Brian Lee - CFO Emanuele Lauro - CEO Robert Bugbee - President Cameron Mackey - COO.

Jonathan Chappell - Evercore ISI Gregory Lewis - Credit Suisse Doug Mavrinac - Jefferies Ben Nolan - Stifel Spiro Dounis - UBS Ken Hoexter - Merrill Lynch Noah Parquette - JPMorgan Fotis Giannakoulis - Morgan Stanley Herman Hildan - Clarksons Platou.

Hello, and welcome to Scorpio Tankers Inc. Third Quarter 2016 Conference Call. Today conference is being recorded. I would now like to turn the call over to Mr. Brian Lee, Chief Financial Officer. Please go ahead.

Thank you and thank everyone for joining us today. On the call with me are Emanuele Lauro, Chief Executive Officer, Robert Bugbee, President Cameron Mackey, Chief Operating Officer. Information discussed in this call is based on information as of today November 14, 2016 and may contain forward-looking statements that involve risks and uncertainty.

Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the 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 Internet and also is being recorded for playback purposes. An archive of the webcast will be made available on the Investors Relations page of our website for approximately 14 days. Now I'd like to introduce Emanuele Lauro..

Thank you Brian, and morning and thank you for joining us today. It's a sad day today at Scorpio Tankers. Don Trauscht just passed away yesterday. He was a Director of the company since the company IPO back in 2010. In these occasions, it is always difficult to say something meaningful and especially for someone like Don.

His calibre and vast experience spoke for himself really. We will miss him both professionally and as a person, and remember him with a lot of gratitude and admiration for what he did, for what he brought into our company. Our thoughts at this time of course are with his family, with his wife, children and grandchildren.

And personally I am extremely grateful to Don myself. First of all for accepting to serve on the board of Scorpio Tankers, which back in autumn 2009 when we met and discussed this possibility was a -- we were a want to be public company owning only three vessels.

And second the way he did it, being the green and un-experienced chairman of a listed company with people of his calibre on the board, it's not easy. But Don always made me feel comfortable and guided me in the most constructive of ways, so I really owe him a lot. Now changing the topic and going to business. We released our third quarter results.

As highlighted in those we've seen a softness in the product tanker rate environment throughout the third quarter, we think is mainly driven by de-stocking of product inventories in combination with the lower refinery throughputs. And this is actually also combined with the reduced oil trading activity that we've experienced over the summer.

This is generally even to the relatively stable oil price which he had in the last few months. The same situation has persisted in the fourth quarter. Although we do expect firmer rate for the reminder of the quarter in line with seasonality.

Having said that the market fundamentals remain in-tact with demand outlook for product tankers that continue to be positively driven by the continued oil consumption, and the increased output from export Middle Eastern refineries. The supply side looks increasingly favorable with the MRs order book being close to its 20 years low.

And this will soon result in demand growth actually overtaking supply growth in the second half of 2017. All of the above of course is helped by the far Eastern shipbuilding industry situation which struggles to attract new orders in any meaningful size.

And that the combination of it could actually outline a pretty bullish scenario for the product tanker market on a medium term basis. I'm sure we'll discuss this in the Q&A session, but before that I'd like to turn the call to Robert..

This is the operator. We are unable to hear you on the line, please check your mute function..

Sorry, I was on mute. I just like to say good morning everyone. I'd like to echo what Emanuele said about Don. He's clearly missed by all of us here and for the management he was not only a great mentor but his optimism, his values provided a great shining light to encompass us all to following the development of this company.

The first time this morning we got in general a great group of analysts. I had really hope that as most of you doing you would held your publications before either this conference call or talking to the CFO. A couple of people haven't and they of course are going to have to republish because they got numbers wrong after this conference call.

And I would just really hope going forward we provide the time and the opportunity always for the analyst to talk to the company or the CFO. I'd like to look at couple of things that where I think is very encouraging is the cash balance is normally at the end of -- earlier in the quarter this is sort of mid-quarter.

