Teekay Tankers Ltd (TNK) Q4 2022 Earnings Call Transcript

Teekay Tankers Ltd (NYSE:TNK) Q4 2022 Earnings Conference Call February 23, 2023 11:00 AM ET

Company Participants

Kevin Mackay - President & CEO

Stewart Andrade - CFO

Conference Call Participants

Jonathan Chappell - Evercore ISI

Omar Nokta - Jefferies

Operator

Welcome to Teekay Tankers Ltd.'s Fourth Quarter 2022 Earnings Results Conference Call. During nan call, each participants will beryllium successful a listen-only mode. Afterwards you will beryllium invited to participate successful a question-and-answer session. [Operator Instructions] As a reminder, this telephone is being recorded.

Now for opening remarks and introductions, I would for illustration to move nan telephone complete to nan company. Please spell ahead.

Unidentified Company Representative

Before we begin, I would for illustration to nonstop each participants to our website astatine www.teekaytankers.com, wherever you will find a transcript of nan 4th fourth and yearly 2022 net presentation. Kevin and Stewart will reappraisal this position during today's convention call.

Please let maine to punctual you that our chat coming contains forward-looking statements. Actual results whitethorn disagree materially from results projected by those forward-looking statements. Additional accusation concerning factors that could origin existent results to materially disagree from those successful nan forward-looking statements is contained successful nan 4th fourth and yearly 2022 net merchandise and net position disposable connected our website.

I will now move nan telephone complete to Kevin Mackay, Teekay Tanker's President and CEO, to begin.

Kevin Mackay

Thank you, Ed, and hello, everyone, and convey you very overmuch for joining america coming for Teekay Tanker's 4th fourth and yearly 2022 net convention call. Joining maine connected nan telephone coming are Stewart Andrade, Teekay Tanker CFO; and Christian Waldegrave, our Director of Research.

Moving to our caller highlights connected Slide 3 of nan presentation. Teekay Tankers generated full adjusted nett income of $147.5 million, aliases $4.33 per share, up importantly from a beardown 3rd quarter adjusted nett income of $57.9 cardinal aliases $1.70 per share. To put this successful context, it is Teekay Tankers' highest ever quarterly adjusted nett income.

We person fixed announcement to workout acquisition options connected 9 vessels presently successful waste leaseback arrangements for a full of $164 million. Related to this, we person besides signed a word expanse to refinance 19 vessels nether a $350 cardinal revolving in installments facility. By taking these actions, we will destruct immoderate of our much costly debt, thereby reducing our already competitory fleet breakevens, and we will amended our expertise to optimize our equilibrium expanse connected an ongoing basis.

We expect to complete nan installation by nan 2nd 4th of 2023. With 51 vessels aliases 96% of our fleet operating successful nan spot market, we person precocious operating leverage that has served america good successful this very beardown market. To exemplify that point, we generated $4.84 of free rate travel per stock successful nan 4th fourth alone. This equates to much than a 50% annualized free rate travel output based connected our closing stock value yesterday.

As a guideline, for each $5,000 summation successful rates supra our $15,000 free rate travel breakeven level, we expect to make astir $0.65 per quarter, aliases $2.60 per twelvemonth of free rate travel per share.

I would besides item that we generated $20 cardinal successful free rate travel during nan 4th from our 4 in-chartered vessels. In nan tanker market, spot rates person been very beardown done nan 4th fourth and first 4th to date, pinch Aframax and Suezmax rates outperforming each different tanker sectors, arsenic nan midsize conception has been nan superior beneficiaries of accrued ton mile request from nan EU prohibition connected Russian crude lipid imports.

Even aft nan imposition of nan value headdress mechanism, Russian crude lipid export volumes person remained strong, pinch exports successful January astatine an eight-month high. Additionally, early indications are that nan accelerated reopening of China should support world lipid request maturation successful 2023, which should guarantee that tanker request remains astatine robust levels.

Finally, nan bid book for caller tankers remained astatine grounds lows and should spot negligible further deliveries done astatine slightest nan 2nd half of 2025 owed to constricted disposable shipyard capacity. The play of very debased fleet maturation complete nan adjacent 2 to 3 years, coupled pinch patient levels of request growth, constituent to a continued beardown tanker marketplace complete nan mean term.

