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Edited Transcript of GNRT earnings conference call or presentation 13-Mar-17 12:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Gener8 Maritime Inc Earnings Call

NEW YORK Mar 13, 2017 (Thomson StreetEvents) -- Edited Transcript of Gener8 Maritime Inc earnings conference call or presentation Monday, March 13, 2017 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* George Fikaris

Gener8 Maritime Inc - VP

* Peter Georgiopoulos

Gener8 Maritime Inc - CEO

* Leo Vrondissis

Gener8 Maritime Inc - CFO

* Sean Bradley

Gener8 Maritime Inc - Manager and Commercial Director

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Conference Call Participants

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* Doug Mavrinac

Jefferies - Analyst

* Spiro Dounis

UBS - Analyst

* Alex Hahn

Citi - Analyst

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Presentation

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Operator [1]

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Good morning and welcome to the Gener8 Maritime fourth-quarter 2016 earnings call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to George Fikaris. Please go ahead, sir.

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George Fikaris, Gener8 Maritime Inc - VP [2]

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Thank you and good morning everyone. We appreciate your participation in our fourth-quarter 2016 earnings call. With me today are Peter Georgiopoulos, Chairman and Chief Executive Officer and Leo Vrondissis, Chief Financial Officer. A slide presentation containing information relating to our discussion as well as additional materials relating to our earnings announcement is available on our website at IR. Gener8maritime.com.

You should be aware that in today's conference call we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. For a discussion of factors that could cause results to differ please see the Company's press release that was issued today and the Company's filings with the Securities and Exchange Commission including without limitation, the Company's in a report on Form 10-K for the year ended December 31, 2016. Now I will turn the call over to Peter.

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Peter Georgiopoulos, Gener8 Maritime Inc - CEO [3]

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Thank you and good morning everyone. Today I would like to review our highlights and results from the fourth quarter of 2016 as well as our performance against our strategic plan. Leo will then walk you through our financial results in more detail and discuss market conditions and the industry outlook. We will then open the call for questions.

Starting with slide 5, our newbuilding program is nearing completion and has proceeded according to schedule. In 2016 we took delivery of 15 ECO newbuilding VLCCs including three during the fourth quarter. So far in 2017 we took delivery of two more ECO newbuilding VLCCs and have just one remaining ECO newbuilding VLCC expected to deliver this year.

We simultaneously continue to remove order vessels from our fleet with the sale of one 2000-built Suezmax tanker in the fourth quarter and one 2003-built VLCC subsequent to the end of the quarter. As of today we have an operating fleet of 40 vessels comprised of 24 VLCCs, 10 Suezmax, four Aframax and 2 Panamax tankers. Following delivery of our final VLCC and assuming no further changes to our fleet, we will have a fleet of 41 wholly owned vessels including 25 VLCCs.

The average age of our fleet will be under five years based on a deadweight weighted average age and our VLCCs whenever an average age of just 2.7 years. This will give Gener8 one of the youngest, most modern VLCC fleets in the world. Modern fuel-efficient vessels command a premium in the market and we expect this premium to become more pronounced in the future. In the fourth quarter operating days for our ECO VLCCs represented 77% of our total VLCC operating days, a 54% increase compared to the fourth quarter of 2015 and a -- 43% of our full fleet operating days.

Turn to slide 6 and our financial results for the fourth quarter. Gener8 Maritime's results for the fourth quarter include adjusted net income of $20 million or $0.24 basic and diluted adjusted earnings-per-share; net income of $5.8 million or $0.07 basic and diluted earnings per share; adjusted EBITDA of $64.3 million and net voyage revenue of $99.6 million. Our operating results were reflective of a seasonal pickup in rates that began during the fourth quarter and carried over into the first two months of this year.

The typical seasonal upswing was subdued as the global fleet absorbed new capacity. We are nonetheless pleased with the relative performance of our fleet, particularly our ECO VLCCs which earned approximately 15% more per day then an average daily TCE basis than our non-ECO VLCCs. The daily time charter equivalent rates earned by our VLCCs in the spot market including our vessels that were within Navig8's VL8 pool were $36,282 per day which was approximate 63% of the rates earned during the fourth quarter of 2015 when the market experienced a problem period of strength as well as a volatility.

