Scorpio Tankers Inc.
Q4 2014 Earnings Call Transcript

Published: 2 Mar 2015

[Operator:]

Hello, everyone, and welcome to the Scorpio Tankers Incorporated fourth quarter 2014 conference call. This conference is being recorded. I would now like to turn the conference over to Mr. Brian Lee, Chief Financial Officer. Please go ahead, sir.

[Brian Lee:]

Thank you. And thank you everyone for joining us today. On the call with me are Emanuele Lauro, Chief Executive Officer; Robert Bugbee, President; and Cameron Mackey, Chief Operating Officer. The information discussed on this call is based on information as of today, March 2, 2015, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forward in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosures in the earnings press release that we issued today, as well as Scorpio Tankers' SEC filings, which are available at scorpiotankers.com. Call participants are advised that the audio of this conference call is being broadcast live on the web 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. Now, I'd like to introduce Emanuele Lauro.

[Emanuele Lauro:]

Thank you, Brian. Good morning to all, and thanks for joining us today. The format of the call is known to most of you. Today as well we'd like to devote most of the call to Q&A. We largely remain focused on execution, and whilst the majority of our fleet is now trading on the water, we are still taking delivery of 12 newbuildings in the next four months. The number of operating days quarter-on-quarter are increasing substantially. And Q4 has seen a few deliveries pushed in to Q1 in order to have 2015 build vessels as opposed to December 2014 ones. Demand for product tankers continue to increase at a rate which we see being healthy. This is evidenced by the year-over-year increase in rates across all product tanker classes. Even at the peak of U.S. turnaround season, high global refining margins have sustained refinery runs across all regions. This has contributed to a strong product exports and has pushed up product tanker demand. As refinery maintenance is now set to slow down, we expect the product tanker market to remain tight for the foreseeable future. In the months ahead, we expect demand to further increase, as mentioned, as a result of new refineries coming online and demand increased due to the economic growth. The latter is being substantially held by the lower oil price. We further expect that the percentage of product tanker vessels on order versus the current fleet will continue to decline, rebalancing the supply and demand curves. With this, I don't know if Robert has something to add. Robert? Otherwise we can go to -- yes, great.

[Robert Bugbee:]

Just had a few things. Look what we have in Scorpio is that we presented a positive investments thesis for the product market, and we continue to see evidence, as that thesis is unfolding. We don't believe that others are now in a position to replicate that. We've embarked on a strategy to put low-cost highly-efficient steel on the water in front of what we expected to be a multi-year recovery in the CPP market. This recovery is expected to be driven from both cyclical and secular elements. We have put in place a low-cost financing that has maximized the company's degree to the freedom. We have already demonstrated the flexibility of that capital structure to take advantage of market opportunities both in industry and in financial markets. We have engaged in several accretive asset transactions, where we were the only party with the available financing to conclude quickly. We sold assets however where we were able to high-grade the overall fleet and release capital to use for our accretive newbuilding transactions and shareholder-friendly capital return activities. We, for example, repurchased over 20% of our shares, when Wall Street had last cited the company's underlying value. We have returned over $115 million through dividend payments, inclusive of what we have recently announced. This has enabled us to derisk our shareholder's investment and ensure that we are judicious with their capital. Looking forward, we believe our best-in-class asset portfolio, low-cost financing and dedication to remaining opportunistic in the face of ever-changing opportunities, especially when it comes to capital return policy, are set to drive attractive shareholder returns. Management own significant amounts of stock. We wake up each day seeking to ensure that the company has a solid financial fitting to seize all opportunities, while at the same time where there any unexpected challenges; and, b, to maximize the value of both, our and your shares. With that, we'd like to hand it over to questions.

[Operator:]

[Operator Instructions] And we'll take our first question today from John Chappell with Evercore ISI.

[John Chappell:]

Robert, first question has to do with the first quarter to-date guidance you provided for the first time, 75% booked. I'm just curious what's the calendar date or any rough guidance you can provide to when that 75% cutoff was? And the reason I ask is obviously DMR market specifically has been incredibly strong over the last couple of weeks. So just trying to figure out how much of that recent strength is incorporated in that 75% number?

[Robert Bugbee:]

The calendar date would have been cut back by one week as of today. So it really would have been for estimated earnings up to and including Friday week last.

[John Chappell:]

Friday, February 20.

