Brian Lee - CFO Emanuele Lauro - CEO Robert Bugbee - President.

Doug Mavrinac - Jefferies Amit Mehrotra - Deutsche Bank Jonathan Chappell - Evercore Partners Gregory Lewis - Credit Suisse Noah Parquette - J.P. Morgan. Ken Hoexter - Bank of America Merrill Lynch Spiro Dounis - UBS Securities Ben Nolan - Stifel Fotis Giannakoulis - Morgan Stanley.

Welcome to the Scorpio Tankers Inc. First Quarter 2016 Conference Call. Today's call is being recorded. I would now like to turn the call over to Brian Lee, Chief Financial Officer. Please go ahead, sir..

Thank you and thanks everyone for joining us today. On the call with me are Emanuele Lauro, Chief Executive Officer; Robert Bugbee, President; Cameron Mackey, Chief Operating Officer. The information discussed on this call is based on information as of today, April 27, 2016 and may contain forward-looking statements that involve risk and uncertainty.

Actual results may differ materially from those set forth in such statements. For discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release that we issued today, as well as the 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 Internet and is also being record 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 would like to introduce Emanuele Lauro..

Thank you, Brian. And good morning and thank you for your time today. We continue to run the business focusing on those topics which are important to our Company. We're executing on our strategy which we discussed with you from time-to-time.

We continue to make the best of our operating and commercial structures and making sure that we're constantly out there trying to capture the best of what the market has to offer in terms of rates. On the debt front, we continue to refinance existing debts on better terms than what we have at present.

We've experienced and continue to experience tightening of the lending market in the last few months. We keep on having though very encouraging conversations with our lenders which keep on being supportive. To expand a little bit on this, we have focused on financing our 2017 new buildings.

We have received non-binding offers from a number of our lenders, we're confident that we will be able to finance these ships in the not too distant future at what we considered appropriate terms.

We're encouraged generally about the supply and demand dynamics going forwards and wise the focus of the Company certainly to reduce the financial leverage. We remain active and alert to capture those opportunities that the markets may present.

So, in general terms I would say the beginning of this year has been as expected and we've taken a number of actions which have contributed to reduce the outstanding debt of the Company.

And we're sort of cruising -- on cruise control as far as day-to-day activities and still very much alert making sure that we see everything that surrounds us and everything that changes. The markets which we're experiencing -- the rate environment which we're experiencing now. We've given guidance is probably below what we expected.

And having said that we, I'm sure we will have the chance to discuss this in the Q&A section. And with this, I would like to pass the call to Robert..

Thanks, Emanuele. As Emanuele indicated, we're primarily focused in running the business.

We've been making very good strides operationally, in terms of contracts of affreightment and actual trading the vessels with customer partnerships et cetera which will continue to over time, show up in the performance of the vessels related to the sort of published stock market.

From the balance sheet perspective, where really the target is without talking about degrees or percentages that the target is very much that we would want June 30 net debt-to-equity to be lower than where it is on March 31.

We're very confident what we're saying in the longer term fundamentals with increasing demand, combined now with we've reached big part of the apex of new building deliveries. The order book itself is shrinking every day, the capital markets are putting a big constraint on competitors ordering vessels.

We ourselves at this space have no interest in ordering vessels, we have now interested in acquiring weaker balance sheet companies. We've got enough vessels across our full platform to really do the contracts we need, the chartering performance we need.

And as Emanuele said, we still put ourselves in a position where, if opportunity -- opportunistically there is a crisis or value being shown, then we're now prepared to step-in and do that. And with that, we'll turn it over to questions..

[Operator Instructions]. First we will hear from Doug Mavrinac, Jefferies..

Robert, whenever I see your press release, the thing that jumped out at me the most actually had to do with MR rates that you guys have secured quarter-to-date for the second quarter of around $18,000 a day. And as we know, we're about to head into a seasonally stronger time of the year.

So when you see that you've secured 39% not your days at 18-grand a day, one or two or even three things that are in the near term horizon gets you the most excited..

Nothing in it, gets this really-really excited. What gets us really exited is lack of deliveries in 2017-2018 and the increased environmental regulations and the fact that this balance sheet is maturing every single day as is the operation of the company.

