Overseas Shipholding Group, Inc.
Q4 2016 Earnings Call Transcript

Published: 7 Mar 2017

[Operator:]

Good morning and welcome to Overseas Shipping Holding Group’s Fourth Quarter 2016 Earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Brian Tanner, Head of Investor Relations. Please go ahead.

[Brian Tanner:]

Thank you, Daniel. Good morning everyone and welcome to OSG’s earnings conference call for the fourth quarter and full year 2016. Before we begin, I would like to start off by advising everyone on the call with us today of the following. During this conference call, OSG’s management may make forward-looking statements regarding OSG or the industry in which it operates, which could include without limitation statements about the outlooks for the tanker and articulated tug barge markets, changing oil trading patterns, forecasts of world and regional economic activity and demand for and production of oil and petroleum products, OSG’s strategy, expectations regarding revenues and expenses including both G&A expenses and vessel expenses, estimated bookings and TCE rates for the fourth quarter and full year of and other periods in 2016, estimated capital expenditures for 2017, projected scheduled dry dock and off-hire days, OSG’s consideration of strategic alternatives and its ability to achieve its financing and other objectives, and regulatory developments in the United States and elsewhere. Any such forward-looking statements take into account various assumptions made by management based on its experience and perception of historical trends, current conditions, expected and future developments, and other factors management believes are appropriate to consider in the circumstances. Forward-looking statements are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of OSG, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Factors, risks and uncertainties that could cause OSG’s actual results to differ from expectations include those described in OSG’s annual report on Form 10-K for 2016 and in other filings that OSG has made or in the future may make with the U.S. Securities and Exchange Commission. With that out of the way, I would like to turn the call over to our President and Chief Executive Officer, Samuel Norton. Sam?

[Samuel Norton:]

