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Scorpio Bulkers Inc (SALT) Q2 2019 Earnings Call Transcript

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Scorpio Bulkers Inc (NYSE: SALT)
Q2 2019 Earnings Call
Jul 22, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the Scorpio Bulkers Inc. Second Quarter 2019 Conference Call. I would now like to turn the call over to Hugh Baker, Chief Financial Officer. Please go ahead, sir.

Hugh Baker -- Chief Financial Officer

Thank you, operator. Welcome to the Scorpio Bulkers second quarter earnings conference call. On the call with me today are Emanuele Lauro, our Chairman and Chief Executive Officer; Robert Bugbee, our President; and Cameron Mackey, our Chief Operating Officer. Earlier today, we issued our second quarter earnings press release, which is available on our website. Also available on our website will be a short presentation with slides. Slides are available on the Investor Relations page of the website under Reports and Presentations.

The information discussed on this call is based on information as of today, July 22nd, 2019 and may contain forward-looking statements that involve risk 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 statements disclosure in the earnings press release that we issued today, as well as Scorpio Bulkers' SEC filings, which are available at www.scorpiobulkers.com and also www.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 Investor Relations page of our website for approximately 14 days. If you have any specific financial modelling questions, you can contact me later and we can discuss these offline.

Now I'd like to introduce Emanuele Lauro.

Emanuele A. Lauro -- Chairman and Chief Executive Officer

Thanks Hugh and good morning or afternoon to all on the call. The second quarter has been a good quarter of progression for the business. It is recognized that there has been turbulence and macroeconomic noise through the quarter. However, these new flow masks [Phonetic] some important positive trends. We observed monthly sequential increases in Chinese steel exports. A strong South American grain season, and increased Indonesian coal exports matched with the rapidly growing Indian coal imports. All of these factors have contributed to building a very strong third quarter rate environment, as we are experiencing it now.

Looking into the second half, there remains potential for some amelioration in the trade wars and the gradual normalization of Brazilian iron ore exports. Initial signs of record Russian and Ukrainian grain harvest are also encouraging. In the quarter, we continue to actively manage the fleet with selective disposals to create value and liquidity. We were able to retire senior unsecured financing and undertook selective sale and leasebacks at attractive rates.

Our are scrubber, retrofit program is ongoing and we now have 37 vessels contracted with additional options available. Earlier in the year, we were pleased to have taken time charter coverage through the some of the most challenging periods in the market. This cover rolled off through the second quarter and the fleet is repositioned to benefit from stronger spot market, which we have anticipated in the second half of this year. We have also looked to time chartering some vessels on the rates which look attractive.

In addition, it is interesting to note that the order book for mid-sized vessels is at the second lowest level since 1996 against the backdrop of a rapidly ageing fleet. As such, looking ahead through the next 12 months, it is pleasing to see how SALT is positioned. We have a modern, efficient and substantially scrubber equipped fleet. We have value creating investment in STNG, Scorpio Tankers, which is a significant source of value for our shareholders. Our balance sheet is robust with sensible financial leverage and $160 million of liquidity in cash and equivalents. Finally, our outlook on earnings trajectory is positive, fully requisition in the strengthening spot market.

With that, my remarks are over and I will hand the call back to Hugh Baker.

Hugh Baker -- Chief Financial Officer

Thank you, Emanuele. Let me say that during the second quarter the Company's net income was $35 million. This included a gain and dividend from the investment in Scorpio Tankers of approximately $53.1 million and also included a writedown of assets held for sale of $5.2 million and a writedown of deferred financing costs of $2.7 million .Total vessel revenues for the second quarter were $49.1 million and EBITDA was $65.2 million. When reflected in time charter equivalent or TCE terms, our Ultramax fleet earned $8,993 per day in the second quarter and our Kamsarmax fleet earned $10,830 per day.

During the third quarter to date, our Ultramaxes have earned $9,603 per day for 42% of our days and our Kamsarmax fleet has earned $12,656, also for 42% of days. Our cash position on July 19th was $160 million. We have no restricted cash and all of this cash is freely available to the Company. We completed -- during the quarter, we completed the sale of SBI Electra and SBI Flamenco for approximately $48 million. We made the decision to sell two Ultramax vessels, which are now classified as held for sale.