The average daily TCE earned by our ECO VLCCs was $37,431 per day compared to $32,419 per day for our non-ECO VLCCs. This is a reflection of a two-tiered market benefiting owners of modern tonnage as well as the incremental earnings that ECO vessels can generate. As we have said before, we believe the modernity and fuel efficiency of our fleet is a significant competitive advantage for Gener8 Maritime. I would now like to pass the call over to Leo to walk you through our financials in more detail and discuss the market.

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Leo Vrondissis, Gener8 Maritime Inc - CFO [4]

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Thank you, Peter. Turning to our financial results on slide 8, net voyage revenue decreased by $1.1 million, or 1.1% to $99.6 million for the three months ended December 31, 2016 from $100.7 million for the same period in the prior year. The decrease was primarily attributable to lower average TCE rates earned by our fleet partially offset by an increase in our vessel operating days following the delivery of vessels from our newbuilding program.

Direct vessel operating expenses which include crew costs, provisions, deck and engine stores, lubricating oil, insurance and maintenance and repairs increased by $7.4 million or 32% to $30.3 million for the three months ended December 31, 2016 compared to $22.9 million for the prior-year period. The increase in direct vessel operating expenses was primarily due to the average increase by 11.2 vessels or by 40.8% in the average size of our fleet for the fourth quarter 2016 as compared to 27.4 vessels in the fourth-quarter 2015. We believe our direct vessel operating expenses are highly competitive and partly indicative of the benefit of operating a young modern fleet that requires less maintenance and repairs.

General and administrative expenses decreased by $2.6 million or 32% to $5.6 million during the three months ended December 31, 2016, compared to $8.2 million for the prior year period primarily due to $2.2 million of lower legal and other professional fees relating to among, other things our existing facilities during the three months ended December 31, 2016 as compared to 2015.

Depreciation and amortization expense which includes depreciation of vessels as well as amortization of drydock and special survey costs increased by $12.6 million or 90.3% to $26.6 million during the three months ended December 31, 2016, compared to $14 million for the prior year period. The increase in vessel depreciation and amortization was primarily due to the increase in our fleet size as we took delivery of 15 vessels during the year ended December 31, 2016.

During the three months ended December 31, 2016, we incurred losses associated with the disposal of vessels and certain vessel equipment of $14 million primarily related to the sale of the GenMar Spyridon and perspective sale of the GenMar Ulysses. Net interest expense increased by $13.5 million to $18.3 million for the three months ended December 31, 2016 compared to $4.8 million for the prior year period. The increase was primarily attributable to the decrease in capitalized interest of $7.9 million or 70.5% to $3.3 million compared to $11.2 million for the prior year period.

We do not capitalize interest expense associated with funding of our VLCC newbuildings after vessel delivery. Contributing to the increase in to the increase in interest expense net during the three months ended December 31, 2016, was an increase associated with our credit facilities of $3.7 million or 43.4% to $12.4 million compared to 8.6 million for the prior year period due to the increase in outstanding borrowings under our credit facilities and Senior Notes.

Our outstanding borrowings under our credit facilities and Senior Notes were $1.6 billion and $1 billion as of December 31, 2016 and 2015 respectively. In addition, in 2016 we entered into six interest-rate swap transactions that effectively fixed the interest rate on a portion of our outstanding variable rate debt to a range of fixed rates. During the three months ended December 31, 2016 we recorded $1.2 million related to interest rate swaps settlements as net interest expense.

Net income for the three months ended December 31, 2016 was $5.8 million or $0.07 basic and fully diluted earnings per share compared to net income of $45.5 million or $0.55 per basic and fully diluted share for the same period in the prior year. Adjusted net income for the three months ended December 31, 2016 was $20.1 million or $0.24 per basic and fully diluted share compared to an adjusted net income of $47.7 million or [$0.58] per basic and fully diluted share for the same period in the prior year.

