that every investment over 20 years is almost all of them are sanctioned. Because in the commercial kind of, you know, markets where we operate. Very few actors, except us who is that far north of or older than 20 years. There are some trading, but the trading then of internally for big oil majors or refiners where they kind of, you know, control the technical management on the netting of the ship themselves. So since I would almost put, like, an equal sign between 20-plus and sanction, Speaking of the sanction fleet, we are we are, you know, we are not really seeing kind of utilization increase on that fleet. But what we are seeing is that although extremely slowly, more and more are getting kind of sold for recycling. So it is it is a very, very kind of slow trend because you do face kind of the sanctions as you, you know, for the recycle when they need to or want to purchase the steel. But there are kind of starting to we are starting to see movements there where actually some of these ships are getting removed. Okay. Super helpful. Thank you very much, and have a great weekend.
Operator: Well, thank you. Same to you. Thank you. As a reminder to ask a question, will need to press 1 and 1 on your telephone. We are now going to take our next question. And this 1 is from Devin Sangoi from Tetch Investments. Please go ahead.
Analyst: On a good set of numbers. I have few questions. 1, on when do you see the China, you know, as the winters will approach, China will come back in the market. And in that situation, how do you see the market? And second 1 is on the Suez. You have a drought and obviously the limited amount of ships are going to go through Suez now. How does it impact the flows? Of the smaller ship?
Lars H. Barstad: Yeah. No. First of all, on China, I think, kind of the question you are raising there is basically the big the big question. The biggest question of them all in shipping. Because China has effectively reduced their imports, you know, at certain periods, they basically halved it. And from what we understand from industry sources is that, you know, Chinese kind of domestic demand is not materially reduced And so and since imports are down to the tune of 3.5 to 5 million barrels per day, you know, for sure, they need to be drawing on inventories. They have a huge pile of oil. They have actually been building inventories in the last you know, years leading up to the situation in 2026. So they have a huge cushion. But at a certain point, you know, when you know, somebody in Beijing will start to think that maybe we should kind of be a bit careful on continuing here. I do not know whether if we are there yet. I do not know if we will be there in a year time. it is very difficult to say. But it is this is 1 of the kind of the big important questions. But I think it is more important in respect of oil price rather than shipping at this point. Of course, it could propel shipping even further if they start to aggressively chase barrels. But I think kind of the this is more an oil price kind of thing than on a shipping thing. When it comes to Suez, I think, respectfully,, you might be confusing Suez for the Panama Canal. The Panama Canal is where the drought is, is being experienced. And that is where kind of we are seeing reduced volumes. But not really we because the Panama Canal you know, it is prioritized for containers and, you know, natural gas and LPG vessels. And, you know, kind of the rates and the way that kind of transits are organized. Very few tankers are using For the Suez, this has not yet been an issue that is been addressed. And 1 more question on the scrapping. What are your view? We have seen no scrapping because the market's been very good. But, what is your view? Going forward on next, say, 12 to 24 months? No. As I mentioned a little bit previously, you know, we are seeing some small positive development on recycling, or scrapping, as you say. The challenge has been that the recycling industry is a dollar nominated industry too. So it means that, they have difficulty in actually paying cash for a vessel that is, sanctioned. What we have seen is that the, you know, US authorities have been willing to give exemptions for vessels that are not owned by owners that have sanctioned themselves. So it means that, certain kind of quite well renowned, recyclers have been able to go to US authorities. This is the vessel. This is the history of the vessel. These are the owners. Can we kind of buy this and get the get an exemption or a license to buy this vessel for recycling? They have gotten yes. So, but the, you know, the number of vessels here, we are talking kind of in the teens. So it is it is not material looking at, you know, the vast fleet of sanctioned vessels currently. But at least it is a-- it is a spot. So how that will evolve going forward, you know, it is very difficult to say, but it is-- it is a positive movement at least. Thank you, Lars. Have a great weekend. Thank you. You too.
Operator: Thank you. We are now going to take our next question. And this 1 comes from Audrey Zhong from CICC Please go ahead.
Audrey Zhong: Hi, good afternoon, Lars and Inger. This is Audrey Zhong from CICC. Lars, thank you again for joining our webinar with Chinese institutional investors in March. My first question is on the recent VLCC sale. We know that you sold 2 VLCCs or about $270 million. I think this is a very Your decision to sell the VLCC because given the current strong rate environment how did you compare the sale price with the present value of the future cash flows from continuing to operate the 2 tankers. Thank you. This is my first question.