Thanks Brian. Good morning everyone and thank you for joining us for our first earnings call since completing the spin-off of our international business. Let me start by saying on behalf of the entire OSG team that we are all energized and committed to achieving success as we take this company forward to an exciting new chapter in our long history. We have a solid platform to develop our natural businesses and are excited to begin executing on a plan to maintain and to extend this platform. Before we get started, let me introduce you to Chris Wolf, our CFO since December, who is joining me on this call today. Chris brings a wealth of public company experience, having served in the CFO role at several companies prior to joining OSG. We see his addition as bringing a major asset to our team here in Tampa. Please turn to Slide 4 in the deck provided to you on our website. Let me start by providing an update of the spin-off of what was previously the international shipping group of OSG. As many of you know, we completed the separation of International Seaways on November 30. It now trades as an independent public company on the New York Stock Exchange under the ticker symbol, INSW. There was a lot of attention and effort from employees at both companies that went into successfully completing that transaction, so I want to recognize those efforts. With the separation of these two businesses having been completed, OSG is now a more sharply focused, diversified U.S. flag company with a leading portfolio in the Jones Act market. We are pleased with our performance for the fourth quarter and full year despite challenging market conditions throughout most of the year. The accounting treatment related to the spin-off of INSW no doubt creates some distractions when looking through the numbers; nonetheless, key figures remain very solid for OSG. We reported adjusted EBITDA in the quarter of U.S. $50 million on time charter equivalent earnings of $110 million. For full year 2016, adjusted EBITDA was $176 million on TCE revenues of $446 million. In the fourth quarter, we accelerated the payment of $19 million in principal amount of our bank debt. We strengthened the capital structure of the company throughout 2016, ending the year at 1.9 times net debt to EBITDA versus nearly 3 times a year ago. Recently, we announced an agreement with the Securities and Exchange Commission fully resolving a previously disclosed SEC investigation. This agreement also resolved the last remaining claim in our bankruptcy case and allowed us to receive a final decree and order from the court closing our bankruptcy case. Please turn to Slide 5. The details of vessels owned and operated by OSG provided in Slide 5 provides a good reference point for considering the diversity that our portfolio of assets provides us. Ours is not a homogenous fleet of commoditized vessels; rather, it is a mix of assets, many of which operate within specialized niches that help us sustain higher quality cash flows than what might otherwise be expected. Of the 12 tankers shown, three have been converted to shuttle tankers that serve FPSOs that are operating deepwater projects in the U.S. Gulf. OSG is the only shuttle tanker provider in the U.S. Gulf of Mexico, and these three unique assets remain insulated from what has become a challenging spot market in the traditional Jones Act trades. Our other nine tankers are trading on the west coast and in the U.S. Gulf Coast in clean product and crude oil trades. The markets within which these assets trade have most significantly been impacted by reduced demand for coast-wise crude oil transportation during the past year. Importantly, Eagle Ford shale oil production, a major source of demand for Jones Act trade, declined 390,000 barrels per day in December 2016 from the prior year period. Eagle Ford crude is transported through pipeline infrastructure to Corpus Christi where it has in the past loaded on Jones Act vessels for transportation to refineries in the U.S. Gulf and the Philadelphia area. Please turn to Slide 6. As you can see on this chart on the bottom right, crude oil movements out of Corpus Christi declined throughout most of 2015 and 2016, leading to the redeployment of a number of Jones Act vessels out of the crude oil trades into clean product trades, putting pressure on overall Jones Act TCE rates. We consider attaining the stability of cash flow offered by time charters to be a fundamental characteristic of the objectives of our chartering approach. As such, we intend over time to pursue an overall chartering strategy that seeks to cover the majority of available vessel operating days with medium term charters. Consistent with this approach, we have 79% of 2017 tanker ship revenue days covered for the coming financial year. Referring back to Slide 5, we have 10 ATBs, eight of which have been rebuilt since the original date of construction. Two were built specifically for our Delaware Bay lightering business and are less than 10 years old. Notwithstanding the aspirations of our chartering policy, medium term charters will not always be [indiscernible] nor prove achievable under certain market conditions. As such, during periods of uncertainty in the markets within which we operate, more of our vessels will be exposed to the more volatile and less predictable spot market. A corresponding impact on the visibility and the amount of revenue which our vessels may earn can be expected. Softer charter market conditions will accordingly have a larger impact on our rebuilt ATB fleet in 2017, as six of the total of eight such units will come open into the spot market over the course of this year. At this time, less than 50% of the expected revenue days for ATBs are currently covered for 2017. Offsetting the exposure that our ATBs will have to the spot market, we have maintained continued fixed contractual cover and are experiencing increasing additional volumes handled by our Delaware Bay lightering assets. Please turn to Slide 7. While the decline in U.S. crude production has led to a decrease in demand for coast-wide transportation of domestic crude, the narrowed spread between Brent and WTI has made it more attractive for U.S. northeast refineries to import foreign crude. Imports to U.S. northeast refineries rose 35% in 2016 versus 2015, with the majority of this coming from West Africa. Our Delaware Bay lightering business has been positively affected by this trend. Lightering volumes averaged 209,000 barrels a day in the fourth quarter, up 46% compared with the same period in 2015. For the full year 2016, lightering volumes averaged 172,000 barrels per day, up 64% compared with full year 2015. Further protection from the spot markets can be found in our two non-Jones Act tankers that operate in the U.S. flag international market under the Maritime Security Program, the only two tankers in the 60-ship MSP program. The Maritime Securities Program is another U.S. government-sponsored program to encourage U.S. flag operations with U.S. crew and U.S. compliance and features. These ships are not built in the United States, which is why they are distinguished from our other Jones Act vessels. Beginning in fiscal 2017 in the MSP program, Congress has approved an increase in the annual fees applicable to these vessels from $3.5 million to $5 million. These vessels service a contract of affreightment with the government of Israel which accounts for approximately 60% of their available days and extends through 2020, further improving the visibility of our forward revenue streams. Because of their participation in the MSP program, these vessels also qualify for preference cargoes from various U.S. government agencies, including the Military Sealift Command. The combination of these activities allows these vessels to produce attractive cash flows. In summary, we have a solid mix of vessels deployed across several niche businesses that provide us enhanced financial stability in a market experiencing increased volatility. We believe that this diversified portfolio of assets will allow us to manage through the current market cycle and to be in a position to take advantage of opportunities which lie ahead. I will now turn the call over to Chris to provide additional details on our fourth quarter and full year financial results.

