Emanuele Lauro - Chairman and Chief Executive Officer Brian Lee - Chief Financial Officer Robert Bugbee - President Cameron Mackey - Chief Operating Officer.

Douglas Mavrinac - Jefferies LLC Benjamin Friedman - Morgan Stanley Jonathan Chappell - Evercore ISI Gregory Lewis - Credit Suisse Securities (USA) LLC Benjamin Nolan - Stifel, Nicolaus & Company, Inc.

Noah Parquette - JP Morgan Chase & Co, Herman Hildan - Clarkson Platou Securities AS Ken Hoexter - Bank of America Merrill Lynch Spiro Dounis - UBS Securities.

Hello, and welcome to the Scorpio Tankers Inc., First Quarter 2017 Conference Call. I would now like to turn the call over to Brian Lee, Chief Financial Officer. Please go ahead, sir..

Thank you, and thank you everyone for joining us today. On the call with me are Emanuele Lauro, our 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, 2017 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 and sec.gov.

Call participants are advised that the audio of this conference call is being broadcast live on the Internet and is also 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.

If you have any specific modeling questions, you can call me, we can address those offline. But now, I would like to introduce Emanuele Lauro..

Thank you, Brian. Good morning or afternoon to everybody. As highlighted in our first quarter results announced yesterday, we've been able to execute on what we had planned in terms of strengthening our balance sheet and increase our liquidity position in the rate environment which has been more volatile than what we would have hoped for.

All the steps that we’ve undertake are mentioned in our earnings release and I will not repeat them to you now in order not to be repetitive, but across the board you would have seen management choosing most if not all the available tools to adopt constantly to the best possible position in the marketplace.

We are positive about the way the market is shaping up. We remain optimistic on the product tanker market outlook with the fundamental drivers of our market that has been remained largely unchanged. We are one quarter closer to the recovery and we're getting even more bullish than we had previously thought we would be.

Our markets have absorbed well the large number of newbuildings that have been entering the market so far this year. Bar for the United States, the work product inventories are continuing to decrease, showing headline demand is stronger than expected.

Going forward, the number of new deliveries is rapidly declining with MR order books that remains close to its 20 years low. We still expect demand growth actually over taking supply growth in the second half of this year.

The shipbuilding industry as mentioned before continues to struggle to attract new orders in any meaningful way in the product tanker market and at the same time asset values have now turned the corner and have started going up.

So in general terms, we have a very positive expectation of the product tanker market going forward and are excited about our Company position to benefit from the expected upside. With this, I would like to turn the call to Robert..

Hi. Good morning, everybody. So thank you all for your patience, but as Emanuele said with really exciting going forward this last three, four months since we last spoke.

Virtually everything has gone better than expected whether that’s headline demand, whether that’s rates, whether that’s lack of newbuilding orders, whether that’s on the regulatory side. And that market is clearly much better balanced than any of us would have expected.

None of us including you analyst expected the market to be as strong as it is today. And most importantly that base, that high base even now we are in a weak part of the cycle that high base is going to result as soon as these lines start crossing, you can’t carry on drawing inventories for ever, the newbuilding deliveries are rapidly declining.

At some point pretty soon you are going to get really substantial increases in rates. And that’s you know what you mean by that that’s not one, two, three, four, five days. These are expansions of five, 10, 15, 20 in the larger shifts. We don’t have anything more add to the release. So let’s turn it over to Q&A..

[Operator Instructions] And our first question comes from the line of Doug Mavrinac from Jefferies. Your line is now open..

Great. Thank you, operator. Good morning everyone. I just had a few questions for you all this morning. And Robert kind of maybe extrapolating on some of your comments, when we look at kind of how the markets performing and we see how you have outperformed some of the broker reported rates.

On the one hand that kind of jumps off the paid has been very good, but I'm not so sure that even tells the whole story because what I'm alluding to is during 1Q you had a fire [indiscernible], all these refineries down and yet LR2 rates are still 16 grand a day.

So my question is, is the market just that much tighter I guess and then people even realize given that you can absorb all of those significant outages and still see LR2 rates are 16 grand a day?.