Adjusted EBITDA for the three months ended December 31, 2016 decreased by $300,000 to $64.3 million from $64.6 million for the same period in the prior year. slide 9 provides an overview of our fleet's performance in the fourth quarter of 2016 and Navig8 pools Q1 performance to date. The average daily time charter rate across the fleet was $28,190 during the quarter ended December 31, 2016, a decrease of $12,047 from $40,236 per day in the same period a year ago.

The average daily spot TCE rate obtained by the Company's VLCC fleet was $36,282 per day for the three months ended December 31, 2016 compared to $57,637 per day for the same period in the prior year. The average daily spot TCE rate earned by our Suezmax fleet was $21,095 per day for the three months ended December 31, 2016 compared to $36,861 per day for the prior year period. The average daily spot TCE rate earned by our Aframax fleet was $14,028 per day for the three months ended December 31, 2016 compared to $32,227 per day for the same period in the prior year. In each case the spot TCEs include all spot voyages for the Company's vessels including those that were in the Navig8 pools.

Based on information provided by the Navig8 Group as of March 2, 2017, the Navig8 pools in which our vessels operate have achieved the following contracted rates for the first quarter of 2017: 79% of available VLCC days booked at approximately $45,300 per day; 75% of available spot Suezmax days booked at approximately $26,300 per day; and 74% of available Aframax days booked at approximately $17,750 per day.

On slide 10 we briefly review the balance sheet. As of December 31, 2016, our cash balance was $94.7 million compared to $157.5 million as of December 31, 2015. As of December 31, 2016 our net debt which we define as our total long-term debt excluding any discount and deferred financing costs minus cash was $1.487 billion compared to $800 million as of December 31, 2015.

As Peter mentioned earlier in the call, we sold two vessels, the 2003-built VLCC Gener8 Ulysses and the 2000-built Gener8 Spyridon for an aggregate gross proceeds of $44.4 million. Of this amount we used $31.7 million to prepay debt associated with these two vessels. On slide 11 we provide a brief overview of our newbuilding program which is nearly completed. To date we have received delivery of 20 of our ECO VLCC newbuildings. As of March 13th Gener8 Maritime had $48.2 million of payments to be made towards its remaining VLCC newbuilding. Expected borrowings for the newbuilding yet to be delivered is $49.2 million based on valuations received in February from third-party brokers.

Additionally as of March 13 Gener8 Maritime has an estimated consolidated cash balance of $165 million. As we noted in our prior earnings call, Gener8 has obtained commitments for the requisite debt financing to fund our newbuilding program. We share our views on the market outlook in slides 13 through 15. Our discussion reflects market information and analysis from the EIA, the IEA, Clarksons, Baker Hughes, Navig8, Braemar and our internal analysis.

Rates improved in the fourth quarter as seasonal demand ramped up and OPEC boosted up crude oil production ahead of announced production cuts that went into effect in January 1. While rates were at healthy and profitable levels the market was relatively subdued as 2017 newbuilding VLCCs were added to the global fleet during the fourth quarter following the delivery of 30 VLCCs earlier in 2016.

Crude oil production cuts took effect on January 1 of this year with OPEC members in other countries agreeing to reduce production by approximately 1.8 million barrels per day in an effort to rebalance the market and boost crude oil prices. While some market commentators expected this to have a negative effect on the tanker market, the actual impact has been negligible thus far with ton miles lost from disappearing OPEC cargoes being replaced by ton miles from other longer-haul sources.

We believe that trade rates will continue to evolve as the supply-side response to changing crude oil market dynamics. According to the EIA forecasts crude oil demand is expected to grow by an average of 1.5 million barrels per day in 2017 and 2018, and is expected to exceed 100 million barrels per day by the third quarter of 2017. The IEA is a bit more conservative and forecasts annual demand growth of 1.2 million barrels per day for the next several years. This compares to an estimated OPEC surplus production of 1.26 million barrels per day as of the end of 2016 and average OPEC surplus production of 2.3 million barrels per day from 2006 to 2016.