Turning to Slide 4. We look astatine caller developments successful nan spot tanker market. Spot tanker rates importantly improved complete nan wintertime months, pinch nan institution signaling its highest ever rates for a 4th fourth since our IPO successful 2007. This spot was driven by a substance of affirmative request fundamentals and seasonal factors, including longer voyage distances, a unreserved to book cargoes up of nan implementation of nan value headdress and nan EU prohibition connected Russian crude lipid imports, which came into effect connected December 5, an summation successful Chinese crude lipid imports, and weather-related alloy delays successful cardinal load regions.

Aframax and Suezmax rates averaged importantly higher than different tanker plus classes successful Q4, including VLCCs, arsenic shown by nan floor plan connected nan right. This spot has carried into nan first 4th of 2023, and we expect different very beardown 4th for spot rates.

Turning to Slide 5, we supply a summary of our spot rates successful nan first 4th to date. Average first quarter-to-date rates, successful peculiar driven by Aframax size vessels, person improved further from nan very beardown levels of nan 4th fourth based connected astir 69% and 57% of gross days booked, Teekay Tankers' first quarter-to-date, Suezmax and Aframax size alloy bookings person averaged astir $50,600 per time and $67,600 per day, respectively.

For those who regularly participate successful our quarterly calls, you will announcement that we person decided to harvester our Aframax and LR2s into a azygous reported category, which we judge brings nan position much successful statement pinch really we deliberation of and utilize these assets. Importantly, I would item that we person doubled nan size of our in-charter portfolio to 8 ships, having welcomed an further 4 ships betwixt precocious Q4 and early Q1 this year.

Of these, 1 is simply a caller build EcoAframax, which is chartered successful astatine $18,700 per time for 7 years, pinch multi one-year hold options thereafter. These 8 vessels are presently chartered successful for an mean of $24,300 per time pinch a mark-to-market worth of astir $60 million. When we person condemnation connected nan market, these in-charters springiness america nan expertise to quickly and materially summation our operating leverage beyond what we get from our owned fleet, and that move is presently playing out.

Turning to Slide 6, we look astatine changing crude tanker waste and acquisition patterns complete nan past 12 months and really they person benefited mid-sized tankers complete different plus classes. Russian's penetration of crane successful February 2022 has led to a important redrawing of world lipid waste and acquisition routes. Short-haul movements of crude lipid from Russia to Europe declined during nan people of 2022, culminating successful nan full prohibition of Russian seaborne crude oils starts to nan EU from December 5.

Most of nan crude oil, which Russia was antecedently exporting short haul to Europe is now moving agelong haul chiefly to India and China, which has benefited nan mid-size sectors fixed that nan main Russian load ports successful nan Baltic, nan Black Sea and that Cosmino successful nan Far East are each inaccessible to VLCCs. This led to a 39% summation successful midsized tanker tonne-mile request from Russian crude lipid exports during nan year, stretching nan fleet and expanding tanker fleet utilization.

While Teekay Tankers is not participating successful nan activity of Russian cargoes to transportation ships into nan alleged protector fleet, efficaciously removes them from mainstream trades and reduces effective alloy supply. In addition, Europe has been replacing Russian barrels pinch imports from further afield, including nan U.S. Gulf, Latin America, West Africa and nan Middle East. 90% of nan crude lipid was Europe imported during 2022 was connected Aframax and Suezmax tankers, and nan lengthening of voyages resulted successful a 12% summation to midsized tanker tonne-mile demand.

The nett consequence of these changes is that world Aframax request accrued by 12.6% past year, while Suezmax request accrued by 10.7%, acold higher than nan request maturation successful different tanker plus classes. We deliberation that these waste and acquisition shape changes are durable, representing a measurement alteration successful demand, alternatively than a short-term spike, and nan midsized crude tanker waste and acquisition routes will proceed to beryllium stretched successful 2023, which will thief support beardown spot tanker rates successful nan midsized segment.

Turning to Slide 7, we look astatine nan outlook for lipid demand. The IEA expects world lipid request to turn by 2 cardinal barrels per time this year, taking lipid request supra pre-COVID levels for nan first time. Almost half of this maturation is expected to travel from China, pinch request accelerating from nan 2nd 4th onwards, arsenic nan state opens up aft 3 years of strict COVID-19 lockdowns. This will thief offset somewhat weaker request maturation successful nan OECD nations owed to economical headwinds arsenic a consequence of precocious ostentation and rising liking rates. Another cardinal constituent of lipid request maturation successful 2023 will beryllium nan continued resurgence of world aerial travel.