It's about sort of on a low point this mid-month where your expenses have exceeded your points of income. So in some ways, the cash balance understates their present strength. We continue to work hard on improving the balance sheet going forward and various financings which we very optimistic to achieve.

We believe rates will continue to improve they have been improving over the last week. And today they are improving and we've always, as I said plus or minus one week of Thanksgiving we will start to get that movement. And we are confident that that is taking place at the moment.

Our fleet is strongly weighted to the markets that we think are going to be the strongest in the winter. For example our MRs and Handys in total are over 75% weighted to the Atlantic market.

This deliberate positioning has actually has cost us a little bit in the end of our third quarter results and the beginning of our fourth quarter in positioning the fleet for that way.

But the small, $1,000-$1,500 a day may have cost us in that end period, we expect to be more than end up having the vessels in the right place, for when Atlantic starts to benefits from the combination of a Northern winter and the really strong underlying demand in the Southern Atlantic related to gasoline.

There has been six really big changes since our second quarter conference call, all of them have been positive to the fundamental. The banks have remained very disciplined. However they continue across the shipping sector to provide strong support to those people in that top quartile of each of the industry sectors and shipping.

We were at the end of the second quarter conference call hoping the capacity cuts, we said it was possible and may be probable. Now it's no longer probable, it's happening. We're getting those yard capacity cuts right into our areas of the product market and we expect more to come.

Environmental legislation we had hoped that there would be ratification of the water ballast and there would be the low sulfur coming in 2020.Now there is no longer hope, that's been ratified and it's been ratified to Scorpio's favor.

And our modern fleet is there really is no other fleet in the world that's better placed for those environmental legislation changes. The world itself is working. We're seeing headline growth across the commodities we ship. We're seeing a China that is functioning.

We only have to look at the dry cargo market and across the dry cargo market itself, whether it's from the smaller ships or the large ships.

Despite there being actual supply growth in an already over tonnage market in the second quarter, and in the third quarter and fourth that dry cargo market continues to strengthen, continue to strengthen now numerous commodities and numerous areas. That is very encouraging for Scorpio Tankers, in the product markets.

We also saw the news in from Japan. Japan is traditionally been a very high-volume user in naphthalene products and that's a very encouraging sign we saw. U.S. as a result of the election, U.S. oil and energy policy now reduces in our opinion the chance of OPEC cuts or very least the adherence of it.

The oil market seems to price this possibility or probability that you will not have disciplined OPEC cuts, whereas if we look across the tankers space, it is if the stock are trading on certainty of those cuts.

That's whether we look at our own peer group in the product space or we look at those other companies, specifically crude oil companies that would benefit tremendously in the crude oil sector. The spot market in crude is belaying that though as it remains strong and that will be a benefit to the product market. Finally destocking has occurred.

And there are almost no new buildings delivering into fixed positions in the product market or the crude oil market in the past two months.

And what has changed now is that rather than in the second quarter we were looking into the teeth of destocking, a weak seasonal period with refinery turnarounds, we're now looking straight into entering the strongest season of the market And the base rate of that market is already well off its bottom.

The last two-three-four-five weeks have been very constructive. And as I say it doesn't necessarily show in our guidance, so much or in our results because we have made this conscious transition to position the ships in a very long weighted way to the Atlantic basin. With that, I'd like to open it up to questions please..

Thank you. [Operator Instructions] And we'll take our first question from Jon Chappell from Evercore ISI..

Thank you. Good morning and good afternoon. Brian, my first one is actually for you, the Credit Suisse facility of the $61.2 million, that seems to be the only one with any availability right now. Obviously you've done a lot on the refinancing front.

As that $61.2 matches up with the remaining CapEx, how many ships are associated with that? And then what's your comfort level and what's the timing on being able to attain financing for the remainder of the newbuilds?.

That with the two LR2s that are under construction now, so roughly $30 million each. And we're working on the newbuilding financing and we hope to have something in the next few weeks..

Okay so based on Robert's comments, becoming a little bit more difficult for the average player but you are seeing no real change in the conversations with the banks as one of the Blue Chip counterparties?.