Yes, I think that's another – really important thing. I mean we're really through with the LR2 performance. I mean that one is that – is not those refinery outages. So it’s having everything thrown against it. That’s the part that’s most affected by the Asian drawdowns and inventories. That’s the one is being really hurt by these outages.

Yes, as you can see by those rates, those results that is way above what you could normally expect. So that’s being driven, that's your pure indicator. The headline demand out there for products worldwide is accelerating and accelerating pretty rapidly.

And that’s the one that I alluded to that can – once you're up in that territory of the 15, 16s in a market like this. Once this inventory destocking stocks or the refinery outages come – stop and come back on line. That market can move and move in multiple thousands of dollars at any moment..

Right, because when you're talking – that is offsetting that stage or [listing] our point that LR2 rates are 17 grand a day before the stuff comes back online.

So obviously, that will display [indiscernible] to the fire?.

Yes, and we’ve got – we’ve had a lot of practice now in our LR2s. We got a fantastic fleet there, they're all modern, they’re really good and they are absolutely ideal for this very articulated trade now, the LR2 rate. I have some sympathy for you analysts now, previously I’ve sort of complained a little bit.

But I've got a lot of sympathy is that simply isn't an index out there that you guys can begin to relate actually how our ships are trading.

I mean I will give you an example of one of the ships went from, loaded in the Arabian Gulf, discharged in Northwest Europe, reloaded in Northwest Europe, discharged in Korea, reloaded in Korea, the same place and discharged in the Arabian Gulf. There's not an index around that can cope with that sort of triangulation.

And the idea for us two years ago, LR2 could actually have more loaded time than a market have, is crazy. So you have to have a size. You have to have fleet. You have to have certain contracts. We're not going to tell you all how we do it. That’s just not what we're going do. But clearly size and quality of ships helps.

You can see in our own results, we have one LR1. Well, that's nowhere near close to where that LR2 performance is and that’s simply because we just don't have one ship is whatever..

Right..

You can't do what we can do in the LR2..

Right, gotcha..

And that’s really exciting..

Yes.

And Robert, I mean so when we’re talking about the increase triangulation and the strong earnings even before some of the big Middle East refineries come back, another notable thing is that when we look at the MR market, you guys earned a little bit over 13 grand a day in 1Q and in 2Q you’ve earned 15, five a day and that's a much deeper, much bigger market.

So is that also kind of part of the story or another way to kind of gauge just how tight the market is, is that not only your are not getting some…?.

Yes, I think in the MR market, I mean I think all MR. I think I'm very sure as Ardmore having that conference call today. They would be as excited, because you've really had a lot of expansion of volume [indiscernible], you've had a lot of deliveries in those first, two, three months that are being absorbed.

And another thing that’s fairly unique here is I think this is only like the third time in my career that the second quarter has started off higher than the first quarter in MR. And that's only happening because the headline demand is so strong. And again, it's happening against the headwind of non-U.S. inventory drawdown.

So I’m sure it's going to be choppy, but I'm really convinced that sometime fairly shortly, we are just going to wake up and this whole market would just lift to a different place..

Right. Gotcha..

We’ve been pretty cautious over a year and a half to now. We've been talking in the last conference call. This time we have a very little visibility. That’s changed in the last two, three months. It's actually acting rationally.

From our desks again we can actually say with reasonable certainty whether the market is going to be moving up or down over the next week or two..

Right. Yes, and that’s a big change. And then Robert, so we know kind of how tight the market is now, I think everyone kind of should see the demand side, it should only continue to firm and as we also have visibility, the supply growth is really going to start to slow in the second half of this year.

So in terms of other things that we haven't seen yet, can you comment on whether or not you've seen any increases or changes in ordering behavior? Has there been any changes in capital availability to the BARDA industry that would change that or we still expecting that the demand is not only going to be good, but your supply is still going to flow, no matter what can be done about it?.

So I think there are two or three really exciting things in the product. Yes, the capital is constrained. Yes, there are hardly any new building orders. There is pretty good reasons for that. First of all available shipyard capacity for the products is actually declined. Japan is filled up for a long way. Korea have lost key product yards.

No side of the business, the major three trades is more affected by this shutdown in Korean capacity than the product side. And then those yards in China, those few yards in China that can build products is starting to get dry bulk orders. I mean this is the irony.