During the quarter, we incurred capex of $1.4 million for exhaust gas cleaning systems or scrubbers, and total capital expenditure to date on scrubbers amounts to $8.7 million. Details of our scrubber -- scrubber capex are included in the earnings press release and earnings presentation. I can also announce that time chartered in four Kamsarmax vessels, details of these charges are provided in our earnings press release. We also closed -- we've also closed the previously announced sale and leaseback of 16 vessels for a total of $143.5 million in additional liquidity including scrubber financing. All of the previously announced sale leaseback have now been closed and executed.

In addition, all of the previously announced loans -- loan upsizings relating to our scrubber program have also been approved and are in various stages of execution and all are expected to be closed in the third quarter of 2019. Recently, we issued a notice of redemption for all of our $73.6 million of outstanding senior notes. We [Technical Issues] to be repaid in the first week of August. Finally, I can mentioned that no shares were purchased during the quarter and since the end of the quarter and then the Company's Board of Directors have declared a dividend of $0.02 a share as of July 22, 2019.

With that, I'll open the -- I'll open the call up to questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Greg Lewis with BTIG. Your line is now open.

Gregory Lewis -- BTIG -- Analyst

Yes. Thank you and good morning, everybody.

Hugh Baker -- Chief Financial Officer

Good Morning, Lewis.

Gregory Lewis -- BTIG -- Analyst

Good morning. I guess my first -- I guess my first question is related to, the current market, we've seen a nice uptick here over the last four weeks. Really, what I'm curious is, you have your existing cash position. You have some debt do in the in the Q3 quarter. How should we be thinking about, how you're viewing in terms of a minimum liquidity that you kind of want to have on your balance sheet? And, how we could be thinking about potential uses of cash, if the market that we're in now continues going for the next couple of quarters?

Robert Bugbee -- President and Director

Okay. This is a good question. I mean, well, first of all, the rates are present, I mean, they're all over the Baltic Index and Bloomberg, etc. But the breaks are present and significantly higher than those that we've had traded bookings for the start of the quarter. So Kamsarmax is in excess of 17 and Ultramax is in excess of 12.5. The market's moving upwards. We're also moving into what is normally the stronger period for the dry cargo, which lasts [Indecipherable] at the beginning of the following year, the beginning of January, pre-Chinese New Year. So, yes we're expecting a period of strong -- strong cash -- positive cash flow. At the same time, what we're doing is we are continuing to look at selling a couple of ships where we're seeing pretty strong pricing relative -- especially strong pricing relative to our existing NAV. And on the basis that our stock is, our existing NAV must be somewhere between $9.5 and $10 right now. And it is rising because we've now got strong cash generation and you've got S&P values going upwards.

So we are placing ourselves into position where the balance sheet, first part of the year was securing the balance sheet, securing we could keep our investments on. We felt very strongly as we do now, where the Scoping Tankers is a very good investment and probably the best play there is in IMO 2020 and that hasn't even begun to play out properly yet. The second part of the year or this last part was to add that and now we're pricing. Now we're raising, you know, further liquidity by a couple of sales, which actually means that you have to read between the lines or I'll make it clear if you want that the independent of what ever we're doing and going to do in Scorpio Tankers of keeping Scorpio Tankers right now is what we're doing because we believe in that upside.

We have the ability to stop closing that gap between where the stock is trading and on the asset value. I don't want to be -- we don't want to be tied to an exact number on what we think we need for cash for minimum liquidity. Contractually the lenders, our covenants say we must at all times have a minimum of $35 million of cash. So that's...

Gregory Lewis -- BTIG -- Analyst

Okay, great. And then I guess you kind of touched on STNG, but -- and then just one more from me. Just as we think about, I guess you chartered in these four Kamsarmaxes, looking like they were on spot plus some sort of, plus some sort of spread for the Kamsarmax/Panamax, you fixed one, I guess what I would say is, I mean, what was the thought process in chartering in these vessels at sort of a tie the spot rate? [Speech Overlap] chartering like a fixed rate?

Robert Bugbee -- President and Director

Yes, sure. But in your -- it's relative to the index you're getting and it allows -- depending on what you're doing with paper on the other side, you can turn what is your -- what is the floating position into a fixed rate position? And you can also take a -- take an arbitrage. I think one of the ships is already, since been taken in. We've already been able to fix that out at a spread position, while taking options. But in general, if you look at the entire fleet, the entire fleet is basically a spot fleet. And as I said, inside of this -- inside of how you're doing it, just because the ship itself is taken in on a floating rate, doesn't mean you can't create further length through what you do on a matching paper contract.