[Christopher Wolf:]

Thanks Sam. As Sam noted, OSG completed the separation of its business into two independent, publicly-traded companies through the spin-off of the then wholly owned subsidiary, INSW on November 30, 2016. The spin-off separated OSG and INSW into two distinct businesses with separate management. OSG retained the U.S. flag business and INSW holds entities and other assets and liabilities that formed OSG’s former international flag business. The spin-off transaction was in the form of a pro rata distribution of INSW’s common stock to our stockholders and warrant holders of record as of the close of business on November 18, 2016. In accordance with accounting standards, the assets and liabilities and results of operation of INSW are reported as discontinued operations for all periods presented. Unless stated otherwise, the following discussions relate to the continuing operations of OSG. Now let’s review fourth quarter and full year 2016 results in more detail. Please turn to Slide 9. TCE revenues for the quarter totaled $110 million, a decrease of $5 million or 4% compared with the fourth quarter of 2015. The decline was primarily driven by lower daily rates earned by our Jones Act tankers, Jones Act rebuilt ATBs, and our non-Jones Act tankers and account for a $9 million in TCE revenues. Most of this decrease was attributable to our rebuilt ATBs. This decrease was partially offset by a $3 million increase in Delaware Bay lightering revenues on increased volumes, which Sam highlighted earlier. We also had a 52-day increase in revenue days excluding our modern lightering ATBs, resulting from fewer dry dock and repair days which accounted for a $1.5 million increase in TCE revenues. TCE revenues for the full year 2016 were $446 million, a decrease of $3 million or 1% compared with the full year 2015. This was primarily due to lower daily rates earned by our Jones Act tankers and rebuilt ATBs, accounting for a $16 million decrease in TCE revenues. Again, most of the decrease was attributable to the rebuilt ATBs. This decrease was largely offset by a 256-day increase in revenue days for our Jones Act fleet, excluding our modern lightering ATBs. This was driven by fewer dry dock and repair days and resulted in an $11 million increase in TCE revenues. Also contributing to the offset was a million dollar increase in Delaware Bay lightering revenues and increased average daily rates by our two MSP vessels, which accounted for a million dollar increase. Moving to Slide 10, fourth quarter 2016 adjusted EBITDA was $50 million, up 6% from $47 million in Q4 of 2015. The increase was driven primarily by lower G&A expenses in the current period partially offset by the decline in TCE revenues discussed previously. Margin increased from 41% of revenues to 46%. For the 12-month period, 2016 adjusted EBITDA increased 5% to $176 million and margin increased to 39% of revenue compared to 37% in 2016. Moving to Slide 11, net income from continuing operations for the fourth quarter was $65 million compared with a net loss from continuing operations of $34 million in the fourth quarter 2015. The increase reflects the non-cash benefits of the reversal of the deferred tax liability on the unremitted earnings of International Seaways in the current quarter compared to a tax provision in the fourth quarter of 2015. The current period also saw reduced interest expense on lower outstanding principal balances. These increases were partially offset by a vessel impairment charge of $6.6 million reported in the quarter. In addition, net loss from continuing operations in the comparative fourth quarter 2015 period included $28 million in bond premium and consent fees and related professional fees paid on notes repurchased. Net loss from continuing operations for the full year 2016 was $1 million compared with net income of $81 million for the full year 2015. The decrease reflects vessel impairments recognized in the second half of 2016 partially offset by the benefit from the reversal of the deferred tax liability mentioned earlier and reductions in interest expense. Net income from continuing operations in the comparative full year 2015 period included a one-time non-cash income tax benefit of $150 million. In addition, there was $30 million in bond premium and consent fees and related professional fees on notes repurchased. Net loss from discontinued operations for the fourth quarter was $340 million compared with net income from discontinued operations of $44 million for the fourth quarter of 2015. Net loss from discontinued operations for the full year 2016 was $293 million compared with net income of $203 million for the full year 2015. Results from discontinued operations in the fourth quarter and full year 2016 reflect a charge of $333 million to reduce the carrying value of the INSW disposal group to its estimated fair value, calculate on a held for sale basis. Please turn to Slide 12 and moving from left to right, we began 2016 with total cash of $205 million, which included $11 million of restricted cash. During 2016, we received $202 million in cash distributions from International Seaways and we generated $176 million of adjusted EBITDA from continuing operations. We expended $7 million on dry docking and improvements to our vessels. In March, the board of directors declared a cash dividend totaling $32 million. During 2016, we repurchased and retired $119 million of Class A common stock and warrants. We made optional and mandatory prepayments of $110 million in principal on our term loan and opportunistically repurchased and retired an additional $27 million in principal at a discounted price of $23.6 million. On our bonds, we executed repurchases of $38 million, bringing our total deleveraging activities in 2016 to $175 million. The result was we ended the quarter with approximately $207 million of cash, including $16 million of restricted cash. Let’s turn to Slide 13. Continuing on our discussion of cash and liquidity, as we mentioned on the previous slide, we have $207 million of cash at year-end, including $16 million of restricted cash. Our total debt at year-end was $525 million, consisting of $444 million of term loan and $81 million of bonds. We also have a $75 million revolver which is presently undrawn. Combining our undrawn revolver with unrestricted cash, we had $282 million of liquidity at year-end. We are not subject to any amortization on our term loan and we are not required to make any principal payments under the term loan until 2018. With $254 million of equity, our net debt to equity ratio is 1.3 times, and as Sam mentioned, our net debt to EBITDA leverage was 1.9 times at year-end compared to just under 3 times in the same period a year ago. This concludes my comments on the financial statement. I would like to now turn the call back to Sam for his closing comments.