I'll put it in terms of what can be exciting even today, that you are only -- you're in a pretty balanced market, despite the fact that we've had a very-very warm winter. There has been a lot of arbitrage dislocation as you know because of the moving oil price which has sometimes made it difficult for trader.

All these things contributing to can't really call 18 day week, but not a super strong environment. As we go forward in the days or weeks behind, you have a balanced market. So, any moment -- any input into the demand is going to rip that market straight up. With oil pricing, what we're reading -- I mean we read the same stuff as you do, both U.S.

gasoline consumption, Indian gasoline consumption, Chinese gasoline consumption as we turn towards that gasoline season across the northern hemisphere, with continued increase in demand from the developing areas of South America Australia, Africa sure that's exciting.

I mean it's always exciting when you -- what you're making $18,000 plus on MRs [ph] and things are pretty dull and boring right now. That's sort of -- what's exciting is because boring is kind of really good..

And that was kind of the point was that, $18,000 a day and a whole lot is happening right now, that any one of those things that you just mentioned seemingly would get the market really going and so just trying to figure out which one of those, one or two things that you thought would be the most likely?.

It is any of the above. That's why, it's like -- look we're setting the [indiscernible]. We have a fleet that's on the spot basis. The balance sheet that's generating sufficient cash to delever as Emanuele said very -- in a reasonably short time, we will have that financing done in -- for the new things.

And we have a spot market at the moment where that being a lot of headwinds, but it's still $18,000 a day.

Going forward, I just don't know which day this sort of increasing demand line them online against a supply line -- supply line it's going to get fairly flat in the months to come, because we've gone through, we've observed in that first quarter tremendous amount of delayed deliveries from December 2015 and that's what's exciting -- what's exciting is, you don't have the orders, demand is growing, regulation is increasing and the company itself is already making good money and whatever it is paying an 8% dividend that's what--.

Yes. Exactly, let me ask you this. So far over the last handful of years, you know there's been a lot of focus on how much refining capacity is being added and people are using that as a guide to figure out how much you know could demand growth increase in the refined products tanker market.

But my question is, recently there's been a lot of chatter about additional teapot refineries in China getting import licenses over the next couple of years and we saw what happened last year when those are of import licenses occurred and you saw the throughput taking place.

So my question for you is over and above the refining capacity additions that we see -- how could an increase and maybe teapot throughput of a million barrels a day impact the products market if you're seeing increased volumes coming out of the Asian markets..

Well, the whole of Asia is pretty exciting with the products, whether it's Australia are importing refined products. But we look at this China specifically. China hasn't just been - isn't just in a position in terms of the refined products at the moment. It's helping out on vegetable oils.

But China as it develops its refining capacity, whether it's the teapot refineries, whether it's the major refineries, against its underlying demand is going to do well.

Any big refinery area whether it's Europe or the United States historically, it's going to create more and more arbitrage opportunities in addition to its actual demand and it's great fun for the product market, as China just hasn't existed at all. It's coming from such a base level, so whereas in the dry cargo market and in the last 12 months.

The fear off will actual China slowdown was dreadful, every single month China became more important to us in terms of product trading..

And then final question for turning it over, you mentioned Robert at the top that. At the top that the financing environment has gotten even more difficult than it already was. We see that there are hardly any ships on the order book. The order book is actively shrinking.

My question is, we have obviously from my perspective, a very attractive supply-demand setup for the next year, two years et cetera. It is kind of for the foreseeable future, but yet if you look at the time charter market and the published rates are softening ever so slightly and if you look at asset-wise and they are softening ever so slightly.

Is that just kind of an aberration in terms of well we're coming out of a seasonally slower time of the year and as things firm up, then you would expect those things to firm up as well? Or do you just see that is maybe a market dislocation right now? So what are your views on the current environment for time charter rates and asset values? Even though I know that you guys are in the period where you're de-levering, this kind of--.

Okay, but there are pretty good reasonable expectations of that is because asset values are there because credit is tighter and because companies like ourselves have better alternatives than buying assets. When you are trading below net asset value, your first point of call with free cash is not to go and buy assets.

The same is across the space, you'll dry cargo market. There are many private owners in product, where the dry cargo market is in such distress that they have to maybe put their tankers on the market for sale. So, here it actually hasn't got much to do with people's views of long term fragmental -- that leads to necessity.

When it comes to the time charter market, oil companies have been under pressure -- major oil companies have been under pressure. So, they don't necessarily -- their first point-of-capital isn't necessarily to charter in tankers.