Lars H. Barstad: Yeah. Hi, Audrey. No, it is, again, an, excellent question. There were 2 kind of key analysis that we applied to the considerations. 1 was kind of what this implied value of the assets that Frontline own. And as we are priced by the market at the, you know, multiple of almost well, at the time, it was, north of 1.3x NAV. The implied value of the vessel was actually higher than what we achieved But the second 1 is, and this is where it gets a little bit kind of not mathematical to put it that way. it is-- you know, it goes a little bit on experience in this market. You know, we are operating in 1 of the most volatile markets in the world. If not the most. That volatility tells you that nobody actually knows what is gonna happen around the next turn. We looked at the assets. And, you know, for us to decline selling at that level, we have to believe that we were gonna make almost $70 thousand per day every day until that vessel was 20 years old. Or those vessels were 22 years old. If you look at kind of how our market is has been moving historically, We thought that was a bold ask. So, you know, of course, it was the highest price achieved for that generation of ships at the time. And that was basically the analysis So, basically, what we do is we look at what do we need to get the 15% return on equity, which is, you know, where Frontline wants it to be kind of in order to make an investment case. And that resulted in this kind of rate requirements, and how likely it was set up that rate requirement was going to be real. And we thought potentially not. Maybe for the next couple of years, but not for 9.5 years or-- sorry-- 11.5 years or 11 years, whatever it was at the time. So that was, basically the analysis. But you have a very good point. It was an easy decision to make when you are standing in the middle of the market, which at the time was earning for VLCC around a $100 thousand per day. it is, of course,, something you that needs deep consideration.
Audrey Zhong: Great. Great. Thank you a lot. that is very clear and very helpful. And my second question is the cash breakeven rate. I noticed that despite the reduction in financing margins, I think you did a very great job in decreasing your financing cost. But actually, the Suezmax cash breakeven point increased to exceeding the VLCC breakeven for the first time since 2021 based on our quarterly tracking. So that is the $25.7 thousand already reflect the benefit of the lower financing margin? If so, what other factors that drove the increase? And how should we expect the Suezmax cash breakeven to trend in the second half of 26? Thank you.
Inger Marie Klemp: Sorry. I was not hearing everything you asked about but I think you were referring to the Suezmax breakeven rate. Is that correct?
Audrey Zhong: Yes. If you please allow me to repeat my question. Actually, it is why the Suezmax cash breakeven higher than even VLCC Cash breakeven rates in Q2.
Inger Marie Klemp: Yeah. The reason for that is that the dry dock component and the cash breakeven rate for Q3 cash breakeven rates are much higher than it was for the Q1 cash breakeven rates. And then in addition to that, in Q1, we had undrawn debt or an RCF, which was undrawn. On 1 of the vessels, which is assumed to be drawn in the Q2 breakeven rate.
Audrey Zhong: Okay. Great. So can we expect that the Suezmax cash breakeven in Q3 and Q4 also have the trend, like, in Q2? Because I think it is increasing. The Suezmax cash breakeven.
Inger Marie Klemp: I am I am not so sure I understood what you said now. What was the question again? Actually, it is Q3 and Q4, what would the Suezmax cash breakeven be like? Say, I think the Suezmax cash breakeven is increasing. Sorry. The cash breakeven rates are for 12 months forward. So it is for 12 months forward from the second from the end of June 2026. You add on 4 quarters to the end of June 2027. So this the cash breakeven rate. of 27 and a $25.7 thousand for Suezmax vessels are for the 12-month period going forward, including then the Q3 Q4, Q1, and Q2 of 27. it is an average. So yes, And it is explained by what I just said. That you have dry dock of 7 vessels in that period. Which they did not have in the previous cash breakeven rate, which we showed you for the end of the first quarter. Okay. Okay. Great. I understand that. Thank you, Inger. Thank you.
Operator: Thank you. That was the last question for today. I will now hand the call back to Lars for his closing remarks.
Lars H. Barstad: You very much. And all of you for listening in. it is truly an exceptional market. We are experiencing and also well into Q3. So, looking forward to our call next quarter. Thank you very much.
Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