Yes, there is no change, it's a little bit more difficult. But as you seen we did, along with HSH and we're working on a few other things. So it's difficult, it's out there, but we think we are getting through pretty well. .

Alright okay. Robert I noticed that newbuild schedule pushed back a little bit.

One of the newbuildings now in the first quarter of 2018, has that been something that you've been looking to you, maybe spread out the operational leverage, or is that a function of what you spoke about with the yards, starting to face some issues not be able to meet their commitments?.

I think it's really all down to the yard, there across the space not just ourselves, not just in products but across the entire industry trying to stretch their workload out as long as they possibly can. And that obviously is slowing down supply growth.

To go back to Brian's comment, I don't think we remain extremely confident of the financing of those vessels. I think it is completely true what are you saying that the environment itself as you 're doing it is getting slightly different. I think that overall is a good thing in the sense that we're confident of getting it.

But the great thing is that, across the capital spectrum here you've got the unwillingness to just go on fun any form of spec lifting position. So when you get the improvement in the rates, that is unlikely to lead to a lot of the ordering despite the large amount of yard capacity, if it's coming down, very little bookings have been put in there.

And then when you put combination of ships being delayed consciously by the yards on their work schedule, it means as about as close as guaranteed as you can be of a supply side that is really under the some control for period here. .

Okay. I appreciate the answers. I'll turn it over, thank you. .

And we'll move to our next question comes from Gregory Lewis from Credit Suisse..

Yes. Thank you and morning. Could you just provide us a little bit of an update on your sort of chartered-in strategy? How we should think about that over the next couple quarter? Just as we look into 2017 we start to see some vessels roll off. At the same time like as Jonathan was talking about newbuilds are coming.

Should we expect the total chartered in fleet to sort of drift lower here or is this really just going to continue to be a function of how company views the market in an opportunistic nature?.

So I think you had a couple of things that in our favor is to fundamentally the book itself is reasonably short historically for us. And with charters rolling off, in cases at higher rates than where the time charter market is now, that does provide opportunistic possibilities of deals.

The difficulty and that is that despite what maybe sought out there they're actually aren't that many. We try every day. We have a bullish view to the market, especially medium and long term and we now going close into winter. So the our news is that there just isn't much quality tonnage out there at rates for example that are quoted in indexes.

But to answer your story is that I think that you would see a combination of expensive higher rate tonnage rolling off. Or the option if there is renegotiated combined with opportunistically if we can, taking tonnage..

Okay great.

And then Cam, are you on the line?.

Hi Greg. .

Okay, great. Hi, how are you doing? I'm doing great. Could you talk a little bit about the impact of Colonial Pipeline on the product tanker market? And I realize that it's back online, but it seems like rates have kind of still held up a little bit here.

Could you sort to talk about maybe that impact and then where maybe we go from here?.

Sure Greg. I think in our view like any positive demand shock it has a great deal of persistence. In other words, once you get panicked fixing during the course of that pipeline interruption, it will take weeks if not month for the market to reset back to where it was all other things being equal.

Now in case you, don't have all other things being equal. So you have a positive shot which throw position that's completely head over heels.

And so naturally you have much more stretch allocation and tonnage around the Atlantic Basin and it will take a long time for those rates get back to where they were before absent any other positive catalyst like weather or rebuilding the repositioning of stocks that sort of thing.

So it was a positive surprise for the market notwithstanding the tragedy but like I said it has a long, long tail associated with it. .

Okay guys. Perfect, thank you very much for the time. .

And our next question comes next question comes from Doug Mavrinac from Jefferies..

Thank you operator, good morning guys. I just had a couple of follow-ups as well. First Robert when you were talking about the fixed development since the end of the second quarter, that had been positive.

One that you mentioned was the reduction in yard capacity, how that's coming to fruition? My question is can you talk about the long-term implications of that closing of yard capacity? And how long it would take for that yard capacity to ramp backup in the event of an increase in earnings? And so basically how permanent is that and how important is that to the overall supply demand balance not just over the next couple quarters but over the next two or three years?.