[Samuel Norton:]

Thank you, Chris. Please turn to the final slide of the presentation, Slide 14. We were pleased with our performance for the fourth quarter and full year 2016 despite challenging market conditions throughout most of the year. We are facing progressively uncertain market conditions but niche businesses, like our shuttle tankers, Delaware Bay lightering and Maritime Security Program vessels, help provide stability in the face of increased market volatility. We are well positioned to build on the company’s strength, address future growth opportunities, and drive shareholder value. We will now open up the call to questions. Operator?

[Operator:]

[Operator instructions] Our first question comes from Steve Sylvester with Alcentra. Please go ahead.

[Steve Sylvester:]

Hey, good morning. Thanks for the call. Just to be clear, you do not have any more mandatory payments or ECF payments on the term loan for ’17?

[Christopher Wolf:]

That is correct. We prepaid an amount last year so we’re covered for ’17, so the calculation would take place at the end of 2017 for a repayment in March of 2018.

[Steve Sylvester:]

Got you, and in terms of the ATBs that you mentioned, six of eight going off charter at different points in the year, could you give an idea of the cadence of that through the year and how that may impact--again, just contracts that are coming due Q1, Q2, Q3?

[Samuel Norton:]

So we have two ATBs currently trading in the spot market. They have been trading in the spot market throughout the first quarter. We have another two that come off during the second quarter, and the balance come off during the third quarter of the year. So as we stretch out through the year, we will be seeing those vessels come off their historical contracts and seeking opportunities either in the spot market or elsewhere.

[Steve Sylvester:]

And in the current spot market, the two ATBs, are they making money at those spot rates?

[Samuel Norton:]

We have the 214 and 242 have been operating in the spot market since the early part of December. Each of those vessels has, when taking into consideration utilization as well as the prevailing rates attainable in the market, been generating material surplus cash flow over their operating costs, so from our perspective yes, they’ve been contributing to our financial performance and therefore continue to operate in the market.

[Steve Sylvester:]

So with that said, if the market doesn’t change, is it possible that the other ATBs that come off in Q2, Q3 would be able to get that same rate, or is that too much capacity for the current market?

[Samuel Norton:]

No, that would be speculative. There are a lot of forces that are at work in driving ultimately the supply and demand dynamics in our market. I think broadly speaking, a consensus view is that supply for the traditional trades of the Jones Act is probably in excess of what is needed. As I have commented on earlier occasions, the principal driver for volatility will be the demand for crude oil transportation coast wise in the United States. That demand spiked in 2014 and 2015, and then subsequently fell off quite dramatically. As many of those listening will be aware, crude oil production in the United States has been increasing of late. It is uncertain at this time whether or not that crude oil will be directed to U.S. refining centers as it has been in the past or whether it will be exported, so there is kind of a wait and see attitude from that perspective as to how that will affect forward demand. As far as looking at the traditional clean product trades within the Gulf of Mexico, that market remains stable and we would expect it to remain so for the foreseeable future, so absent a change and shift in demand for crude oil transportation or an otherwise change in demand for refined product consumption on the east coast, which might drive more maritime transportation needs, we would think that market forces over time would dictate a need to try and remove some capacity from the market.

[Steve Sylvester:]

In terms of your own fleet, are there other assessments, special assessments that come up in ’17 that may motivate you take some capacity out on your own side?