[Robert Bugbee:]

Correct.

[John Chappell:]

And then also, I've asked this before, but now the market's a little bit different, so I'm going to ask it again. A lot of the charter-ins start to roll off, and I guess most of them in the next four months or so. Now, I guess the original plan was kind of to let those roll off and become more of an owned ship operator, as you take delivery of the newbuildings. But given the options that you have on some of those, let's call them last year's rate levels, should we assume that at least from an option extension standpoint that you may look to keep some of those charter-ins for a longer period of time?

[Robert Bugbee:]

I think we're going to continue to be consistent, where we've always said that where there are options that clearly deep in the money. And yes, we do have those that in an environment we see is actually continuing to improve long-term that we would have no hesitation in exercising those options.

[John Chappell:]

Last question, kind of longer-term strategic. As I went through this press release, there is a lot of similarities to the OMI press releases, seven or eight years ago with the quarterly guidance. And also if you just go to the cash flow statement having big buybacks right on top of growing dividends. Absent the sale of the company, which is obviously impossible to predict, what's kind of the next steps in the strategic playbook for replicating what happened at OMI in the middle of last decade?

[Robert Bugbee:]

I think you are seeing, first, that now during this first quarter, which is -- this is really, the first quarter the company is going to have, let's say, no significant EBITDA or significant sequential earnings gain. And what we are doing at the moment is, let's say, securing that and focusing on the quality of execution for this quarter. So we are focusing on as hard as we can on the daily nuts and bolts at Scorpio Tankers. And focusing long-term strategically on the quality of that balance sheet, that quality of that balance sheet that enabled, I think OMI was a great comparison. So that enables you to really concentrate then exclusively on value creation, whether it's through stock buyback, the dividends, et cetera. So at this time, now, it's like pressing the pause button on investments. And it's just very, very steady, just making sure on operating basis that we, as Emmanuel said, taking delivery of these next 12 ships over this next four months, and ensuring that we have a great start to this cycle that is playing out quite nicely at the moment.

[Operator:]

And we'll take our next question from Gregory Lewis with Credit Suisse.

[Gregory Lewis:]

Robert, I'll be curious on your thoughts and what you're seeing in the market related to the issues with the refineries on the U.S. West Coast, what types of dislocations is that creating? Is that creating an opportunity for you guys is or is just kind of at the moment taking volumes out of the market, which potentially come back later? Just sort of any color you can provide around what that's doing to the market?

[Robert Bugbee:]

I think if we take it in general terms, as we've got to this point now in the product market, where supply and demand is reasonably balanced. And most importantly for the first time ever, we've got a Northern Hemisphere market, a Southern Hemisphere market, and East of Suez or West of Suez market, and you've got all four of the product tanker size functioning. Any dislocation is going to have more significance. Right now, it just so happens to be the West Coast, California is proving good demand. That demand is coming not just from the Caribbean area, but you're even looking at voyages all the way from Korea around Asia to meet California, but it's just one sort of thing. We would expect that maybe when California is cleared up and whenever it's going to be, something else is going to happen. We've just got this increasing trend where you've got refineries slowly opening up in the Middle East and India, combined with a very positive demand side as a result of economic growth and stimulation coming from the low-oil price. And then you've got countries like Australia that's switching from crude to product imports. You've got countries like Britain itself, who is suddenly actually having to almost import more jet fuels and gasoline than it can produce itself. So here you're getting growth in those areas without even any underlying demand growth for the base product itself in those economies. And as this market continues to tighten, any dislocation will create opportunity.

[Gregory Lewis:]

And then just following up on Jonathan's question. You mentioned that the 75% contract coverage in the press release. But I mean should we be thinking that the Handies have the most remaining Q1 market capture versus the LR2s, just given their sizes or should we think about it being pretty equal across the board?

[Robert Bugbee:]

I think that's a good question. I would categorize the LR2 -- so if you took the midpoint at 75%, Handies would have probably at that date been 70%, 69%; LR2s would have been as high as 79%; LR1 77%; and MRs 73%, 74%.

[Operator:]

And we'll take our next question from Ben Nolan with Stifel.