It's like -- we're happy to pay what the market has to pay because we have other priorities because we're under pressure in our core areas and at the end of the day shipping -- whatever rate is still at the minimus cost to oil production or refined margin, that kind of don't care, but that has helped us in another way.

Yes, we're not seeing in the market such a big under time charters from the oil companies. But I think that is -- but the appetite to secure quality tonnage through a different way hasn't abated. So, that's why -- for us that’s great, because that's helping our ability to get contracts of the affreightment..

Moving on to Amit Mehrotra, Deutsche Bank..

Just one quick question for Brian. On the gross debt declined on slide number 5, $87 million over the last couple months, but the new build payments also decreased by about $70 million obviously most was explained by the proceeds from the asset sales, but just want to see if you can tell us how much of that $70 million was paid for by debt.

And then how much of the $300 million plus of remaining newbuilding payments will be financed with the new debt. Thanks..

Our financing hasn't changed. We're looking that were we're financed anything between 50% to 60% of the contract price, that's the LR2s which are coming this year or will be at 50% as Emanuele said, we're looking at proposals for the new buildings going forward. So those will be anywhere between 50% to 60% in that range..

And then let me just ask one more. This is could probably going to be a little bit of a tough question, so I apologize in advance, but you know, Robert and Emanuele, you guys have built this Company Scorpio Tankers to be sort of very investable by institutional investors in terms of sort of pure play exposure and also market capitalization.

And to the point now, we're the product tanker company in the world which is quite an accomplishment. But I think there are also a lot of investors out there that actually want to own your stock. But they'd like to see some evolution on the incentive structure.

And so what I want to ask you is -- is this is a focus for you guys as you maybe evolve from your own asset acquisition company to maybe an operating company.

And could we actually see any evolution in towards a more sort of typical type investor, incentive structure to get in those sort of people that are maybe on the fence about it from a share capital standpoint. Thanks..

Sure. Amit, I'll just start with a comment and then Robert can continue. I think that in general terms and we built this Company as you say with the aim of becoming being a very investable company which I think we have accomplished this part of a structure.

We have not really chosen the structure ourselves, but we had come out with what was the best structure in order to be successful in raising capital back in 2010 and list the company.

And we kept it very much in the same way that you close from time to time we had these discussions, we certainly constantly look at whether the current structure is the best going forward or not. Our shareholders, you know, to tell you the truth they have not come out to us complaining about our structure.

I'm not sure, if you have different feedback, certainly offline we can discuss and you can enlighten us on what the feedback is, because we haven't had been having these type of discussions from our shareholders and we're quite open in considering changes well. We're not stocking one fracture and say no, this is the way things should run.

We're quite open and happy to look at different structures if they ameliorate the investor belief of the Company or this is what shareholders want..

We're quite relaxed about the way we look at this, that's what I'm--.

Amit, I think it's pretty that we've been very consistent to the extent that the right thing to the right thing to do at the right time any structure, we'll do it. We're obviously cognizant that things change. There is an argument related to -- there is a growing tendency for or growing focus on governance, clarity etcetera and we'll respond to that.

And in the same way as we studied the idea, a year and a half ago, there was a big clamper for Scorpio Tankers to do an MLP. Thank God, we didn't do an MLP.

But we studied it and we studied it properly and we're aware of what yourself has been saying, what other certain analysts have been saying, so far I support what Emanuele says, we've heard very little from shareholders, but nevertheless in the same way as everything else we would do that study and look insiders own a lot of stock too.

So, if we think that there is real value in integrating or terminating the relationship on the management side, then I'm sure the independent directors will consider that..

Okay, that's fine. Let me just ask one more with respect to just the cash priorities. You guys are obviously taking delivery of all these vessels as from the focus, but once that fully occurs I would assume that you're going to sort of de-risk or deleverage the company to the extent that you think you have an optimal balance sheet.

So just say we get to the point where we're at a reasonable leverage relative to the market value of the assets? Could you just sort of enlighten us in terms of how you view your cash deployment priorities beyond that point, i.e., beyond the point of optimal deleveraging? Thanks..

So, can I just give you a clarification.

So this is what are you talking about, not the 18 now, after the vessels have been delivered or price to that point?.