Sure, I think that's a very difficult position. Obviously in any industry you are going to have the ability to over time, to reignite it. I think in this specific industry the yards they're losing skilled people. They are trying to form some of consolidation. But it's not just about staying in the product market.

You are having the whole of shipping every day there is such a correlation to the whole of shipping to world GDP overtime that what happens is that you're setting the stage for strengthening, I mean the dry cargo market it will recover at some point so will other sectors.

And then all of them in one go over in a short period like a year start to try and get in through the gap of the yard capacity. But it's not just stimulated, the demand isn't just going to be stimulated by world demand for economics but regulation and aging fleets too.

And in each of the cycle, each of the super cycles and that's what really ends up happening. Whether it's 1985, whether it's 2003 or whatever, the yard starts off on demand there undersupply. Now gives it three-four-five years, yes of course. Then the yards come back on like they did in 1990 or in 2008-2009..

Right. But it sounds like it could take some time before that happens.

Even once people see the light of day?.

Yes, because they can't completely turn the switch on and off real quick. And in the sense that shutting down yard capacity needs in many cases government approvals, I think redundancies, dealing with unions while the opposite occurs too. You've got to hire your people at the yard et cetera et cetera and then reopen docks which take time..

Got it, thank you for that. And then second question. I think I know the answer to this , but I still wanted to ask if it's in case. Over the last couple of months you guys have chartered in three MRs. To me that indicates or at least shows kind of your view of, kind of your outlook for the market going forward.

And then also your preferences for time chartering and vessels versus acquiring vessels at these very, very low asset values.

So my question is how do you think about that balance? I mean increasing your operating leverage, because I think that this is a fantastic opportunity in the market that was provided by the transitory destocking of refined product inventories.

But how do you think about taking advantage of this low charter rates against the backdrop or the long-term fundamentals are very attractive.

How do you think about increasing operating leverage and time chartering vessels maybe even looking -- picking some assets on the cheap?.

Well first of all, again it's not quite so easy in the same way as time chartering in great tonnage. It's even harder at least where around whole load of Eco 2013 build onwards product tankers lying around willing to be sold right now.

Now I think if we approached Ardmore and we said, hey can we have some of your MRs on the cheap please? They'd probably say no, like I am almost sure they would say no. So the same as BW, BW have loads of product tankers. But I don't think that that family has any other view than we do that things are going to improve.

Yes, of course we had -- where has the price deterioration occurred? It's happened with older tonnage and it's happened with companies who just like TK for other reasons just getting rid of their last two modern thinkers. They want modern product tankers, they would like -- we have to for our own reasons just get hold of, get rid of ships.

Ironically you've actually now got the potential of some inflation coming back into the industry which ultimately is good for pricing. So it's not as easy as saying, wow, let's take this opportunity to buy assets et cetera. What we have done is we prioritize ourselves, we've got very selfish.

So we prioritized our cash or balance sheet strength on to maintaining the dividend. And the biggest dislocation is between our stock price and the value of those assets themselves. So just going around buying one or two product tankers is like no..

Right, right. And actually the segues to my final question is, I think some of the market were questioning your commitment to the dividend there it is. And maybe you've talked about the cash balance that you have in the strong balance sheet in your prepared remarks.

My final question is as we go forward, how do you think about that capital allocation process? Does it change because of market conditions or is the dividend still kind of top priority and then….

So far, I appreciate the question but so far in our prepared remarks it was -- we are pretty clear on the second quarter conference call. We said we expected a weak market. We said we expected it to strengthen into winter.

We said what we would like to do related to the dividend and we want that our balance sheet itself maybe more flexible than it may first appear. We're also saying now in these prepared statements that we actually expect the market to get stronger therefore cash flow to improve. We're saying that we're confident in doing financing.

We said we have not -- we haven't finished working in opening up that balance sheet position. And this is the time where the company just wants to be consistent..

Perfect. That answers my questions. .