[Ben Nolan:]

Robert and maybe Cam, when I look at the first quarter so far especially in the last two weeks or so, when rates have really popped pretty nicely, at the same time that we're seeing pretty cold weather across the United States. Last year, the same time or actually a little bit earlier, the weather was really cold and it had a negative impact on the product tanker market. I am just trying to understand what is, how do you determine whether or not, say, a weather impact is going to be positively impactful or negatively impactful? What exactly is the determinant?

[Robert Bugbee:]

Well, I think last year, we had a number of factors coming together that were awful. We had terrible palm oil; we had terrible vegetable oils, we were flooding in South America; you didn't have those first of those Middle East refineries coming online allowing the freedom for exports coming from Europe. You also got an increase in exports from Russia into Europe, which is allowing that ability for Europe to feed the U.S. East Coast in its cold. The other thing is the oil pricing is completely different from where it was this time last year. So those U.S. East Coast refineries themselves are put under more pressure, because the vesselsing of crude oil is being less efficient. In conjunction with that, the weather has been severe enough that they've even had delays in their operation of getting crude. So this year, it's being largely positive. One thing I would mention always that, right now the triangulation aspect in the Atlantic is very difficult, because you haven't actually got much product coming from the U.S. Gulf to Europe. You've got a lot of product going from Europe to the U.S. East Coast and a lot of product coming out of the U.S. Gulf to the developing economies in South America, Africa and even going to Asia. So it's a very different year. Last year there was no ops. There was vegetable oil in a mess. The Asia market itself wasn't as strong. So you just had more shifts with less demand being focused into that Atlantic Basin. Today, the product market has developed so much more. We can see just the difference in the LR2 rates on the East of Suez this year compared to this time last year.

[Ben Nolan:]

And then my next question I guess relates to the LR2 vessels that you guys are acquiring from SALT. I know there were several options to acquire several more of those. How should we think about modeling those? I mean is that something that you at this point would see as accretive and something you'd move forward on or maybe not?

[Robert Bugbee:]

An option is an option. There is either two more options, and the declaration of those options don't come until May 31. So it's an option, there has been no discussion in management, no discussion in the Board related to those option at this point.

[Ben Nolan:]

Maybe correlated to that, but not directly, we've seen really good product tanker rates and a relatively modest increase in asset prices. Although, I guess I would say at the same time last year, if we would see, have seen rates like we see today, asset prices probably would have been substantially higher. Would you sort of attribute the market as it stands right now on asset prices relative to charter rates? Is it a function of just less capital available to chase opportunities or am I completely off?

[Emanuele Lauro:]

I think in many aspects of shipping or energy or anything from the capital markets that's being -- we had, let's say, hoped right across shipping for a period, then there was the disappointment. Then there was the capitulation, liquidation from the General Energy side. And that that has created let's say, speculative capital. You've got the players, the stronger players, whether they're the Maersk, BWs and the STNGS being very much more measured in their capital allocation. And I think that the whole market itself have turned more to a show-me market. So for us it's very understandable and we saw that it's very, very similar to 2004, 2005, where you had a breakout in the actual final underlying supply demand curves and rates, but it took a little while for asset values to catch up. So I think we just simply turn from the hoped right, to show it and prove it.

[Ben Nolan:]

And that I guess also translates into sort of the relative lack of new vessel orders as a past item 12 months or so, just market has been very strong, but no orders?

[Emanuele Lauro:]

Yes. We've got that plus -- actually there's not that much yard capacity. We are seeing even our own vessels have been delivering slightly later than we would expected and vessels at the back of the queue are going to deliver substantially later than when people expected, across the broader products. But yards are generally be now booked up through till '17 in that area, plus the stress on certain shipyards is meant that actually newbuilding prices themselves. The creators of these yards are not willing to give vessels away at cheap pricing. Plus I would say there's greater discipline from the capital allocation side in the product market. There are the equity IPOs are being closed. So they're not having those speculative orders being put in at the moment.

[Ben Nolan:]

And then last question for me. You guys have now sold or agreed to sell the final remaining LR1s, but you still have some charter-ins and you still have the pool, the Panamax pool. How are you thinking about that segment of the business going forward? Is that something that is just being phased out overtime and you'll focus on the larger and the smaller end of the vessel assets?