[Samuel Norton:]

I think that the perspective that we have is monitoring the utilization factor of the assets to ensure that we continue to generate positive cash flow from the use, continued use of these assets, and we have a pretty low threshold cost to be able to do that; but ultimately we face capital expenditure requirements in the context of intermediate surveys and/or special surveys that come due. Four of the ATBs that we currently operate will face some decision with respect to capital expenditure in the context of those survey positions in the second half of this year, and that would probably give us cause to think about what the current market conditions are at that time and whether or not we have confidence that in investing further capital into these assets, we have a high probability of recovering that additional investment in addition to covering the cost that we currently incur.

[Steve Sylvester:]

Great. Just one last - uses of cash, obviously you have a health cash balance, you don’t have any more mandatory payments on the term loan. Can you sort of prioritize use of cash this year?

[Christopher Wolf:]

Sure. This is Chris. I’ll try to take that. I think we know that over the past couple of years, we’ve done a lot of share repurchase and debt retirement, so we’ve done a lot of payments there, but if I were to prioritize, we obviously wan to grow the business and we’d look to grow organically. We generated a fair amount of EBITDA last year of $176 million, so we generated a good amount of cash flow, but I’d say first and foremost we’re going to reinvest in the business and do that, and do it in a prudent way, so that’s first and foremost. I do have to point out that the bonds are due technically in March of 2018. We have a unique feature in our revolver that if we want to keep our revolver going, we have to deal with the bonds by the end of the year, December 29. So that’s part of the overall look that we’re having in capital structure, and it would be a little bit premature for me to say exactly where we’re going there, but obviously that’s something we’re going to have to deal with this year, either through prepaying it--or I should say, using cash for payment or looking at refinancing of that and possibly other debt instruments as well.

[Steve Sylvester:]

Okay, thank you.

[Operator:]

Once again, if you would like to ask a question, please press star then one. Our next question comes from the Sean Kelley with OFS Management. Please go ahead.

[Sean Kelley:]

Thanks guys. Just to make sure I got my notes correct, so of your tankers, six are dedicated to clean product only, three could do either dirty or clean, correct?

[Samuel Norton:]

The tankers can shift back and forth between clean or crude transportation, depending on the customer’s need, so I don’t think it’s correct to categorize them as being one or the other. The ATBs are less flexible, although in theory they can also trade back and forth between the two. The cleaning time and cost necessary to convert an ATB from crude transportation to clean transportation is more complex, given the operational features of the barges in terms of quickly and efficiently cleaning can be done. There are also features in the barge - some of the barges, for instance, don’t have heating capacity, so if you’re transporting crude oil that requires heat, then they’re not properly equipped, so that limits their ability to trade. But for the tankers, they can go either way, clean or crude depending on the customer’s requirements.

[Sean Kelley:]

Sure. So how many in your fleet today are currently handling clean product versus dirty?

[Samuel Norton:]

I’d have to look that up. I think right now that your numbers are not far from wrong, and I think that the shuttle tankers are obviously handling crude, they are taking crude oil production off of the Gulf of Mexico FPSOs into refining centers in the Gulf of Mexico. There are to my memory two other vessels that we have that are engaged in crude transportation, and the balance of them are trading clean. It may be three, I would need to check that.

[Sean Kelley:]

Have you run a scenario where if you’re only doing clean product, what the business looks like from a top line and EBITDA, just broad numbers?

[Samuel Norton:]

I don’t think it’s--I mean, the day rates for the vessels are the same whether we’re trading clean or dirty, so we don’t really look at the business from that perspective. We have end user charterers that elect to use the vessels in one trade or another. The reason why we try and articulate and differentiate between the two types of trades is that the demand dynamics in the clean product trade are different than the demand dynamics in the crude market trade in the Jones Act trade. The clean market trade has historically been centered on transportation fuel movements from Gulf Coast refineries into the State of Florida, and if you go back decades that’s been the primary driver of Jones Act demand. The advent of shale oil production in Texas, in particular in the last five or six years, created and drove a whole new demand dynamic for Jones Act tankers, and I’ve stated before in some of our other presentations crude oil movements out of Corpus Christi peaked in 2014 at about 800,000 barrels per day, and as the slide in the deck shows, that’s dropped off significantly in the last two years, so that’s been a big swing factor in demand. Some of the increase in capacity and the supply in the Jones Act was driven by an anticipation that that crude demand would be sustained. The lifting of the oil export ban at the end of 2015 together with pricing dynamics that have changed the relationship between domestic WTI prices and international prices, principally focused on Brent prices, has then resulted in a shifting of procurement patterns particularly by the east coast refineries, as I’ve noted before, and that resulted in a significant drop in demand for crude oil movements in the United States. Whether that comes back or not, that’s a question that all of us are quite focused on and trying to understand what might drive that demand to return. There has been some speculation in the markets about, for instance, a border tax adjustment, if that were to be implemented, how that might affect procurement patterns for the refineries in the United States and indeed how that might shift procurement patterns for clean product, particularly in Pad 1 along the east coast of the United States.