And the matter of words, of course I can run a cash flow model. Let's says if you have rates $7000 a day for MRs and $5000 a day for LR2s, of course you can't carry on paying the dividend adding for an item.

But what is an actually test of the board's decision for is to take the one year Clarksons time charter estimates to nick those a little bit, i.e. be more conservative in those. But at least that some form of compendium of market thoughts and third party.

Even as we said we can't charter-in at those rates and see whether the company can function for the quarter and the following year after that. And if you run through our model, the company is fully able to pay its dividend and being compliance of its loans. .

Okay, that will helpful. .

It's about as long or as far as the board meeting was on that subject. .

Right, no, that is very helpful Robert and I thank you for the time..

And we will move to our next question comes from Ben Nolan from Stifel..

Yes, thanks. So I wanted to circle back to something Robert that you were talking with Jon about in terms of the slippage of the newbuildings. And you'd said that the yards are doing everything that they can sort to stretch the schedules to provide cash flows for a going concern purposes. I suppose to employee -- their well there is something else.

Is there anything at this point that your MR schedule might be stretched or is that -- or that yard's pretty well situated so that what you see as what you got?.

Cam?.

It this pretty much Ben what you see is what you get at this point..

Okay, that's helpful. And then the other thing is just thinking about sort of, and Robert I think you laid out all the things that should cause the market to tighten and so forth.

But when I'm, is it possible at all to quantify how big of a deal whether is in the winter? Or at least conceptually normally it's seasonally stronger, but how am I guess?.

Well it's huge. And we haven't had a normal winter for the time but it has the double combination of more demand in the North Atlantic. And at the same time as you've got that driving seat and gasoline season in the Southern Atlantic and the South American countries' demand has been steadily increasing year-over-year for some time now.

The next aspect is that, normally normal winters have bad weather so you have congestion which slows down the supply side, the whole operations side start to slowdown. If you get ice in Northern Europe that can be a tremendous boom to shipping too. So it's hard to underestimate the value of the normal winter against the warm winter.

And we've already seen one winters for a while. At the moment it’s starting off as if it's going to be at least normal. So it's really hard to understate how important it is.

It also is important because a tough winter or normal winter means that everything is depleted as you're coming out the winter, it means that people can't store or get ahead of the next season. And that's being so damaging in warm winter as when you're not only drawing product from the season you're in.

But people are able to time to prepare and not get ahead to the next ones.

Cameron you'd like to add to this?.

Just the thing that also wanted to the load land convention ships actually carry less cargo in the winter. So they're restricted from carrying the same quantity and this obviously has a nice effect on the supply demand balance..

Great. Well that's very helpful. And that was my question. Thanks guys. .

And we'll go to our next question from Spiro Dounis from UBS..

Hey, good morning everyone, and sorry about Don. Robert, just want to follow-up on the inflection point here around Thanksgiving. I think you made a prediction last quarter and directionally looks to be about right so far. Just curious you saw rates to be in a better place right now.

If there are more or less where you thought, and how that factors into maybe doing additional charter ins from here?.

Well, I think that first of all it wasn't a very bright call as sort of 18 now of the last of 20 winters is being plus or minus two weeks from Thanksgiving. Secondly, look right as Cameron indicated a higher than what we would expected.

And that's the function of a couple of things, one, the colonial pipeline as Cameron pointed out, that is set the dynamic where the present supply and demand is much tighter. Secondly, we think like in many markets of shipping , the underlying supply and demand balance is much tighter than it is actually observed.

But clearly something must have been happening in the dry cargo and the crude markets. Those vessels to be trading where they are right now, the crude oil side to be trading where it is. And very often in the market sentiment itself is 50% rate change. So we've already happy with where rates are right now.

We're really encourage of example of how aftermath is it being moving out in the heart and the in the Mediterranean area or in Europe. And we're very encouraged that the base rate at this point that there is in Atlantic and more importantly position less so, I would say we are a little bit ahead. .

Okay thank you. .

As it comes to time chartering in, the penalty for being a little bit ahead and six factors of fundamental reasons that the market in fact going forward. Actually know it's a harder environment to take ships in the moment. And I think that's the bullish sign..