[Robert Bugbee:]

Well, for STNG, it's a lot to do with relevancy and where we see the returns. So we got this great position in the Handies, the ice-class ships high regulated, requires a lot of operational intensity. We've got a large new building fleet there and fleet that doesn't have many ships in order. The MRs, that's the work for the trading workhorse, and the LR2 is that expanding market driven by those Middle East and new refineries that add that sort of batter or real drive as the supply demand curves improve. The LR1s, we didn't focus on and I don't think there is any drive to do anything from STNG on that basis.

[Operator:]

And we'll take our next question from Omar Nokta with Clarkson Capital Markets.

[Omar Nokta:]

Robert, I just wanted to touch on the Atlantic Basin commentary you were giving. Few years ago the TC2 route became a bit of a question mark and so we started tracking the transatlantic triangle. What do you think going forward, is the TC2 coming back to relevancy? Is there a different route or what would you think in the Atlantic is probably the best barometer of vessels trading there?

[Robert Bugbee:]

I think it's very difficult for all of us to the moment. I mean we've got the very, very significant changes happening in the market itself. But while the WTI spreads the currency dollar, euro currencies. The pressure on those U.S. East Coast refineries exist combined with the opportunities that the U.S. Gulf refineries have to explore East, Africa or to South America, plus the strength in this new demand area or new markets in Asia. I think probably the better way you could do this, in a more conservative way you could approach this, instead of take the totals, to take the markets individually, whether it's TC2 U.S. Gulf. Asia, add a little bit for a modern fleet, because it's going to get the occasional triangulation opportunity. And so I believe that took a moment, and then when we've all got a bit more better data, then we can fine tune it.

[Omar Nokta:]

So just moving target again. And then sort of with that, I know the market has become much more dynamic across all four product tanker segments. Are you able to give any sort of geographic mix about where your fleet-wide operations are kind of or where the fleet is located currently or is this just too dynamic to get a handle on?

[Robert Bugbee:]

Well, I think you could be rest assured that after the Handies have completed, the Handy Ice Class ships completed their initial palm oil voyages, they would have been trading in Northern Europe, North Atlantic. The MRs are probably 75% on the spot-side, 70% to 75% right now Atlantic versus East spread. The LR2s, you can't avoid them being in the east. The east market is going to dictate the rates anyway, even if on occasion they are traveling into West Africa or into Europe.

[Omar Nokta:]

And then also just wanted to, I'm sure you've gotten asked this question before, but the drop in oil prices, has that in anyway sort of changed your view on what conventional vessels look like from a return perspective? Obviously, you and the team have been pioneers of the eco story. But does the second-hand ships built with non-eco specs, do those become more attractive or is it still eco the way to go?

[Robert Bugbee:]

I think we are going to do this transparency in bits and pieces. So right now you are seeing us come with a sort of estimates related to booked revenue. There is not really spread. But whether we do it in that first quarter call or into the summer in the conferences, you still have a bunker differential anyway, but you still have much more than a bunker differential. You have actual headline revenue differences, because of the specifications of the vessels that are beyond the bunkers. So for us, especially with the pricing that we got on this new fleet and what you are getting in general operations and ease of maintenance and customers, you talk to a list of customers. We will not be doing anything else, but investing in eco-ships.

[Operator:]

And we'll take our next question from Herman Hildan with Clarkson.

[Herman Hildan:]

So year-and-a-half ago you were pretty clear that first half '15 was the latest you would have delivery of vessels, given that you believe that that timing would be perfect in terms of recovery in the market. And I think you've been more right than you even believed at the time. But you've also seen over the last two months, you guys had some 2016 deliveries. Now, you mentioned earlier on in the call you took a pause on the investment button. But what kind of prices would you want to see or rates, before you would alternatively change that strategy?

[Robert Bugbee:]

It's another question we sort of considered in the last week. It's not a pause of on the investment button. We put a pause on the dividend button. What we wanted to do is right now to just have a period, where we're just focusing on the execution and the delivering of the ship. The asset that we acquired back in December was so discounted against the actual value of the market that this came into the -- this were too good to pass bracket. In theory you will always make decisions based on what's your best allocation of capital, whether it's paying down debt, whether it's increasing dividends, whether it's buying back stock or whether it's acquiring assets accretively.

[Herman Hildan:]

And just going a bit back to Q1, I mean if you look at through TC14 rates in the Pacific, I think it's fair to say that 18,000 by March in Q1 is a bit of a disappointment. Is it possible to provide some color on why it could be that your guided rates in Q1 has been, call it, somewhat on the weak side than what we see in benchmark rates? Is it, for example, more trade as vessel deliveries?