I mean Scorpio Tankers ironically is probably the best investment you can make on the dry cargo recovery, not just on the product tanker recovery..

That’s all right.

And then I think Emanuele mentioned that also that we’re starting to see asset value is moving higher as well, so it truly seems like at all levels that inflection point…?.

Yes. You would expect in this environment that asset values to start moving higher because look at the cash flows. I mean it’s not – look at what we're reporting on the MRs and assume that sort of where people we doing things. Yes, of course you can buy an MR present price when the cash flow is out..

Yes. That’s fantastic..

Thank you..

Thanks Robert..

Thank you. And our next question comes from the line of Fotis Giannakoulis from Morgan Stanley. Your line is now open..

Hey, guys. This is Ben stepping in Fotis. So just a piggyback kind of on the last question, I was curious, it seems that we have visibility in certain factors in the order books at record lows, rates keep – and the orders books coming down, refinery margins are trending upwards, U.S. exports are increasing.

So I was just curious and you said over the next few weeks, but what would trigger this inflection point and are you seeing any changes in behavior of charters at this time?.

The first behavior you are seeing is charters is much more competition to chartering vessels. So the charter is trying to put risk on or cover on – in the trades. Okay, so that's one – it’s a good concentric thing.

What triggers it is you just don't know, I mean you are obviously pretty tight on supply demand when the markets ripped up in the last weeks is done so very quickly and very hard, taken the long time to sell off. So that's why you know it's really balanced.

You can't predict that point where people sit there and say, we better not draw any further on our inventories. And that one catalyst. As soon as that happens, obviously more spot demand comes in. We're already seeing it in the crude oil side. I mean the crude oil side itself, which is also helpful here, is performing better than what people expect.

If you just can't literally predict that to the week. You got the ingredients for it because everybody including ourselves is talking about this week environment that somehow in this week environment the rates are facing at the pretty constructive level. So unfortunately you just don't know.

You just know the ingredients are there, the risk therefore to the upside every single day. Every time the markets go bit down in the last 10, 12 weeks, it reached – it’s made a higher bottom and every time it bid up, it’s made a higher top..

Fair enough. That’s the one for us over here. Thanks so much..

Thanks..

Thank you. And our next question comes from the line of Jon Chappell from Evercore. Your line is now open..

Thanks. Good morning and afternoon. Just three hopefully relatively quick ones, first off Robert, I appreciate your sympathy. It's obvious incredibly difficult for us with some of the different trading route.

But to the extent that STNG is kind of continuously outperformed the history benchmarks difficult to quantify maybe but how much of that is associated just with the general lack of transparency in the market for it kind of outsiders and how much of that is associated with fleet size, scale, pooling arrangements et cetera?.

Well, first of all yes, you would have a benefit in fleet size and pools and maybe that can give you a 10% to 20% hedge with obviously the new ships consuming less fuel and et cetera and being wanted by the customers. But the fact to the matter is the actual index is that you all have available to are useless.

That completely useless that is there's no point in actually then being printed, because – so there is no comparison. There's not a question of how are you outperforming the index? The index is not relevant to size, relevant as how many ice creams are sold in Central Park today..

It’s okay..

Well I mean just look at the numbers. I mean they're being completely – they haven’t been beaten by one standard deviation. They've been smashed out of the park, because the index itself is only based on AG to Japan and back again in one specific cargo and I've already indicated that that just not what we're doing..

Right, there is a component than that’s what you’re dealing as far as the positioning of you fleet in that backhaul that’s you are able to…?.

Yes, everybody, but that part of it we maybe get to do it better than the average, but that part is just what the trade is. You're trying to compare those indexes as like saying well, what’s the cost of – how much is the cost to go by steam train from New York to Boston.

It doesn't like – its old fashioned, the description of the market that no longer exists..

Got it. All right, we will keep trying. And second question, pretty noteworthy the bullish tone I think of this call, especially relative to the last few and there is kind of like none to middle on the timing understandably. So obviously three months ago, we were talking about a dividend cut. Now we're talking about a strong balance sheet.