Gregory Lewis -- BTIG -- Analyst

Okay, perfect. Thank you very much for the time everybody.

Robert Bugbee -- President and Director

Thank you.

Hugh Baker -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Amit Mehrotra with Deutsche Bank. Your line is now open.

Amit Mehrotra -- Deutsche Bank -- Analyst

Thanks. Good morning. Hi, everybody. I just wanted ask, when we started with the investment in STNG, obviously -- it's obviously been a home run investment, I would say benefit of both SALT and STNG shareholders. But to be fair, we haven't really seen the benefits that's clearly for SALT shareholders at least in tangible terms, even though the stake now represents, call it around 20% of the Company's net asset value. So, I just want to ask you, how do you think about the STNG stake, solely from the standpoint of SALT shareholders? Because we have not -- we have not seen it. Commensurate increase in the STNG stake is not -- has not corresponded to any real material increase in SALT's equity value. Thanks.

Robert Bugbee -- President and Director

Yeah, well, it's hard to work out with a stock that's up more than 50% in the last sort of two months, whether you've actually seen any benefit to this thing, investment or not, I would argue with you there, but, I think to take your analogy and I'm on dodgy ground being English, talking about baseball, but you brought it up, and you said the STNG is a home run. I would say STNG is not quite a home run yet. I would say that, STNG is on base. What we've done is hit a single and we got the first and maybe we're starting -- maybe we're crossing the second right now. But, that market is right on the cusp of beginning the IMO 2020 positions, which STNG is better placed than, I think virtually any other company there is in the world to benefit from that. And I think it's important run that one out and to see, and it's a question of time. I don't think it's a feasible thing to do to -- I think a lot of what you've written about is theory.

You're right that there's a massive discount to NAV. I opened the call with that. I mean, I invested myself more in SALT because I think that during up cycle and you've got a great disconnect with NAV and the market is going positive, etc. But with regard to the idea of selling the STNG and buying SALT, so you have to announce that you've sold STNG for $160 million and $170 million and then try and buy the equivalent amount in SALT. Well, I don't think that one works at the pricing. And I was very clear with the first called that we are able to do things in SALT now. We have moved SALT into a position where we're able to do things in SALT to narrow the NAV cap that is independent of whatever we do with STNG.

Amit Mehrotra -- Deutsche Bank -- Analyst

Yes, but you had I mean, listen, I'm not going to -- I don't want to get into a robust philosophical debate on public call --

Robert Bugbee -- President and Director

No, no, no. We don't need Amit. We don't need to sustain rerun of the conversation we all had in -- when was that? I think we had this conversation three times now. We -- not with you, but generally with analysts...

Amit Mehrotra -- Deutsche Bank -- Analyst

You guys have had an uplift. [Speech Overlap]

Robert Bugbee -- President and Director

It was February, what are you doing? It was a April-May-August [Phonetic] stops at $23, now this stops at $28. I mean, we think the STNG stock is going to move up over the next period.

Amit Mehrotra -- Deutsche Bank -- Analyst

You've never -- Hugh said, you mentioned earlier that you haven't got back one share of SALT -- SALT shares. Wouldn't you, I mean the SALT stock has moved up with the market. You guys have proactively not done anything. So proactively captured the dislocation. And the question, I have is that when you talk about...

Robert Bugbee -- President and Director

Well, I would say we have what we thought as we've been able to hold that, that has moved up 40%, 50% in the quarter in terms of real assets. You've got to understand -- it's theoretical what you're talking about. You cannot go and sell $160 million of STNG and go and buy $160 million of stock in SALT at $6.0, $6.10 or at $4.58. My personal, where I bought stock personally in SALT, I moved the market $0.20 in the two days that I was trying to buy it. And that wasn't anywhere near a $160 million.

Amit Mehrotra -- Deutsche Bank -- Analyst

I'll move on. But clearly I understand that dynamic. But I'll move on. I wanted to ask Hugh about the bookings to date. It's frankly a bit underwhelming given that the recent inflection in the spot rates that you guys mentioned. So how should we just think about, modeling out the 2Q relative to what you disclose? I mean, should we look at the spot rate as a good indicator or maybe are there more higher -- off higher days that we should think about?