Well, you take delivery of vessels. You have fully delivered fleet, you're generating cash flow, hopefully and that cash flow cruised the balance sheet, deleveraging the balance sheet to the extent that you're comfortable relative to market value. The asset, you're still generating cash flow.

What do you do with that cash flow?.

Okay. So, between now and 18, as you said you've got or at the moment you have a balance sheet that deleveraging. At the same time, we're increasingly optimistic of the substantial rate expansion in improving fundamentals as we approach 18.

So when you get to 18, we have a fully delivered fleet and hopefully a balance sheet that's already de-levered from here. Also, we will be fully financed, etcetera-etcetera.

And then hopefully in this next couple of years, we have our cake and eat it, whereby we're able to use this period to maintain balance sheet surplus and then all of a sudden, rates expand, you're already deleveraged and you have a whole bunch of free cash to decide what to do..

Right. Okay, alright that's all I'm going to get..

But what we're not going to get is you'll continue to get the same dividend policy of let's say conventional or normal dividend price position. You're not going to have a suddenly turn to -- doesn't matter how much cash we're making. We will not turn to a full dividend payout policy. We will continue to have a set policy as it were..

Our next question comes from Jon Chappell, Evercore..

Looking a little shorter term in 2018 and revisiting one of the transactions that you announced intra-quarter, so if we look at the proceeds from the sale of five MR product tankers, what you paid down in secured debt associated with those ships and what you expect to repay.

In the second quarter, it looks like there is total net proceeds still about $75 million. So, it's noticable that both Emanuele and Robert mentioned deleveraging the balance sheet, June 30 versus March 31. Our results are notable that there continues to be a disconnect and share price relative to the results we've been able to put out.

So just want an update on $160 million remaining on the authorization. The buyback program, you've been very clear, you won't add new leverage to do that, but you do have a little bit of a windfall here about $75 million. So how do you kind of think about that over the next two to three months buyback versus the deleveraging..

We've made it pretty clear that we intend to have June 30, as the net debt-to-equity lower than March 31. Okay, so let's say there's straight forward boundary. We, yes, we're obviously still generating strong cash flow even on the rates and cash flows beyond dividend payments.

And yes, the balance sheet will get -- there is another way of the balance sheet is likely to get stronger, because I think will be rewarded by. Let's say then with the growing off of the company. Whereby, I think over time we will probably have the less requirement for the liquidity covenants may be taking down to.

But I don't think it's right to say anything other than, you know what you saw in the first quarter where we manage to do all of the things that we've just said in terms of the headline and we managed to opportunistically buy stock of 580 and bonds 82. So, your first priority is to ensure that your net debt-to-equity is low at June 30s and is now.

And it is clear that you have the ability to take opportunity. We don't know what opportunity the market will give..

Two more quick ones, we've talked about 2Q to date rates, as well as laid out very nicely with the 1Q rate.

It seems like a historical relationship with [indiscernible] relatively MRs has widened a little bit, partially in 1Q, but especially in 2Q, is there a something specific to that segment of the market that is causing the underperformance of the Handy's relative to the MRs to widen or is it just been very phenomenon?.

I think we expect it to be temporary, but you've got, you had in the first quarter in the last four or five months, no changes in - how Russia will dealt with the lower price and if there is a class of vessel, there would be most affected by the warm temperatures in the northern hemisphere for the last four, five months, it would be ice class Handysize vessels..

Alright, but last year the seasonality we had kind of lead 2Q into 3Q, it also appears to that kind of near itself. The ice class maybe would conceivably go away during that period and therefore, you would expect the 2Q to-date type of discount to narrow as well as we get into the lead 2Q into 3Q..

Yes, but you've got such a lot -- I actually one of -- is you've got tremendous, you have a market that was broadly balanced that doesn't matter where the rights are as broadly balanced with MRs and these LR2s.

And you have substantial day today volatility around the pricing of the base products and if this year -- I think you'll be this year is going to be pretty volatile around that position, but the more important thing is that as each month goes by the longer term fundamentals, we now improve and you just don't know when that inflection point is going to come..

One last quick one for Brian, seems like the add-back on the convertible, we do the diluted share count 5.5 million this quarter, up a little bit from the last couple of quarters. This 5.5 million a good run rate to use going forward or that continued to march up. I guess you closed the conversion, actual conversion day..