So maybe this is for Brian or Robert, but what's kind of the comfort level now with overall liquidity and as the market shifts to such where you'll be very cash flow positive again? How do you kind of think of use of operating cash flow going forward as it relates to either the stock or the market, which is somewhat bottomed?.

I’ll answer. The first one is obviously we’re comfortable with our liquidity we done it. Brian has done a tremendous – team has done tremendous amount of work on that balance sheet in the last six months. As to what are you going to do if you start earning $1 or $2 a share, let’s just see what’s available of the alternatives..

Got it. Final one insider buying and seems to be a little bit of a copycat of what happened with – last year a lot of insider buying with the management company of Scorpio brokers seem to pull back….

We love sequels, especially when they can be better than the first half..

Those are rare..

Yes..

All right, that’s all I have..

And I’ll leave in there..

Thanks, Robert..

Thank you. And our next question comes from the line of Gregory Lewis from Credit Suisse. Your line is now open..

Yes, hi, thank you and good morning. Yes, I mean Robert clearly there's a little bit of a swagger extra stride in your step.

Has that pertains to where the market is now and how you think about the chartered in fleet? Should we be thinking about that I mean I feel like as we're taking delivery and winding down the new bill program, it sounded like in the past, we would maybe see a chartered in fleet shrink? Just given your tone, it looks like maybe we could actually see more opportunistic and to…?.

It’s a double hedge, so it’s a double position. Look, we have taken and thought as where we – because we're bullish on the market and where we've seen is opportunity and optionality.

In my comment earlier, we're now starting to get competition from the actual customers themselves when we're looking at charters and the market itself has strengthened and the real - and the time charter rate forward has strengthened and there are less owners because of what's happening, willing to charter out quality operated tonnage.

So you desire maybe the same, but your ability to get deals may be drastically lower. So you not actually – you may not actually see much of a build on that charter book..

Okay.

And then just I mean I guess congratulations on – I guess the third – I guess where executing on that previously announced sale and leasebacks, is at a market at the company continues to explore or to Jonathan’s comments about your comfort with liquidity, should we be thinking about – is there more opportunities for STNG to do that or that was sort of a one-off or we’re on that…?.

There are more opportunities to do that, but we're not in the process of doing that at this moment. I mean we got a – we as you know from January, early February we felt very little visibility. We were extremely cautious. We were really, really focusing hard on making sure that we built that liquidity in the balance sheet.

That is being done combined with a material change in our cash flow and our cash position from the fact in market was much stronger through that period than what we were predicting you know real low cases.

And now we believe going forward that we've not only charged the battery or created the liquidity, but that the chance of the market falling into a distressed position is much, much lower and even if it does, it will be much, much shorter and the risk now in our own internal models is like we said to one of the previous questions is to the upside.

I mean we're not, it really matters now that the newbuilding delivery order book is flowing very hard, matters that those refinery margins is there matches the refineries are coming up and guys that were taken down. They’re doing it. So our risk parameters are less. So we don't see the need to go and do that in a moment..

Okay, great. And I guess to some speaking out here, so maybe we're going to sell it more ice cream in Central Park today than we did earlier this week. You guys have a great day..

Thank you..

Thank you. And our next question comes from the line of Ben Nolan from Stifel. Your line is now open..

Yes, thanks. So I have a couple of questions for you guys. First on the newbuilding side obviously, just said over there's not been much activity handful orders, but most of them seemed industrial and nature.

One of the things that came up yesterday was that in the earn-out call was that the arch have been really aggressive and trying to win in new business and hard selling opportunities.

Is that something you guys have seen on a product tanker side? Is that a little bit more relegated to the larger ship classes?.

No not there, I mean Cameron was to say anything that….

It’s a new one to answer. It’s a nuance answer various from arch yard.

What really has changed over the last couple of years is that because the shipyard themselves are going through stress; it’s not stress situations you have lenders and creditors behind them or stuck between the rock in a hard place which is to say they are faced with either closing down or reducing capacity or only booking capacity that meet certain financial hurdles i.e.

cash flow positive or de minimis losses. And so really it has been for the most part pretty wide with that spread that it kept a lot of orders from happening, where orders have come in the product tanker space have largely been to clear out old contract and deal blocks in advance of a new regulation that captures engine emissions.