[Sean Kelley:]

Okay. If I missed this, I apologize, but just average remaining life on your contracted charters, where does that stand today?

[Samuel Norton:]

That’s not a figure that we generally give. We do provide and have given you forward-looking percentages in terms of revenue days that are covered for the balance of 2017, so I would direct you to that data that has been provided in our public filings.

[Sean Kelley:]

Okay, and then your renewal rates, can you give us a sense of where they’re coming in at, relative to the ones rolling off?

[Samuel Norton:]

I think that the right way to answer that is to direct you to broker assessments in the market, and I think that broker assessments today would look at period business for the tankers in the low to mid 40s per day, and for the larger ATBs in the upper 20s. I think those numbers are probably consistent and have been for the last several months.

[Sean Kelley:]

And what would you say your breakeven is, cash breakeven on tankers and ATBs today?

[Samuel Norton:]

You know, the build-up of that, I can direct you to the bare boat charter payments that we pay on our tankers - that’s a line disclosed in our financial statements, and then you can take the operating cost as generally--I think the industry generally assesses Jones Act tanker operating cost in the low 20s per day, and the ATBs probably $10,000 to $12,000 below that.

[Sean Kelley:]

Okay, and the bare boat charter payments are how much, roughly?

[Samuel Norton:]

They’re $23,000 to $24,000 a day. We have 12 tankers altogether - 10 of them are on leases. The line in the financial statements is, from memory, $92 million a year roughly, so if you take $92 million and divide it by 10 and divide it by 365, you’ll get your average bare boat rate.

[Sean Kelley:]

Okay, great. So sounds like they’re kind of breaking even right now, is that the right way to interpret it?

[Samuel Norton:]

I’ll leave you to make your own assessments as to that question.

[Sean Kelley:]

But just the math you gave me, it sounds like--okay. And then the scrap values on the ATBs, what do you guys think roughly you get if you end up in fact scrapping them?

[Samuel Norton:]

Look, the international price for scrap steel right now has kind of been static around $300 per lightweight ton for some time now. That obviously fluctuates up and down as well. The actual steel value of the ATBs is probably in the range of 8,000 or 9,000 lightweight tons, so you can do that math. We generally believe that the physical condition of our ATBs is not in a condition that would normally induce us to look at scrap. As we’ve stated, all of these ATBs have been rebuilt in the last 15 years, so we remain open to and interested in finding, if not utilizing these assets in their traditional trades of clean petroleum product transportation in the Gulf of Mexico, finding alternative uses to repurpose these assets or alternative markets that might realize and recognize the value of these assets in a continuing operational mode to a premium to their scrap value.

[Sean Kelley:]

Okay. That’s very helpful. So last question - promise. In terms of days, available ship days for 2017, is that going to be a higher or lower number given dry dock and expectations, that sort of thing?

[Samuel Norton:]

It would be slightly lower. We have possibility for as many as eight dry docks and intermediate surveys during the course of 2017, three special surveys on our tankers and four intermediate surveys on our ATBs. Whether or not we carry out the intermediate surveys, I touched on that earlier, in this year, in the second half of this year, that will be a capital decision that we’ll make in the context of where we see the markets at that time, so that’s kind of a wildcard as to whether or not we’ll actually spend that money and take the vessels through their surveys. But for the tankers, it would be a marginal increase in days lost to dry dock in 2017 versus 2016.

[Sean Kelley:]

Okay, thanks guys. I really appreciate it.

[Operator:]

Once again, if you would like to ask a question, please press star and then one. It appears that at this time, we have no further questions. I would now like to close the question and answer session and turn the call back to Brian Tanner for any closing remarks.

[Brian Tanner:]

Thank you, Daniel, and thank you everyone for joining us today. I’ll note that we are attending the Seaport Global conference later this month on March 22 in Coral Gables, Florida. Please speak to your Seaport Global representative if you wish to schedule a one-on-one meeting with us there. We appreciate your support and look forward to speaking with you in the future. Have a great day.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.