It continues to go up and part of it is when the dividend at end of this year, there is a change in the conversion ratio..

Okay, so about 100,000 at quarters?.

That seems about right..

Our next question comes from Gregory Lewis, Credit Suisse..

I mean the gentlemen. I guess, Brian, Jonathan just referenced the proceeds from those three vessels in April and then later this quarter.

What is that number going to be at $33.3 million that is, what is, should I say it's $100 million?.

So there is debt associated with each vessel between $18 million and $20 million in fees..

So when we think about the proceeds versus what's required to pay down the debt right, so Robert when you talk about debt coming down by nature of those asset sales that's going to come down anyway. So I get the sense you're addressing this.

So beyond the debt that is required to pay down with the asset sales, you're going to use -- it sounds like you're going to use the rest of debt to pay-down additional debt, is that a fair statement?.

Yes, I mean that's what we've been doing in the first quarter. I think that -- no but Brian put a number in there, what we're doing in the first quarter and now I would also say that the debt which is bank debt that baby bonds and there is converts which also we consider as a form of debt.

So the key line here is the net debt to equity line that we're focusing on..

And then I was a little bit confused by some of the statements..

I mean look very simply, if we can use this period to -- we don't know the broad market risks, what's going to happen over the summer, the currencies negative interest rates, the stock exchanges, the fact that banks debt is there, so the most value, we think we can provide long term here, it really stabilized that balance sheet showed us tremendous operating leverage to the future, to steadily improving longer term fundamentals.

We keep the leveraging checks, so as we've explained to Amit, so when that rates really break out, everything then is becoming surplus to the requirements. And that requires a little bit of delayed gratification.

We're not doing anything to juice the stock in the short term or anything, but the permanent value of a balance sheet that is not too levered combined with a brand new fleet is huge..

And then just shifting gears a little bit, it seemed like a lot of new build product tankers that are being getting delivered, let's say it over the last 12 months to 18 months have been -- then getting put on sort of -- as a brand new vessels doing on like a [indiscernible].

How do you think the market develops as these vessels -- as the new build orders stop flowing in? Where is the draw for those vessels for that trade to continue? Do you kind of understand what I'm talking about here?.

What do you mean?.

So obviously sir, we've all these new builds, they initially do - we've seen new builds get delivered, they go in Asia, they do a gradual trade away. And then they continue on.

As the new build deliveries, how is that trade going to develop?.

Greg, it's Kim, obviously the trade doesn't go away. What - the new builds are a small percentage of the overall trade requirement, palm oil coming east to west. So it's a great cargo for an existing ship. We do those cargoes from time-to-time and it's a great trade to reposition your ship across regions.

So it enhances the triangulated earnings of our fleet, but your underlying comment is does it tighten the market once those new buildings attenuate..

Absolutely it does..

Next we will from Ken Hoexter, Bank of America Merrill Lynch..

Robert you noted that given the assets trading below NAV and you've been active. Now in the time charter market, we were adding three S-Class vessels. How is that market currently? Would you look to do more in and can you talk about how you look at that balancing returns long term versus owning the assets..

As I said you know our position right now is - look you could - we preferring to deleverage financially. So I had to maintain operational leverage, so we have a, we've been running down the charter book to. So, look if they, if the market throw and if the market gives up value here. And in all of this and you get charter rights.

You know - we will cherry pick and maybe add 2 or 3 charters to that position. As we've said before buying an asset right now is pretty low on the agenda..

So are you seeing, again, you are pretty active in the first quarter. Do you see more opportunities to charter-in or is that not a focus in--.

As I said charting in is about opportunity. Okay, their rates really, they kind of locate, but the market itself, the individuals of quality ships, really do believe in the fundamental strength here. Now what you'd ideally like to do is obviously pick somebody else under financial constraints. So that's why I'm saying it's opportunistic.

We don't have to stretch ourselves here. We don't have to go out and charter in ships just for the sake of it. We want to charter in ships where the owner is forced, for example to give us time or option flexibility or discounted rate for some reason but the balance sheet allows us to do that..

Right.

On the order booking, you noticed it was more balanced right now in terms of what you're seeing on supply demand given the spike that we've seen on the larger VLCC ordering, is any that interest creeping down to the product side, now that you're seeing kind of the supply demand balance and are you seeing the interest and try to enter the market with new orders start to pick up or park up at all?.