That’s where you have seen a little recent blip in ordering. There really hasn’t been a lot of activity..

Yes. I think it’s different in price as we said, I mean it's affected. I mean you yourself did this really excellent report on the diminish yard capacity and if someone goes through that report they're going to see that it's in that product tanker range that the biggest hits of comment.

If really aren't any bargain basement deals on the products and if anything I would expect the prices to be moving up as they're trying to push them also up in the drybulk carrier. The market is slightly different, right. I mean you've got the really big yards there that is still up and functional..

Okay. That's helpful. Thanks for the kind words there. The next question relates to and you actually alluded to this little bit ago, the LR1 business, the one remaining looks like it comes off contract pretty soon. And I know that it was in the Panamax pool.

How are you guys think about that asset class? Structurally it looks like it's you're almost entirely out of it, longer-term is there any change….

I think there's no problem with the asset class structurally assessing that the asset class is – as I've said many times before, you cannot have a situation where MR is strong and LR2 is on, so Handy is strong and MR is on. So the LR1 you put in the same boxes the rest of the clean space.

It's more of a point that one ship just doesn't kind of do it whether over time we can find a way to increase that position to a meaningful point where we can trade them as effectively as the other classes we have, who knows..

Okay..

I'm never going to say never..

And then last one for me and this comes out from time-to-time, but just curious your latest thoughts, obviously in the crude tanker space there has been decent amount – some noise and some actual activity around M&A and so forth. There still a lot of private equity bad product tanker vehicle is out there.

As we get closer to this sort of upward inflection point in stronger portion of the cycle.

Is that something that you would expect to pick up and is it something that you might would be involved or do you have a scale on?.

I think look across the pool of shipping, if you're a shareholder you would hope that M&A activity picks up, one because you've got the chance of creating proper sizable institutes that can benefit from the economy to scale in the markets and be able to access different forms of capital, whether lenders would like that as well as you know more shareholders.

So you hope that for the industry. The difficulty in the product market itself is – is the disparity or difference between fleet ages and fleet types. There are not many fleets that kind of compared to us, and yes, but hope the consolidation – consolidation is good, so hope that will happen..

Okay. I'll turn it over. Thanks Bob..

Thank you. And your next question comes from the line of Noah Parquette from JP Morgan Chase. Your line is now open..

Thanks. [Indiscernible] that China is thinking about putting in place expert quotes for refined products. I love to hear your thoughts on that. To say that’s really been dynamic past year and a half, it stayed local.

Can we see even ton-mile accretion for that or what do you think that would do to the tough market?.

Well, firstly I think that China is generally positive to the product market whether it's because they consuming the stuff, whether or not it’s because they are taking the vegetable oils and palm oils in as well which is very helpful to the product demand.

Whether or not they're increasing their own refinery capacity and normally what happens like in Europe or the United States if a geographical zone increases and matures its refinery capacity they start ultimately trading in and out. But China is still a pretty small part or very small part product tanker overall trade.

So whether or not it's positive, I wouldn’t like to hype it too much in the sense of – it’s not really that relevant product at the moment.

What is relevant is that the Chinese economy is growing and it's taking the cruds and it’s taking overall energy and is supporting the drybulk market which competes for ultimately for shipyards and shipyards basin products..

Okay. And then I wanted to get your thoughts on the upcoming ballast water treatment implementation, given the ability to remove the IOPP certificates from the special survey.

What do you think the effect will be? How this plays out over the next few years in terms of scraping?.

I think there will be in the end a very little – a very minimal impact, so the following reason is so far the United States is not granting any sort of blanket waivers or extensions to the implementation of the regulations, which means that if you want to trade to the United States, your timeline for that CapEx and that cost is set.

And so I just don't see unless there is some remarkable change at harbor. In the Coast Guard I don't see anyway for most owners together around that implementation schedule.

And consequently as you see another transportation industry, you will see a further segmentation, you might not see increased scraping, but what you will see is tankers relegated to second tier tertiary markets leaving wide open the premium trades in premium market to the most modern vessels with the systems installed.

And you will see that price differentiation in most segments or between those segments. That’s how we're looking at it now..

Okay. That's helpful. Thanks..