Robert Bugbee -- President and Director

Okay. So the bookings to follow after the first bit. So the bookings to date are underwhelming on the basis, the bookings to date largely obviously reflect that where the market was weeks ago. And the market weeks ago, you can see in the second quarter earnings was substantial -- it was lower than what we're doing now. So we're showing in pure math, let's say in the last two or three weeks prior to the market moving up really strongly in the last week though we were probably fixing around 14-ish or 15 on the Kamsars and we were fixing where it was 10 and 11 on the Ultramaxes.

In dry cargo, you almost have this immediate response. So your present bookings that you'll be doing now, would be at those rates that we were indicating, or around those rates that we were indicating earlier. So therefore, if you believe the market was going to continue this quarter at/or around where it's being fixed right now, you would model 17 or so -- 17.5 of the Kamsarmaxes for the balance of the day and you would model, 12.5 for the Ultramaxes for the rest of the day. If you felt it was going to be higher, your model more and if you think it's going to be lower, your model less.

Amit Mehrotra -- Deutsche Bank -- Analyst

Yeah, I know, I get that. The question was, is there a off- hire days that we should get to the scrubber investment plan? Should we think about that as offsetting some of the spot rate strength?

Robert Bugbee -- President and Director

Not really. I think that the -- there's nothing really significant or unusual or important in respect of off-hire.

Amit Mehrotra -- Deutsche Bank -- Analyst

Okay. Thank you very much for answering my questions.

Operator

Thank you. Our next question comes from the line of Randy Giveans from Jefferies. Your line is now open.

Randy Giveans -- Jefferies -- Analyst

How are you doing, gentlemen? How are you?

Hugh Baker -- Chief Financial Officer

Good.

Randy Giveans -- Jefferies -- Analyst

Alright. Two quick questions from me. So chartering in the four Kamsarmaxes, selling to Ultramaxes, is there a new preference, let's call it, for Kamsars? And what is the reason for the sale of the Ultramaxes at this point in the cycle?

Robert Bugbee -- President and Director

I think that the simple reason is we're aware of, perhaps we disagree with the previous question as methodology of doing things, but we agree totally that the Company is trading significantly below its net asset value. So we are securing exterior -- securing sales where we can, that are at the NAV, which will ultimately close that gap, which is pretty huge. I mean, $6 up to $10 is a pretty steep position with the $10 we know is rising every day. So we're cognizant of what the previous questioner is really driving at, that we have to start to create better value in the stock, and we agree with that. So that's that part.

The second part is we believe we're moving to stronger times. So we've felt that for, obviously, a little while now and the hire with stronger times plus the IMO factor, the IMO regulation. So in strong good times, your higher base of ships, your bigger ships are going to be earning slightly more. And obviously, Kamsarmaxes with scrubbers are going to have a better position to IMO returns than Ultramaxes without scrubbers. And we have staged our own scrubber installations waiting for Kamsarmaxes [Technical Issue]. So it takes fine tweaking of the position.

And also, if you looked at our book, we came into the position with more Ultra dead weight than we had Kamsars, so we're just balancing that position, slightly tweaking it, adding more risk because we are expecting, we are going into better times.

Randy Giveans -- Jefferies -- Analyst

Okay. I guess two quick follows on the that, the $10 you're referring to is the projected or your current NAV for SALT?

Robert Bugbee -- President and Director

I think $10 is about where the NAV has been for the last two, three, four weeks.

Randy Giveans -- Jefferies -- Analyst

Okay, that fine.

Robert Bugbee -- President and Director

Right, and then -- it's rising simply because the rates are -- even the rates we've given are significantly cash flow positive, rates that we're fixing at now are very cash flow positive. I mean, to put it in perspective, if you've got a vessel that is only $18,000 with $5,000, $6,000 in cost, that's $12,000 a day times 360 days, is what's that $4.3 million, $4.4 million of cash flow over NAV value of $19 million, $20 million, $21 million. Well, that asset is going to be going up every second today. The S&P market is moving up, which is why my comment is that whatever we or you think the NAV is, last week, it will be higher by tomorrow.

Randy Giveans -- Jefferies -- Analyst

Got it. Okay, just trying to clarify that. Now segueing to the scrubber installations, which you've kind of mentioned on in the 2Q '19 earnings release, the release guided to three Kamsarmaxes being scheduled for 2Q '19. Looking at your revised schedules, it looks like some of those installations and the, I guess, affiliate payments have slipped into 3Q, same with Ultramaxes, some of those have been moved around from 3Q into 4Q. So all that being said, have there been any scrubbers installed yet? And per the table, will 17 still be completed by the end of the year?