Got it. I appreciate that. Second questions just around use of cash and deleveraging. I think two quarters ago, you kind of made more priority to deleverage. And I think from what I can tell you looks like you prepaid about $16 million in debt on K-Sure facility.

Is that part of this goal here to deleverage or is there something specific at play there?.

Yeah we've looking at few different things. And that just helped with the getting our covenants along lined together. .

Yes, I think you've got to take a responsible partnership attitude with your lenders. I think the lenders are being very accommodating to the company. And we have got a lot of operating leverage to the upside. We are committed to the dividend and you got to measure that with balance at the same time the lenders.

Which is we think that the probability is very weighted to what we are saying, but you can never be 100% sure. .

Got it. Appreciate your comments everyone. .

And the next question comes from Ken Hoexter from Merrill Lynch..

Hey good morning Robert, Emanuele, my condolences as well. Just on the ECO vessels, just given the new rules, you mentioned that real quick.

Any adoption you have to make given your recent deliveries on how the rules stand out?.

Cameron?.

On the Sulfur cap that's coming in 2020, there is obviously lots of conversations on what options exist for owners. Scrubbers being one, but scrubber technology analogous to what happened in ballast water treatment, scrubber technology is still evolving and there is a long way to go between now and the deadline.

But suffice to say that given the enhanced fuel consumption of our fleet as and when there is a greater disconnect between the price of marine gas oil or marine diesel ultra-low sulfur fuels and conventional high sulfur fuel oil, given when there is that price separation leading into 2020, we will be in a very good position to capture a lot of that benefit that our competitors will not simply on a apples-to-apples world scale basis.

In other words as freight is priced we will have better take home economics than anybody else, because we have the most efficient fleet out there. Whether or under what conditions we would invest in scrubber technology is an open question that will take many months and years to address..

So and some investment may have to be made by everyone to that level, it's unknown yet based on what you can install onto the system is that been something?.

It's complex piece of technology and a complex capital investment decision for any owner. But our position is one of more of a luxury position just given the alternative which is operators' ships as they are. Other owners won't have that luxury and they'll be facing down the barrel of a rather long gun as that deadline approaches..

Appreciate that.

And Brian, the discussion on the commitments going back to I guess the early capital call question on your newbuilds, is there a timing of discussions or timing of need to get it locked ahead of your CapEx Schedule? Is there a time kind of deadline that we need to see the next layer of capital availability?.

You are talking about the financing of the newbuilding , right?.

Yes, for the newbuilds, yes. .

First that's being delivered is scheduled for the end of the first quarter of 2017. So that would be a deadline, a ultimate deadline. We're working on to do before the end. .

Okay and thoughts on having the, the next is it too expensive to have the next package available for the entire newbuild program? Is it just cheaper to get each kind of commitment as you go along?.

No, I think that Brian said that he's working on something that we're comfortable and working on something. And it will be in a matter of weeks, what he said to me. And I think we'll leave it at that. .

Okay. And then I guess maybe..

And the matter of weeks is well before the end of the first quarter next year. .

Okay. Not matter of weeks being by the end of the year. .

It can be matter of weeks, it can be by the end of the month. We're not giving any more details other than what we're seeing. And so far we've got pretty good track record of financing things. I would take that from that. It's in the last throes of negotiating and doesn't want to negotiate public.

And maybe part of its negotiations are that he can split the financing up or he can keep it in one place so doing bits and pieces. Sometimes it's just not good to be too transparent..

Okay if -- just one last one on the rates Robert, And you gave great insight on that the plus two weeks. Is there a point where you become worrisome if weather I guess holds out as were in this or a normal year you mentioned just before so far it seems like a normal year.

Is a normal year good enough to get you the tightening that you want?.

Normal will be really good..

Because you're comparing to the last few years where it was just too warm to get the normal trajectory..

Comparing it to years of it, normal always seems really good. .

Okay. .