Thank you. And our next question comes from the line of Herman Hildan from Clarkson Platou. Your line is now open..

Good morning, guys. Just some sort of short questions.

The first one, could you comment on [indiscernible] during the first quarter?.

Zero..

Zero, okay very good.

That’s good confirmation and the second question, I don’t know obviously as of kind of moves away from balance sheet [indiscernible] but the fundamentals and higher it's not a prices and so on traditional sitting still and then watching on the color of the markets and it might be not surprising the earlier question then move fast.

So could you give us on some thinking on what kind of visions you have for the Company going forward?.

What kind of type of what?.

Ambition and what kind of ambition visions are?.

Yes, the first ambition is to get the Company back into profitability. I mean I think that it's like we said before I mean it's – this is very similar to, I don't know, this is very similar that we have a sister company.

That's in the drybulk market and this is very similar to around July, August last year where the bottom have been already set in prices that gently moving up with, rates are gently stronger than expected. And it's – I would say if I had the choice, I would say on drybulk you could say what a difference six months has made.

In products is probably better to say what a difference six months will make. So for us let’s accomplish the easy ambition first, which is returning to profitability. And then we can set some more dreams and more ambitions..

Sure.

I mean you talked about on the capacity side?.

I mean it’s exactly the same questioning by the way. The interesting thing is that the last quarter, the questioning was all about how are not you’re going to survive and how are you going – what’s your runway et cetera. And now we’re ready, we’re getting to how are you going to return cash to shareholders? This is like a dry cargo we run.

As I said we love the quotes, we love them..

So I agree.

Just dry clear to thinking about the opportunities for growth though it might be early or so long, but…?.

You got companies that had $0.22 leverage per $1,000 a day, right. So let’s think about profitability. We used to think about probability for you worry about our growth, right..

[Inaudible].

That is still talk to early research department and try and solve the mystery for the world, which is creating an LR2 index that reflects the market..

Yes, if you look on the MR side, it’s about [12 to 14 and came official] and that’s now important in our…?.

Yes, exactly that's what I'm saying if nobody's fault. It’s none of your analysts fault, somewhere we can create something that reflects the modern world and you're probably right, they change..

And then where do you see the incremental with the growth and [inaudible]?.

That’s the point. It’s that literally going full over the place. You got [indiscernible], you’ve got Singapore, Korea you’ve got crossing both ways into Europe, out of Europe to the East into West Africa. It's full over the place. They won't be – it won't be able to solve the LR2 issue by a simple route.

You have to get a group of lump sum a basket, a lump sum paid voyages and the TC voyages..

Sure. Thank you very much. We’ll work on that..

Thank you, Herman..

Thank you. And our next question comes from the line of Ken Hoexter from Bank of America Merrill Lynch. Your line is now open..

Great. Good morning.

Hey, Robert, you confidence obviously clearly are talked about, but just want to check in it, have you seen head fakes on rates like this before or to the trend that give you confidence that there's just too much fundamental turning in your outlook?.

It's hard to get a head fake from a market that is – it is the reason why I wouldn't discuss – of course you can see you have head fakes. But it's hard to describe this is a probability of head fake simply because you know that you had an big increases supply in the first four months and you had inventory drawdowns.

So that tells you that your headline demand must be stronger than you would first thought..

Great. And just another one on economy step back a picture if I can. Just on the OpEx shifts in production as they decrease crude production or try to – non-OpEx seems to be picking up a little bit.

Is there a derivative impact on the product market in terms of length of haul that derives from the shifting crude patterns?.

Sure. I mean the U.S. export capability has been a beneficiary with U.S. crude production coming out. That’s being fine. West Africa being able to afford to being able to sell crude and afford to take in products, again is also a benefit. Yes, I mean it's all good.

I need to chat with you afterwards right because you have $0.60 in 2018 with a price target of four tenth and then underperformed. So from PI, I want to know in the BOA portfolio, what they have is over performance..

Happy to share with you afterwards. Let me just ask another question on the – maybe to Brian, on the sale leaseback, you did that at a loss now.

Just want to understand, I know it was announced before, but if rates are firming or your view is firming was that done because you have the need for capital now or just want to understand why you…?.