No, fortunately a lot of the player -- a lot of our competitors for example -- is the reason [indiscernible] money. Private equity and some of our competitor companies are -- they were looking for liquidity. They're certainly not looking to add dollars to the market at the moment.

I don't think that you've got a public equity market that is willing to fund speculative orders and so far so good. The product market hasn't really attracted that new building ordering attention at the moment..

Okay. And then lastly from me, just on the Gulf Coast as we see a pickup in chemical plants and export capabilities.

How is that impacting the product market or is that removing any additional vessels into different lanes or how do you think it panes out as we move deeper in 2016 to 2017?.

With development on the chemical position is -- demand is fundamentally positive..

Has any of that started to enter the market or is that still too early?.

That's a bit early..

Our next question comes from Noah Parquette, JPMorgan..

I just want to talk a little bit. As you guys mentioned the MR order book, if I think order book is a pretty good place right now. But that's very different on accrued side, lot of supply this year and next.

In the past, it is not always true with some correlation between that two, I mean you talk a little bit about why you have comfort in the fact that the product market can stay strong for the next couple of years, even if we see a weaker crude tanker market..

Well I think it would be clear, we would expect then a year also and two years' time and a three year time for the product market. Right now it's not strong, but we would expect it to be definitely stronger in those forward years with the lack of it.

So you yourself has pointed out the first ingredient to it, is that the product tanker order book is probably the lowest order book measured against the existing fleet that there is an reason hold of shipping, that's a first good thing.

The second thing is that you will place regulations coming forward that a tightening relating to Ballast Water treatment.

The third is that the market itself is a fleet profile itself, will finally is returning to 17 start to age, -- two ways, those vessels getting to 20 years that could be scrapped and those vessels to get to 15 years that no longer can trade in the premium traits. So the supply side is very encouraging for products.

The second thing on the demand side is the opening of new refineries that Saudi Arabia, for example, is investing tremendous amount of capital in partnership even with Unipac China's largest importer on one of the refineries, to increase export capacity plus all the vegetable oils.

So here the product market not only as they, it had two demand drivers, cyclical and secular.

And that in combination with its supply side means that we're very favorable for its position and it's not just because we have products, I mean we thought this for a while now, if you remember we actually bought the bunch of the VLCCs, roundabout high $80 million and we immediately flipped them out of 100 and Sullivan with 105.

We had the choice of playing in the crude market, but we decided the longer term fundamentals related to products was just better..

Okay, I agree. I guess another variable on supply side and we're thinking about is LR2s and are they still trading roughly 50% crude right now as of have been any change there.

And you see any shift at all in the next couple of years and how those ships trade?.

Yes, we have statistics that we had because, I don't think you see a collapse in the crude oil market and also you mound a lot of older LR2s that trading in crude.

Now that means that even if you take a brand new LR2s just that's trading in crude, you've got to clean the thing up and you going to do a whole bunch of stuff get it trading back products and older LR2 trading in crude just may not be at a comeback.

So the statistics are a little bit -- you have to go into the details on them a little bit more than just a percentage of the total..

Okay and my next question, my last question -- so apologize. But there is some talks not really ship-owners but use of LNG is a bunkering fuel.

I mean, farther down the line, I mean I know it's for a while, but is it anything that you've given some thoughts too and what are the implications are economic implications of that and just would love your thoughts on that..

It's a longer discussion, that maybe we could take it off line, I think the summary view is LNG is are ready or relevant fuel for certain types of assets, mostly liners, better on dedicated trades because the constraint is not the gas, it's not the ship being able to consume the gas, it's actually the supply and terminals and bunkering infrastructure for gas and where you're seeing that arise is where you have dedicated vessels on dedicated trades.

For someone like us that's a global player and a spot player. It's not relevant yet, but we're watching it closely and the day will come and we're doing a fair bit of work preparing for that day. But like I said, we can talk more about it off line if you like..

Next we will hear from Spiro Dounis, UBS Securities..

Two hopefully quick ones, first just want to touch on chartering out activity. I guess late last year you did be kind of a -- activity. You guys are digging in, some with strategic partners and I guess this has been a little bit more quietly only on that front.

Just wondering if that's you being less interested in the period market or is that more on the charter side of things, less likely to come in right now..

But, I think it's a double-fault as you pointed out, I mean first of all, we chartered our a very precision basis, the great strategic alliances. Second, we just got a more developed program right now.