[Robert Bugbee:]

Well, Herman, there is a couple of factors here. One is, of course, as we've explained in the past, our newbuilding deliveries come on contract rates that was set some time ago just for positioning purposes from the yard to the West. So you could call that a drag, you could also call it to secure positioning voyage. We're very pleased with the economics and the terms of those contracts, but frankly it's below the current spot rate in the market. That's reason number one. As a matter of fact, it's a large number of MRs that have just been delivered. Reason number two is, of course, I would question, say, the standard practice of on paper, calculating a triangulated voyage with perfect efficiency, and on dates as a realistic benchmark. Of course, some times as chance would have it, some times we'll beat that benchmark. Many times though that assumption of just going from a to b, b to c and c back to a on dates, the prevailing market rates on the day with very little waiting or to merge, no delays, et cetera, is frankly something I think could be reconsidered as a fair benchmark, which gets to Omar's question earlier.

[Emanuele Lauro:]

I think I'd also add that, of course, we've already said that these would take it back to Friday, a weak ago. But I would also remind you that the U.S. Gulf rate and even the TC2 rate was pretty dreadful. The fixing that from January 20 through till February 16 or so, I mean, you had world scale 50, 60 in the U.S. Gulf.

[Herman Hildan:]

And then moving over to my next question, in January you provided guidance $0.10 to $0.14 EPS for Q4. I thought there was this kind of unwritten rule that when you provided guidance you come in at least middle. Could you kind of give some color on that range and result have been yield, I mean up in the low range -- at the end of the range relative to the higher-end one year dividends.

[Robert Bugbee:]

I think we gave $0.10 to $0.14, and then did upright in the middle as per your convention at $0.12.

[Herman Hildan:]

But it doesn't fit the high [multiple speakers].

[Robert Bugbee:]

I think that you are not going to go into details. But, Emanuele alluded, Cameron alluded that we took ships from December, that should have delivered in December, move them into January. We've always been very focused on making sure that the company's breakout year was '15, creating as clearer runway as possible for the '15 position. And I think looking forward, I would think that the sky is above us and getting bluer everyday related to the product market. The company hasn't reached the beginning of the runway yet. It's still just gently taxing out, because it's taking delivery of these last 12 vessels. But some time in the next sort of two to three months it's going to be in that position, where it can spread its wings and go down that runway. And we've been far more focused in these last months on the core execution of delivering what is a huge fleet that that risk has been taken way from all of us as shareholders. And that's been accomplished than, you know, whatever.

[Herman Hildan:]

And on that note, I mean obviously you've taken the company from a very small company to a very large company. And then in terms of fleet size, what's kind of the breaking level, would you say, before you really start to benefit from having a large fleet in terms of number of vessels?

[Robert Bugbee:]

Well, I think you are benefiting from that right now. At this point, this sort of month going forward, you've had a tremendous amount being delivered in these last five, six months, but you're starting to get that benefit right now. You've seen in the 4Q number, general operating cost coming down, cost per vessels and different measurements coming down. And we've got a great visibility with our customers and strong relationships with those customers, as they enjoyed the quality of these vessels.

[Herman Hildan:]

On the cost side also, is it possible to provide some guidance on G&A? Have you reached, call it, full invested G&A level or how would you guide on that going forward?

[Robert Bugbee:]

We're not going to guide on it. But I mean as the more ships deliver, your cost per vessel continues to come down.

[Herman Hildan:]

I meant more on absolute basis, if you are going to go with that and everything that you need.

[Robert Bugbee:]

You pretty much got all the staff that you would need. And yes, the marginal addition of 12 ships to the fleet doesn't create the same stress as going from 12 to 75.

[Operator:]

We'll take our next question from Magnus Fyhr with GMP Securities.

[Magnus Fyhr:]

Just a couple of questions here. On the MRs, you've got about 25% of the bookings left for Q1. We've seen a lot of volatility in the market during the last week. How confident are you that you've gotten book these at a higher level than the 18K rate that you gave guidance on for the fleet booked so far?

[Robert Bugbee:]

I don't think that's a question that we are prepared to answer. I mean I think we've given at this stage what the company has done as and its effort to get better transparency and visibility. We told you what we've done, and I think that we don't want to get into the speculation game at the moment.