Hugh Baker -- Chief Financial Officer

Randy, we found -- we have two vessels currently in the shipyard at the moment having scrubbers installed, but those installations have not completed yet. So the answer is pretty -- pretty soon is the answer. In terms of the wider question, we continue to update our scrubber program and the timings related to that. There's not really a lot of change, but certainly on a quarterly basis in our earnings press release, we put it in the latest -- what it looks like as of the quarter. But essentially speaking, there haven't been any really big changes in our scrubber program for a while.

Randy Giveans -- Jefferies -- Analyst

Okay. So by year end, mid-to-high teens in terms of numbers of scrubbers installed?

Hugh Baker -- Chief Financial Officer

Yes.

Randy Giveans -- Jefferies -- Analyst

All right. That's it for me. I'll pass it on. Thank you all.

Operator

Thank you. Our next question comes from the line of Jonathan Chappell with Evercore. Your line is now open.

Jonathan Chappell -- Evercore ISI -- Analyst

Thank you. Just two strategic follow ups from some of the prior questions, neither of which has to do with your STNG position. So first, I'm just trying to understand, I think you probably agreed to sell -- or the Board agreed to sell the Ultramaxes at a bit of a different time in the market, it was much weaker. The Kamsarmax charter-in decision is probably more recent since the market strengthened, and I understand your reasoning for doing both of them at the time. As we think about going forward, though, should we look at more of an asset-light strategy as you continue to try to arb [Phonetic] the NAV discount through asset sales, while chartering more -- chartering-in more to offset or you kind of good where you are right now with the vessel sales and you like to add more operating leverage going forward?

Robert Bugbee -- President and Director

Well, I think the chance to shop in has passed, I think pretty well now in terms of really putting on -- you might be able to finance a couple of things in the operating thing, but by and large, the market has moved up very strongly and people aren't there to trade their ships away lightly. So, we're basically-basically, you kind of got the hand that you've got in terms of the length. I think that, as Hugh pointed out, even after we pay off the baby bond, the liquidity itself is pretty OK. You will have send the sales and then you have a situation, then you've got positive cash flow. So you can just take it from that position and watch it. You're not going to -- and you'll watch things on opportunity -- literally opportunistically as it works from that point.

Jonathan Chappell -- Evercore ISI -- Analyst

So if there's no more charter in opportunities, but you're still optimistic in the market. Should we assume that the asset sale strategy is probably played out as well, is that kind of what you were just explaining?

Robert Bugbee -- President and Director

No, but maybe it does, maybe it doesn't. Maybe you have a situation where your asset prices are -- we have to watch what happens as to whether or not the -- the whole of the dry cargo stocks, I don't think we're an exception to this rule, our trading certainly below their NAVs. So we have to watch and see what we've given here? How persistent this dislocation is? So, if normally you would expect that if the spot rates are strengthening across the board in dry cargo, that they will react fairly quickly and that they, all the dry cargo stocks would go up, that would be the traditional position once the cash flow comes in. Well, maybe you're in a situation where that takes a little bit more time and so maybe you would be in a position where you would think, OK, fine, would just sell a couple of more ships and we'll see.

Jonathan Chappell -- Evercore ISI -- Analyst

Okay. And then along those same lines, I mean, if we kind of think about staying a year ago, kind of active defense, a lot of sale and leasebacks, and now you've focused a lot of the strategy and the cash flow, that market has turned a little bit on deleveraging. Would SALT, maybe six to nine months or little bit later, the market is starting to improve a little bit, you're just fresh off a bunch of sale and leasebacks. I know you talked about the difference between the current stock price and the NAV, but should we think that the primary use of cash right now would be deleveraging until you're sure that there's a real cycle here and this isn't just a temporary lift?

Robert Bugbee -- President and Director

The -- I think the -- with the vessels that have been sold, I think that the deleveraging path has taken part place, because the deleveraging was again, as you pointed out yourself, the decision to do a lot of this stuff was done much earlier, and so we've had the benefit. We've managed the balance sheet side without the expect -- without the expectation that the market would have strengthened at all, even through the end of May-June period and we'd allowed for the balance sheet to have a market that you could basically repeat the second quarter weakness for a few more quarters. Well, all of a sudden, we're already two months significantly to the positive and if this market carries on for another month, well, we're going to be really positive. So I think it was fair to state that we're very happy with the -- happy is, in fact a stupid word, but we've completed the point at which we have put the balance sheet in the position where we need to deleverage to be comfortable.