Assuming demand growth remains robust and is not eroded by rising prices, additional non-OPEC supply is expected to be encouraged resulting in further trade flow from the Atlantic Basin to Asia. Much of the supply growth is expected to come from the US shale producers, an expectation that is reinforced by Baker Hughes' weekly rig data, which has consistently shown increases in drilling activity since the middle of 2016. Such increases have accelerated since the start of 2017.

In 2016 47 newbuilding VLCCs including 15 of our own were added to the global VLCC fleet. Newbuilding orders were minimal and 2016 as would-be owners faced financing constraints and global supply constraints. A total of 13 orders were placed in 2016. An additional five orders have been placed thus far this year. These vessels all have 2018 or later delivery dates. The VLCC order book currently stands at 12.6% of the global fleet compared to an average of approximately 25% over the past 10 years and 19.2% as of the end of 2015.

We share the [widely] held view that the size of the VLCC fleet will increase over the next 18 months as 49 VLCCs are scheduled for delivery in 2017, of which 16 have already been delivered and 41 are scheduled for delivery in 2018. The backdrop however remains an aging global fleet. According to Clarksons there are over 135 VLCCs greater than 15 years of age representing nearly 20% of the global fleet. There are 30 VLCCs that are 20 years of age or older.

These older vessels are increasingly difficult to charter particularly if an owner wishes to earn a profit. It is important to remember that the crude oil tankers are assets with a finite lifespan; as they age ownership becomes less economically viable. Vessel owners will have difficult financial decisions to make as their vessels age, particularly as regulations regarding ballast water treatment and sulfur emissions appear on the horizon.

Two VLCCs were scrapped in the fourth quarter and international vessel was scrapped this past January. These were the first VLCCs scrapped since February 2015. A number of additional vessels have been effectively removed from the trading market or are primarily used for shorter regional trade and there are approximately 25 VLCCs currently being used for long-term storage and a slight decrease since the date of our prior earnings report.

We continue to believe that any prolonged near-term period of the market weakness will force scrapping. To the extent that the market enters a trough we would expect it to be short-lived given the age profile of the global fleet. I would now like to turn the presentation back over to Peter for closing remarks.

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Peter Georgiopoulos, Gener8 Maritime Inc - CEO [5]

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Thanks, Leo. Despite our cautious near-term outlook for the tanker market we believe that Gener8 Maritime is well-positioned to capitalize on the changing landscape Leo described. A softer rate environment is expected to lead scrapping of older vessels as we have seen in other sectors. Emerging environmental and regulatory changes will further pressure owners to divest of uneconomical tonnage.

In the meantime we believe that our ECO VLCCs will continue to command a premium in the market and also help us maintain our highly competitive direct operating costs. Our VLCC fleet is one of the youngest and most modern in the industry. On a [fully-delivered] basis more than 83% of our VLCCs and 65% of our total fleet based on deadweight tonnage will be ECO-efficient assuming all newbuilding deliveries and assuming no other changes in our fleet.

We believe this will provide us with further operating benefits. We look forward to continuing to deliver a solid operational and financial performance in the future and updating you on our progress in our next earnings call. With that, operator, would you please open the line for questions?

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Questions and Answers

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Operator [1]

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Yes; thank you. (Operator Instructions) Doug Mavrinac, Jefferies

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Doug Mavrinac, Jefferies - Analyst [2]

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I just had a few follow-ups for you guys. First, touching on something that you guys mentioned in your prepared remarks and that is when we look at the underpinnings of the tanker market, you guys talked about how we had to absorb a lot of deliveries in recent months and that demand was actually more robust than I think most people thought. So my question is, when we look at fixture activity it appears to us that the fixture activity itself hasn't really drop off over the last handful of weeks and that any sort of further improvement in demand either because of trying to satisfy growing end-user demand or whatever, could actually be quite additive to the overall supply/demand balance. So my question is, is that right -- is our read right in that fixture activity actually has remained pretty robust and that once we are probably past the bulk of the deliveries that you could see the market probably snapback fairly quickly?