So we've been concentrating on contracts of affreightment and it's as I said earlier, some of the oil companies that they put their focus on other areas when earnings weak, but it's good for us because they still want access to great quality tonnage which helps us on the contracts of affreightment..

And then just -- we talked about placing orders or I guess speculating on later deliveries in 2018 or 2019.

Make it at some point, you're not interested in doing any of that now, obviously, at some point that does turn and I guess it turns into [indiscernible] you want to be out there placing your order and staking your position and I'm just wondering outside of balance sheet and getting leverage to where you want to be, what are the conditions that start to make that market look a little more attractive?.

But we don't necessarily have to do that. I mean that's a presumptive position. We're, by overselves pretty big player and then you extend the pulls off it. So, there is no -- you've got a brand new fleet. We have no replacement requirement, not necessarily. This is not the pressure.

Many people ask us the other thing which is well which of your competitors would you buy? Again that's like -- there's not much point in doing that either. We've really-really got enough capacity to do what we want on an operating position and that's good thing..

And then last one, I'm pretty sure the answer is no. But on the four additional Handymax charter and that you've got the options there.

Did you provide or can you provide when those expire?.

We're not going to disclose that right now..

Next we will hear from Ben Nolan, Stifel..

I wanted to ask a little bit more about the delevering, maybe if I could.

And that, obviously you guys in the quarter brought some more of the converts back and in my opinion that's an excellent use of capital because it's not only accretive in NAV but your delivering and it would seem like that would be the natural path to go down, but I was curious discussions with your banks have any implications on what debt is repaid, other than obviously where assets are sold.

Are you conservative with respect to delevering on the unsecured debt that you might be buying back shares or is it on equal weighting maybe is pre-paying some of the bank debt?.

It's based on that's kind of based on the opportunity right, it's a - as you point out, it's still debt is debt. Yes, you know the converts have the virtue of being accretive on the equity side. But it starts off as being debt to stocks off is being leverage.

You know, the great thing with the bank debt is you can pay down credit lines, so you can pay down ships and you can do it every day. There isn't necessarily every day. You know a willing seller on converts, at the better price that will create value.

There also isn't every day of the week that we're actually allowed to go into the convert market, because even though it's treated as -- it's a public security. So we have to honor the various blackout periods..

Okay, I suppose it's fair to say that is still sort of as highly circled in terms of a target or where you might..

Yes, sure, but every single convert holder or every single equity holder or every single analyst is along with the company would love us to say, yeah, we're going to spend a $150 million in the next three months buying back converts..

So that I hear correctly you're going to spend $150 million?.

We have - see exactly here we're excited that's -- they get to, but that's a not a smart way of creating longer term value .We can be patient, it's fine..

Yes, I agree. Although if your premises correct that the market is going to be increasingly tighter than the values more apparent in the near term..

Shortly you're not going to get that value, if you announce you're going to buy back $150 million of converts. I think we did pretty good last quarter, we de-levered the company. We bought back stock and we bought back converts and we paid a dividend.

That was okay, if you repeat that -- I know it's boring, but if you repeat that kind of little sort of, little but a lot in the measure way as well as deleveraging, you're going to get to a good place. It just might take a little bit of delayed gratification to do that..

And then as sort of connected to that, I'm curious some talking point as of laid any industry. It's been a real contraction of bank finance. I am curious as to what your position is on that. Is that something that, you are hearing some tightness from your own banks or--.

I thinks that's completely clear.

I don't think it is -- it's going to affect STNG because it's relative to the industry, it's a higher cap company, it's a brand new fleet, it's got a very good record and we're not looking to borrow from distressed position and we have a very diversified capital structure, but there is no question that in shipping full stop, there is a less available bank debt.

The lenders they are having to deal with three markets, that are in an absolute nightmare right now. Dry bulk containers and anything to do with offshore, plus to having the Europeans are having to deal with the new Basel Regulations.

So that's what's exciting about STNG for us at the moment because it's like with just a little bit patient, we act in a sensible way into the improving fundamentals, that's good because you have competitors every day and not really able to move very much..

Yes, now I agree. And then lastly for me, something that is just sort of gleaming through the supply side numbers, something that is curious at least is that in the last year or so, we've not seen any -- [indiscernible] VLCC scrap.