If you listen to the first quarter conference call, the first quarter conference call, we announced that we had agreed to sell these three vessels and lease them back, but that the trade had not been executed in the vessels not delivered. In the first quarter conference call, if you remember we were really making sure we had liquidity.

We did not expect the market to be as strong as it is or fundamentally stronger that is. And we focused on ensuring, we would get through the path of weakness, so we had done all our financing and the sale leaseback were creating the liquidity.

Earlier in this call, I said look we've done what we've done, we're pleasantly happy with the progress the market has made. We have more cash than what our forecast were and so we're not working on any more sale leaseback, even though they would be available to us..

Okay. And then similarly that debt you took out at a higher rate versus what's retiring.

Again was that just because the deadline for that was coming up soon?.

Correct, the deadline for that is coming up in October, November. Again, we wanted to play this market from strength and make sure again that we wouldn’t have anything, I mean, yes we can be really sure and really confident in the market, but you can go away and have some stupid [MAC] event coming in the world.

So when we did the baby bond for that few extra fraction of percentage cost, we were able then to ensure that we had pre-funded the purchase of bonds during October, November that’s ensuring the company had no debt due until the middle of 2019..

Okay.

And just to clarify if I can lastly, you are now fully funded for all your prospective deliveries with the recent actions right, so you position well in terms of this rebound now?.

Yes..

Okay. Appreciate the time and thoughts. Thanks Robert..

Thank you..

Thank you. And our next question comes from the line of Spiro Dounis from UBS Securities. Your line is now open..

Hey, good morning. Thanks for taking the question. Robert just wanted to circle back real quick if I could just around the – optimism around the demand side for tanker here in the short-term or medium-term. Just one of those struggled to get any real conviction around just because it seems to be so arbitrage driven.

So I guess I’m just wondering is your basic call that stockpiles globally come in, we get back to imbalance and that's going to drive rates up or is there something else that's really driving it..

Well, that’s driving in the first place is head world GDP, headline product tanker demand. The shift in where refineries are and people like Australia are closing down refineries being importers all of that.

And then that very simply the market is although it’s week is – still positive cash flow, will close the positive cash flow for the players in the market despite the fact we've had three or four months of the remaining largest period of deliveries, plus destocking, which is in itself is taking demand away from the headline growth.

So thesis is that your supply side growth will start to slow pretty dramatically that even excluding scrapping the ships or extended repair time or modification time for the environmental changes and at some point you just can't keep going to the inventories and draw inventories down, at some point you have to stop doing that and just the stopping of it will increase spot demand for ships and got for bid, if you actually turn the other way and start to build inventories that will add even further demand to the market.

So that's where our enthusiasm is based on hand..

Okay. That’s clear. And then I guess if I could think of risk for the supply side and I'm not sure on meaningful would, but I know I guess reasonable amount of LR2 is there trading in the authority market I believe PK is got a few in there, but I don’t have good sense for what's that means in total.

So the rates do actually get stronger, is there real risk that LR2 is come back and the clean trade and maybe…?.

PK particular ship the life because the scrap yard before they come back to the LR2 market, okay. I mean a lot of the ships that are so-called LR2s that are trading in the crude market.

I don't know what they need to do to get back into the product market, because they may be in trading in there, long time or they may be older et cetera it's just not – it’s a really easy thing to do. It’s taken LR2 and trade in crude. It’s very hard to take it from crude and put it into LR2.

You would have to have a sustained delta, a sustained delta where product in LR2s are trading significantly above Aframaxes for that person to make the move to transfer into the LR2 trade because that first voyages are going to be a steep discount and tell they’ve had three voyages in consecutive clean..

Got it. I am very clear..

And the actual trend is quite opposite. Those are super responsible Bloomberg article where they were the opposite, you're getting ships drifting from the LR2 market into the crude market as they are don't want to upgrade their tank coatings and do the maintenance or it's just easier, because they’re old ships to trade in that Aframaxes market.

So the trend is the other way at the moment..

Got it. I appreciate the color. Thanks Robert..

Thank you. End of Q&A.

Thank you. And I am showing no further questions over the phone lines at this time. I would like to turn the call back to over Brian Lee..

I just want to thank everyone for joining us today and we look forward to speaking to you soon. Thank you..

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