Jonathan Chappell -- Evercore ISI -- Analyst

All right. I understand. Thanks a lot, Robert.

Robert Bugbee -- President and Director

Thanks.

Operator

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

Ben Nolan -- Stifel -- Analyst

Thank you. So just a follow up quickly on a few things, as it relates to -- in particular the spot Kamsarmax charters and Robert, I appreciate you sort of effectively said you're buying an option that you can convert into a fixed rate layer and arbitrage, the difference. Is that the entire motivation or is there some element of the idea that perhaps you can, as a function of the pool, maybe do better than the spot market at all? Or is it a market that's not...

Robert Bugbee -- President and Director

Well, that's part of the arbitration. You clearly think that in the structure you're taking it in and you will ultimately be able to fix either through your paper combined with your ability trading in the spot market, trading in the pool in the spot market at better than what the other person is giving it to you at, but you can do both. As I've said, one of the vessels has already been hedged away at a spread, where you've taken it in and you've let it go out. So it's a combination of the both positions. But it's not a -- I don't want to make a big thing about it, something that we're starting. It's let's say more trading. It shows, let's say a more confident aspect of the Company and it's development in the future because it's starting to create those commercial trading platforms rather than what it's been up to now, which is just take -- just really putting ships out on short term charters, etc. So it's really -- I would say the beginnings of seeing a more -- of trying to create more value through the commercial side than just the actual assets and balance sheet side of the Company. But it's an early beginning, this is nothing but -- four ships are not going to make or break the next quarters.

Ben Nolan -- Stifel -- Analyst

Right, I understand. Well, to that end, and I know that you said that the market had kind of passed for being able to charter in ships. Does that include the similar sort of spot link to charter? I mean, I would imagine that people would be...

Robert Bugbee -- President and Director

Perhaps, perhaps not. That part of it seems to historically be OK, that most points to the market, there are people who just simply say, fine, I'll fix my vessel out at a discount to the index or depending on the quality or the specification, a premium to the index.

Ben Nolan -- Stifel -- Analyst

Okay. Perfect. Thanks. And then this is just me trying to sort the numbers on the scrubber thing...

Robert Bugbee -- President and Director

Ben, just to be clear, if you're doing that part, you would be making -- we would be doing that to make the spread of the pools perform right as opposed to edging back to the favor.

Ben Nolan -- Stifel -- Analyst

Okay, right. On the scrubbers, the tables show and in the presentation it shows 52 ships, I believe. But in the tax that says there are 37 firm contracts plus nine options, which is a little bit less than 52. Is there an assumption that you're -- just the entire fleet is going to be outfitted with scrubbers beyond what's contracted or optioned? Or how maybe [Speech Overlap]

Robert Bugbee -- President and Director

I think the best way to prudently model for -- in terms of the balance sheets and the use of cash and required cash would be to assume that all of the options are exercised.

Ben Nolan -- Stifel -- Analyst

Okay.

Robert Bugbee -- President and Director

It is our obligation to tell you the -- to be transparent about how the contract is, and commercially we were fortunate that we were negotiating on block [Phonetic] at a fairly early time and we were fortunate to create opportunities in our contract and then option always had some worth.

Ben Nolan -- Stifel -- Analyst

All right. Okay. Well, that covers up for me. I appreciate it. Thanks.

Robert Bugbee -- President and Director

Thank you.

Operator

Thank you. This concludes today's question and answer session. I would now like to turn the call back to Hugh baker for any further remarks.

Hugh Baker -- Chief Financial Officer

Thank you, Operator. We have no further remarks. Thank you all for joining us today, and we hope to be speaking with you all soon. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.

Duration: 37 minutes

Call participants:

Hugh Baker -- Chief Financial Officer

Emanuele A. Lauro -- Chairman and Chief Executive Officer

Robert Bugbee -- President and Director

Gregory Lewis -- BTIG -- Analyst

Amit Mehrotra -- Deutsche Bank -- Analyst

Randy Giveans -- Jefferies -- Analyst

Jonathan Chappell -- Evercore ISI -- Analyst

Ben Nolan -- Stifel -- Analyst

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