But, it hasn't been a lot but there certainly has been a sort of consistent flow of product tankers that has been scrapped.

Is there a legitimate difference in terms of what -- how charters view these assets on with respect to age? Is an old product tankers substantially less marketable than an old crude tankers? Is that just kind of the way the numbers have shaken up?.

Sure, but there is a substantial difference due to the cargos they carry. Crude oil can less than required specifications for tank coatings or pumping or pumping or piping to carry crude oil than there is any of the products..

So in a market where -- I suspect in a good market neither scrapped heavily, but there is a bit more of a structural barrier on products than crude, is that fair?.

In the greatest of markets, you're still going to have aging of products that bridge through the cargo carrying regulations and the condition of the ship just as we started off, yes we've seen some scrapping in products and when that will accelerate as the ice profile accelerates in the 2017-2018..

We will take our final question from Fotis Giannakoulis, Morgan Stanley..

I want to ask you, how do you think that there is a decline in refinery margins have been in fact that the product tanker markets. We have seen the simple margins returning negative, but -- margins are still quite positive.

Have you seen any change in the flows, especially local volumes from Asia towards Europe?.

I have said before, you're just seeing a lot of volatility factors as a result of this kind of stuff. So, one day offs are open, next day offs are closed and that the only way we can really describe it. You'd add more to that manual--..

So, is there any notable difference in the number of vessels that they go from Asia towards Europe or we have infinity as such? I'm trying to understand what is the refinery runs in Europe and how this demand is going be matched?.

Sure, but we haven't got the data yet and we've just seen -- you just seeing volumes, one we could just look at U.S. Gulf; one week you have 35, 40 -- and next week you have 20. Asia is east of -- this being exactly the same. One day you have lot, one day you don't have either and may react instantaneously to whatever awful spreads are around..

And you mentioned that you are not planning to buy any more vessels or at least that was my feeling from what you discussed, but are there any thoughts about seasonal asset sales for last quarter, in your previous earnings call, you announced this sales of the five vessels.

I think that you have noted that point the fact that you're still was trading below NAV are there any thoughts of potential disposing more asset..

I think a lot of that is now comes down to price and value, I mean the starting point of the sale of these five assets was not so much less [indiscernible] assets, but who it was that we would transacting with and how we wanted to have a -- a positive relationship with them in the future.

So, I don't think that - that's sort of where we, where we started from. So the answer to that is, I don't know there is no necessity to sell assets. I mean, I think that what you've seen and what other analysts have pointed out on the call is that we have a high degree now of financial flexibility.

As a result of the earnings in Q1 and what we booked in Q2 and the sale of the previous assets to deal with what we need to on the balance sheet. And, but we will react to any form of opportunities. And then just way them at the time, especially in relation to wherever the converts are trading or the stock is trading et cetera.

So, I don't want to be pushed into a corner on that one as a yes or no..

Of course and my last question about the higher oil prices compared to the previous quarter have - have higher oil price environment changed at all your outlook in one way or another. I want you to explain to as if possible, how the prices of oil effect both products and crude tankers.

And what is your outlook for both products and crude tankers over the next 12 months..

Well, we're not going to go into outlook for the next 12 months, but we - we consider that to be a probably a high degree of volatility as the oil price bounces around et cetera. The oil price, yes it's gained a little bit, but it's still constructive in terms of consumer demand. Unless we've seen that in various statistics, so that remains positive.

I don't really know what to say much beyond that for us..

And my last question.

Do you have any due on relative performance going forward of MRs versus LRs? Is there any -- of these two vessels, you might think of preferred vessel class within you freight?.

No, we like them both. As you have seen, over the last four or five, LR2s really outperformed the MRs. But, that's not to say that, over the next six months, they might be exactly the same or the MRs might be better. I mean that is an over rule though. We think over the next two, three, four or five years both classes will performed very well.

They are different vessels. The MR is the trading horse of the market and LR2s, although is a big work horse, the real economy, the scale and volume.

I could say to you that the increase of refinery capacity in Middle East is going to be helpful the LT2s, but I can also tell you that the increase in demand associated with vegetable oils, other products and the diversity of trade and increasing growth from South America and West Africa becomes very helpful DMOS.

They just -- both have very good demand..

Thank you. That does conclude today's presentation. Thank you for your participation. You may now disconnect..