The IEA estimates that pitchy substance request will turn by astir 1.1 cardinal barrels per time this twelvemonth to 7.2 cardinal barrels per day, bringing request backmost to pre-COVID levels. This will supply a boost to crude lipid demand, arsenic refiners look to summation throughput successful bid to support nan marketplace good supplied.

As world request recovers, nan world will request much oil. This will partially beryllium met by higher non-OPEC production, which is projected to turn by 1.8 cardinal barrels per time this year, led by nan United States, Brazil, Norway and Guyana. With nan mostly of each request maturation expected to travel from Asia, this should lead to an summation successful long-haul movements from West to East during nan year, which should beryllium affirmative for crude tanker tonne-mile demand.

The OPEC Plus Group has pledged to support its existent proviso cuts successful spot done nan extremity of nan year. However, by nan 2nd half of nan year, nan projected telephone connected OPEC Plus rises to astir 1 cardinal barrels per day, supra existent accumulation levels, suggesting that an summation successful accumulation could beryllium merited.

Finally, Russia precocious announced that will trim crude lipid accumulation by 0.5 cardinal barrels per time during March. We judge that this trim is apt owed to a simplification successful refinery throughput, lowering refinery merchandise exports, while crude lipid exports are anticipated to stay astatine existent levels.

Turning to Slide 8, we look astatine nan affirmative tanker proviso and request fundamentals complete nan adjacent 2 to 3 years, which we judge constituent toward nan imaginable for sustained tanker marketplace strength. As of February 2023, world tanker bid book, erstwhile measured arsenic a percent of nan existing fleet, has fallen to a grounds debased of little than 4%. This is reflected successful nan tanker transportation schedule, arsenic shown by nan floor plan connected nan left, pinch a historically debased number of tankers scheduled to present complete nan adjacent 2 to 3 years.

The gait of caller alloy ordering remains very low, pinch conscionable 8 cardinal deadweight tons of caller tanker orders placed successful 2022, which was nan lowest since nan mid-1990s. The opening of 2023 has seen a flimsy uptick successful activity, pinch astir 8 to 10 LR2 orders being placed successful caller weeks. However, location is small scope to meaningfully adhd to nan 2025 bid book arsenic shipyards are mostly afloat done nan 2nd half of 2025 owed to nan grounds magnitude of containership and LNG bearer orders placed complete nan past 2 years.

We task that nan world tanker fleet will turn by astir 1.5% this year, pinch virtually nary maturation successful 2024. In comparison, tanker ton mile maturation is group to stay astatine very patient levels complete nan aforesaid clip framework owed to nan projected patient levels of lipid request growth, peculiarly from China, and nan continued stretching of nan midsized tanker fleet owed to changing waste and acquisition patterns. As such, we judge that nan tanker marketplace has imaginable to stay very patient complete nan mean term.

I will now move nan telephone complete to Stewart to screen nan financial slide.

Stewart Andrade

Thanks, Kevin. Turning to Slide 9. We item nan company's precocious operating leverage and what that intends for TNK's capacity to make rate travel and create shareholder worth successful a beardown tanker market. Throughout 2022, our attraction has been connected strengthening our financial position and creating equity worth for TNK shareholders, generating $318 cardinal of free rate travel successful 2022 enabled america to trim our nett indebtedness by 41% to $345 million, bringing our nett indebtedness to headdress down to 24% astatine nan extremity of 2022.

Importantly, this rate travel accrued TNK's equity value, thereby creating worth for our shareholders. We person 51 vessels aliases 96% of our fleet trading successful a very beardown spot marketplace that is supported by coagulated fundamentals, positioning TNK to proceed generating important free rate flow. As tin beryllium seen successful nan chart, our fleet-wide free rate travel breakeven level, including barren docking and different superior expenditures is astir $15,000 per day.

For each $5,000 per time summation successful spot rates supra this level, nan institution is expected to make astir $90 million, aliases $2.60 per stock successful yearly free rate flow. While this is not a projection of early rates, to exemplify this point, if 4th fourth spot rates were to beryllium sustained passim 2023, we would expect to make astir $20 per stock of free rate travel for an annualized free rate travel output of complete 50% based connected our closing stock value yesterday.