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Sean Bradley, Gener8 Maritime Inc - Manager and Commercial Director [3]

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Hi, Doug. This is Sean. Yes, I think that's correct. We've seen a higher fixture count in January and February and we are heading that direction for the March dates right now. And on top of that we've seen the fixture count increase in areas that are making up the slack as far as the cutbacks in the Middle East, namely Angola, Nigeria and Brazil and East Coast Mexico. So between demanding very healthy for the [VEs] and the fact that oil is continuing to be pumped and go farther afield, mainly to India and China, we view that as very positive, especially as the deliveries start to slow down middle of this year.

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Doug Mavrinac, Jefferies - Analyst [4]

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Got you. And actually, Sean -- thank you for that -- as a segue to my second question and that is if we envision the delivery profile as a multiyear bell curve -- and I think you just touched on it -- when is it expected that we are going to be past the big surge of deliveries from a cyclical standpoint such that we don't have to worry about huge demand growth forward, A? But then, B, that it translates into better utilization. So is it midyear where these deliveries should start to slow?

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Sean Bradley, Gener8 Maritime Inc - Manager and Commercial Director [5]

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Yes, I think deliveries for this year definitely taper off starting middle of this year and deliveries that are scheduled for the fourth quarter of this year will probably do a similar thing to what they did this past few months and get pushed into the beginning of 2017. So but again 2017 even with those deliveries say -- sorry, 2018 -- even with those 10 to 12 ships slipping back into 2018, it's still a very moderate fleet growth for -- going forward.

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Doug Mavrinac, Jefferies - Analyst [6]

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Right. And just as an add on to that, a lot has been discussed in other sectors, say products, LNG, etc., as far as shipbuilders going out of business, number of newbuilding slots being reduced. Have you guys seen that on the crude tanker side where the shipbuilding capacity itself, whether it's in China, whether it is in Korea, wherever, is actually shrinking over I guess the 2018, 2020 time period?

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Leo Vrondissis, Gener8 Maritime Inc - CFO [7]

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Doug, there has been some rationalization of ship supply and some capacity but not as much with the bigger ships to our VLCCs. I think what you are really seeing that's affecting it is lack of financing in the industry being provided to ship owners. Some of the big banks have cut back their roster by 40%, so that's really what's limiting the orders out there.

I think also another point as an add-on to Sean's comments is you have over 135 VLCCs turning over 15 years of age over the next two, two-and-a-half years and you don't have a big order book as we just commented. So as you have ballast water treatment regulations and additional CapEx and emissions CapEx that's going to come in towards 2020, I think you going to see a large portion of that fleet be scrapped or roll off and that's when you are going to see the market get really tight. What we feel is that is going to start happening towards the fourth quarter of this year and into the next two years.

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Doug Mavrinac, Jefferies - Analyst [8]

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Yes. And just as a reminder for me, the 15-year-old threshold is a big deal especially in the Atlantic, is that right? Because it just makes them less competitive and squeezes them into other out-of-the-way markets?

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Leo Vrondissis, Gener8 Maritime Inc - CFO [9]

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That's right. Most of the big oil majors in order to vet your ship want them 15 years or under and right now I think you are also seeing China which didn't used to have that requirement start to come on with a 15 year and younger requirement. So the spaces that 15 year and older can trade are becoming more limited.

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Doug Mavrinac, Jefferies - Analyst [10]

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Got you. Very helpful. Then just a final question for me before I turn it over. In Peter's comments he mentioned how the ECO ships were earning a significant premium over the non-ECO ships which obviously bodes well for you guys in the near term, especially if we see continued strong crude and bunker fuel prices. But I would also imagine that 2020 is going to be here before you know it. It's just right around the corner.

So my question is, can you guys go through what the non-ECO, or even just the older ships are going to have to do to be complied for 2020 in terms of the capital costs associated with putting on a scrubber, or what are the capital outlays that are going to be required for other guys that should really benefit you guys from a competitive landscape standpoint?