And unfortunately ship so that work in this sort of it doesn't work in the plus 2, 3 standard deviations. Normal is really good. Warmer than normal is not good at all. And colder than normal is generally fantastic. .

Okay, appreciate the time to take that. Thank you..

And our next question comes from Noah Parquette, JPMorgan..

Thanks. Can you just talk a little bit about what you think drove the weakness in the LR2 market in September? And why it’s come back a little bit? I guess what I'm trying to get that is, is that could be seen as the good churn in the coal mine for this idea of high product and low arbitrage, thanks. .

Well I think you have the anticipation in the LR2s, there are a lot of things working that's your biggest destocking area. But also here some of those Middle Eastern refineries were not doing an turnaround in September or early October but the ships are anticipating those turnaround going on in end October or now.

And again I would argue that in many ways it is the canary in the coal mine that the rates themselves or the returns in total were actually no so bad for what was drawing them.

That being times historically where they do react a little bit like VLCCs or Capes where the market will drive your earnings down to the OpEx itself in either way through that worse period the rates we may returns on were significantly above OpEx. So I think yes, again I see that as pretty constructive. .

Okay. And just want to ask just a follow up to the sulfur regulations.

How sensitive, for a tanker fleet how sensitive is speed to fuel cost now especially as kind of ECO class becomes more common? And do you see the room for slowing down as the world fleet uses more expensive fuel?.

It's a great question. That laden speed of vessel as you know is something contractually negotiated between the owner and the charter. We haven't seen over the last number of years but that speed moves very much, it's usually around 13-13.5 knots.

And what does change quite a bit is when the ship is not laden when it's in ballast what speed the owner chooses to run their vessels. And that is what's quite elastic to freight rates and would logically also be quite elastic to the price of fuel.

Making the dynamic trade-off between the opportunity cost of slowing down your vessel and what the economics are on your next probable next employment. So the answer to your question is maybe it really depends on what the freight market is like at the time as those spreads on bunkers start to widen. .

Okay. And just a quick on G&A expenses, cash G&A comes down a lot of less couple of quarters.

And can you say what's driving that if we can assume that to be constant going forward?.

We're just looking at everything and making sure that we do it wisely. So it should be probably up a little bit on the next quarter. So and you should probably look at it for that when you model in. .

All right thanks. .

And we move to our next question comes from Fotis Giannakoulis from Morgan Stanley. .

Yes, hi gentlemen and my questions have all been answered. Thank you. .

Thank you Fotis. .

And we move to our next question from Herman Hildan from Clarksons Platou. .

Good morning guys. Just very short questions, I understand it's always good to be fully transparent.

But is it possible to give some guidance on what the annual debt repayment will be very going forward and how much kind of the new facilities have reduced the annual debt repayment?.

So the new faculties will reduce the interest payments going forward. So it will do that. So in the third quarter fourth quarter, about the debt principal payment is about $20 million. And then for '17 it's about $140 million right now in the principal payments for the entire year. We'll always be as transparent as we can on things that are being done.

It's a different matter where things are being down as it were. .

Now I understand. And just the final short question, a share that you might previously know but short mix up to that, I agree. But in general and tax the duplication between kind of how things are priced and how should it looks like. And you've been very committed to paying your dividend even though there is -- it's a volatile spot market.

But is there at any point where you said that at this share price it makes more sense to buyback stocks and paying dividend.

Or will you stick to that regardless in then you call it near term?.

I mean you never want to use the word any never and wherever. But you're paying your dividend is more, I mean it's right I don't know. So you rates to $37,000 a day, you can pay your dividend and if the stocks still up for you can buy stock.

If you took rates to zero you probably should be paying your dividend to the amount that we're paying, but you probably should be buying back your stock either. .

Yeah I guess it's fair answer. That’s all from me. .

Thank you. .

And that concludes today's question-and-answer session. At this time I like to turn the conference back to our management for any additional or closing remarks. .

Well thank everyone for joining us today. And we'll speak to you soon. Thank you. .

And that will conclude today's conference. We appreciate your participation. You may now disconnect..