[Magnus Fyhr:]

Just switching gears to the time chartered-in vessels, so you mentioned that you will look at them on an opportunistic basis. So there are two ships coming up for renewal here in the next couple of months, one older '07 built and a newer built. Any view on renewing either of those?

[Robert Bugbee:]

This comes on to an area of commercial proprietary. I don't think it's the right thing to do to open your negotiations or not on a conference call.

[Operator:]

And we'll take our next question from Fotis Giannakoulis with Morgan Stanley.

[Fotis Giannakoulis:]

I would like to ask you, I noticed that your Handymax vessels, so far this quarter, they have been earning higher rates than the MR vessels despite the fact that the MRs are larger. Is there any reason for that, any particular route that has been driving with unusual differential?

[Emanuele Lauro:]

I think only that those Handy vessels are ice-class vessels. And that has been good trading in ice, good Russian volumes, and we've had cold weather, so it's not unusual that a ice-class vessel will -- any vessel will outperform an MR during the critical months of winter. And then of course it is unlikely to outperform an MR when the ice goes away.

[Fotis Giannakoulis:]

And my last question is about the dry bulk market and if there are any connection with the product tanker market and I am talking particularly in terms of ordering and potential conversions of dry bulk vessels to product carriers. Have you seen something like that, is this is something that, it might worries you? And what would be the difficulties for dry bulk owner to convert his order into product carriers?

[Cameron Mackey:]

We're probably both seeing the same type of behavior, which is of course from the perspective of the dry bulk market, conversions are happening if and when owners are able to negotiate for them. You've seen conversions into crude, into containers, into all different sectors. So product tankers are obviously one small piece of the puzzle, which generally has to do with shipyards capability and most importantly the timing to delivery, because once you get into the period where shipyards starts to order steel or critical equipment for a ship, the cost of converting basically becomes prohibitive. So you need a long lead time to do it. And then you need, let's say, a common interest to go into product tankers. As a matter of course, we haven't seen many conversions. Obviously, there've been some, besides those of Scorpio Bulkers, but not enough to say, alarm us, as far as the order book goes.

[Operator:]

And we'll take our final question today from Spiro Dounis with UBS.

[Spiro Dounis:]

Just two quick ones from me. So you mentioned in the release that a strategic focus is on a reduced order book, and I guess outside of just not ordering more vessels at this point, I guess I suppose one option would be consolidation. But there really has been a large appetite for consolidation thus far I guess in product tankers, same we've seen in crude tankers. Just wondering if you could expand on that strategic goal?

[Robert Bugbee:]

I think that well you've seen consolidation in a sense that people like A.P. Møller have been buying out ships on the site, from smaller owners, we've even down the same. So it's a small consolidation like that. I mean, we ourselves -- there can be consolidation and one hoaxers consolidation, and let's say the non-eco conventional fleets where companies that they thought their strategic plan was to, for example, go public or IPO. And we would hope that -- we believe that various discussions and some sorts has happened in those companies, and we would hope that some of those would consolidate and push together. We've also seeing consolidation on the margin, whereby stronger pools or strong fleets have been taking over the management, commercial management of some other weaker or smaller owners too, so it's gently generally.

[Spiro Dounis:]

And so with your ability to I guess manage the order book as a whole, how would you say you're able to impact that going forward?

[Robert Bugbee:]

I don't think there is much that we are going to do to try and impact that. I mean, we are that market leader, we have enough ships. I don't think that we are wanting to size. So there is few opportunity in the new eco vessels to even think about it.

[Spiro Dounis:]

And the last one. So I guess with two months of ECA regulations on our belts, I was wondering if you could talk to maybe the actual impact these regulations have had so far? And may be if you've seen some owners without a fuel advantage, trim down exposure in the Atlantic trade?

[Robert Bugbee:]

I think that's a very good question. I mean, if you want to see, and I apologize to Fotis, because this would be another reason why the Handies Ice Class ships have performed well. In those areas, like the Handy Ice, they are more or less exclusively trading in those ECA areas. We are seeing a positive impact and that is going to just get stronger and stronger as we go through. End of Q&A

[Brian Lee:]

Thank you everybody for attending the call.

[Operator:]

Thank you. And that does conclude today's conference. Thank you for your participation.