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Sean Bradley, Gener8 Maritime Inc - Manager and Commercial Director [11]

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I think the operators of the older tonnage are going to have to make that decision whether -- depending on what the cost of the scrubber is going to be at that time when 2020 comes, but I would venture to guess that a lot of them will not make that investment with their trading since they're going to be 15 years and older and their markets are very limited. I think the 15 year and younger fleet will look at scrubbers more seriously. Whether or not they do that really depends on the cost and when their first drydock is around 2020. But again if the market decides on average on the tanker side to not install scrubbers our benefit on the ECO tonnage increases because we will be burning a higher cost fuel with everyone else but we will be consuming a significantly less amount of that on a daily basis, which will really increase our multiple on the earnings.

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Doug Mavrinac, Jefferies - Analyst [12]

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Right. Because that impact should be higher cost fuel, right, which for an ECO guy, it's really helping you guys out tremendously.

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Sean Bradley, Gener8 Maritime Inc - Manager and Commercial Director [13]

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Whether a significant portion of the fleet put scrubbers on it or not, whether it be dry bulk, containers or tankers, the higher cost fuel is definitely going to happen one way or the other in 2020.

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Doug Mavrinac, Jefferies - Analyst [14]

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Right. Exactly. That's all I had, guys. Thank you very much for the time.

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Operator [15]

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Spiro Dounis, UBS

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Spiro Dounis, UBS - Analyst [16]

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Just wanted to start off on your cautious near-term view. It sounds like the game plan is to maybe continue to shed some older tonnage and de-lever sounds like the right strategy? But as you get into the end of the year are you satisfied with your current leverage to a recovery in rates and asset values, or would you look to maybe do something else to increase the exposure, either through maybe more vessel acquisitions or charter-ins which I think is something you've done in the past?

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Leo Vrondissis, Gener8 Maritime Inc - CFO [17]

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We actually haven't done charter-ins in the past, although we wouldn't preclude it if it made sense. I think we just underwent a huge newbuilding program where we took delivery of 21 ships and if you look at our EBITDA growth versus our competitors year-over-year it should be much larger and we spent a lot of money doing that. So we don't feel the need to grow.

That being said, we do think there are attractive opportunities out there and if the right opportunity presented itself, we take a good hard look at it. And we are still very constructive VLCCs and for all the reasons we just said on the previous call, we think that's an asset class that should outperform over the next couple years.

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Spiro Dounis, UBS - Analyst [18]

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Got it. And then also I saw on one of your slides the estimated consolidated cash balance. It looks like a pretty decent jump between now and that $165 million. Just wondering if you could help us maybe bridge that. I believe the Ulysses sale is in there but I'm just wondering what else is making that up?

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Leo Vrondissis, Gener8 Maritime Inc - CFO [19]

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That's the beauty of this fleet, it's the leverage to higher rates and you basically had a strong fourth-quarter that's being reflected in that cash balance and a little bit of the Ulysses.

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Spiro Dounis, UBS - Analyst [20]

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Okay. That makes sense. Last one for me. I think I saw that your final newbuilding was delayed maybe if you months. I think it went from March to July. Just wondering is that due to the yard, or did you guys have some ability to maybe stretch that delivery a bit further?

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Leo Vrondissis, Gener8 Maritime Inc - CFO [21]

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That was mostly due to the yard. We do receive liquidated damages for that, so for us right now that's fine being stretched to the summer.

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Spiro Dounis, UBS - Analyst [22]

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Perfect. That's it for me. Thanks, guys.

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Operator [23]

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Chris Wetherbee, Citi

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Alex Hahn, Citi - Analyst [24]

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This is Alex Hahn in for Chris. Wanted to get a sense of rates. Seemed like there was some -- downside was pretty limited but it's down about [15%] from the beginning of the year. -- Rates are down about [15%] from the beginning of the year. Do you see further weakness going forward and can you give us some color on where inventory levels are?

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Peter Georgiopoulos, Gener8 Maritime Inc - CEO [25]

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Well, rates have bottomed out from the beginning of the year and owners and it seems like the market on the Suez and VLCC side have started to dig in their heels and push up a little bit, although this week has started off a little bit slow this far but it is only Monday. But typically when [VE] rates get into the low to mid-20s it tends to find a bottom there because the Suezmaxes get pushed out of the market. Typically that spread is $15,000 to $20,000 a day between VEs and Suezmaxes, and that's what we are seeing now and that's why it steady at this level. Some volatility -- the slowdown in vessel deliveries should push that back up. As far as inventory levels, we are not involved in that market per se directly. We are involved as far as building the inventories but we have heard that inventories had been drawn down somewhat out East and that's more an effect of OPEC than anything else.

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Alex Hahn, Citi - Analyst [26]

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Okay, thanks. And the follow-up on the -- you guys mentioned that the VLCC, the older VLCC vessels, the number is growing. Just wanted to get a sense of how scrapping activity is trending and maybe some color on the new environmental regulations.

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Leo Vrondissis, Gener8 Maritime Inc - CFO [27]

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The older VLCC fleet is growing. Scrapping has not really picked up as of yet but I think you will start to see it as we have more muted rates this year and as the ballast water treatment and [cap] and people need to go in for drydocks and do additional CapEx. So there is going to become a more limited place for those vessels to trade out East and the utilization on those ships are going to go way down, so owners are going to have a real cost-benefit analysis at the next drydock. What was your next question? environmental regulations?

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Alex Hahn, Citi - Analyst [28]

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Yes, some color on that and if there is any new developments.

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Peter Georgiopoulos, Gener8 Maritime Inc - CEO [29]

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No, I mean there hasn't been any new developments. Those ballast waters being installed (inaudible) September this year?

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Unidentified Company Representative [30]

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Yes, September 8.

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Peter Georgiopoulos, Gener8 Maritime Inc - CEO [31]

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September 8; and sulfur emissions goes into effect right now beginning of 2020. But nothing has changed as far as the timeline or anything additional to owners right now.

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Alex Hahn, Citi - Analyst [32]

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Okay. That was helpful. I will turn it over. Thank you.

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Operator [33]

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Fotis Giannakoulis, Morgan Stanley

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Unidentified Participant [34]

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This is Ben stepping in for Fotis. Just a couple quick questions. So in the event of a prolonged weakness in the market, what levers do you have to strengthen your liquidity position? Would you consider raising capital or is your preference towards vessel sales?

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Leo Vrondissis, Gener8 Maritime Inc - CFO [35]

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Our preference right now is towards vessel sales. I think at the discount that we are trading to NAV you can monetize at NAV. I think that's a boost to our stock as well. We do have older vessels that we have in the past said as the new fleet delivers we would look to potentially out of. So I think there's levers there.

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Unidentified Participant [36]

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Sure. And one quick question on the markets. So you mentioned in your prepared remarks that the trade routes will continue to evolve and I think especially during the OPEC production cuts. Where have you seen these routes develop and what do you expect moving forward? And do you see incremental export potential out of the US and if so, when do you expect that to ramp up?

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Peter Georgiopoulos, Gener8 Maritime Inc - CEO [37]

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Yes, I think we expect US exports to increase. I think US exports first two months have averaged around 1 million barrels a day, which is up around 200,000, 300,000 barrels. That's going to places outside of just Canada and Latin America now. We have seen interest from traders on our tonnage for these kind of moves and we expect that to continue, especially if OPEC holds on their production cuts through the end of the year. But we have seen more cars go from, again, the Atlantic Basin going east, picking up the slack.

So more cargo is out of Angola, Nigeria, Brazil. Some out of East Coast Mexico continuing to go not only to India but also to China and that has been reflected in the cargo count on the VEs and Suezmaxes and that's been fairly regular; and also we have seen a fair amount of additional crude go from the Black Sea, Russian origin, Kazakhstan, going east also on Suezmaxes and I think that's part of the recent move up in Suezmax rates over the past week or so.

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Unidentified Participant [38]

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Sure. Thank you so much. That was very helpful.

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Operator [39]

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There are no more questions at the present time, so that does conclude the question-and-answer session as well as today's call. So thank you very much for your participation today and you may now disconnect your lines.