It is important to besides see nan domiciled of our in-charter portfolio, which is having a worldly effect connected our net beyond that of our owned fleet. Historically, we person taken advantage of opportunities to summation our vulnerability to promising spot markets by expanding our in-charter portfolio. For example, erstwhile we past importantly accrued our in-charters successful anticipation of a beardown spot marketplace successful 2015, our 11 in-charter tankers generated $44 cardinal of incremental free rate travel successful conscionable 1 year.

There's a akin move playing retired now for our in-chartered vessels generated $20 cardinal of incremental free rate travel successful nan 4th fourth alone, and our existent 8 tanker in-charter portfolio has a mark-to-market worth of astir $60 million.

I will now move nan telephone backmost to Kevin to conclude.

Kevin Mackay

Thanks, Stewart. In summary, nan spot marketplace for midsized tankers has remained exceptionally strong, and nan operation of structural shifts successful nan world crude flows, a grounds debased bid book that is fundamentally capped done nan mean term, and aggregate drivers of request maturation are conditions supportive of a beardown marketplace for immoderate time, moreover successful nan look of imaginable macroeconomic headwinds.

The affirmative ton mile effect related to Europe's prohibition connected Russian crude imports are durable and person accrued disproportionately to midsized tankers, and rates for some Aframax and Suezmaxes person outperformed each different alloy classes successful caller months. In statement pinch our stated priority, our 2022 attraction has been connected equilibrium expanse strength, and nan crisp betterment successful nan spot marketplace successful nan 2nd half of nan twelvemonth enabled america to importantly fortify our equilibrium sheet.

Moving into 2023, our operating leverage puts TNK successful a position to proceed generating a awesome woody of free rate travel successful a beardown tanker market. While continuing to build financial capacity, nan institution will request for early fleet reinvestment, nan further rate procreation allows for a broader scope of options to beryllium considered successful our superior allocation readying for nan year. As pinch each our decisions, we will proceed to beryllium guided by subject and nan extremity of creating semipermanent shareholder value.

With that, operator, we're now disposable to return questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And we'll spell first to Jon Chappell pinch Evercore ISI.

Jonathan Chappell

Thank you. Good greeting aliases bully afternoon. Stewart, I want to commencement pinch nan indebtedness broadside of things. A mates of announcements here, and I conscionable want immoderate clarification, truthful carnivore pinch me. It's a multiparter, but hopefully beautiful simple. These non-sale and leasebacks, is that nan extremity of them? Then nan $350 cardinal that you're hoping to tie successful this caller installation successful nan 2nd quarter, obviously, importantly much than nan $164 million, are you utilizing that to salary your existing non-sale leaseback facilities? And past nan last portion of that is, what's nan savings from nan $350 cardinal that you're drafting down successful nan 2nd 4th to what you would beryllium utilized to salary down pinch those proceeds?

Stewart Andrade

Yeah. Thanks, Jon. Good afternoon. So yeah, location are a fewer moving parts here, truthful fto maine effort and benignant of locomotion done it. So first of all, arsenic you mentioned, we're -- person fixed announcement to workout non sale-leaseback acquisition options. We'll beryllium repurchasing those successful March pinch rate connected hand. Related to that, however, we are putting successful spot a caller $350 cardinal indebtedness facility. That revolver will yet finance 19 vessels.

So successful summation to nan 9 vessels that we've already fixed announcement on, we'll beryllium giving announcement connected different 10 vessels this quarter. Four of those precocious successful nan year, but nan remainder of them by nan extremity of Q2 and joining that sale-leaseback facility. So 14 vessels will beryllium -- pardon me, 15 vessels will beryllium done successful Q2, 4 vessels successful Q4, each of them going into that $350 cardinal facility. At nan extremity of that, we'll only person 8 waste leasebacks remaining.

And successful position of nan savings, it really depends connected nan spot marketplace really overmuch rate we generate. The 2 areas of savings from for making this change, 1 is we're astatine a little costs of borrowing. And nan 2nd 1 is it allows for much businesslike rate guidance by being capable to person a revolver, which we tin benignant of usage dynamically. So overall, we are expecting astir $8 cardinal successful savings connected a tally complaint ground per year, but that really will dangle connected really overmuch rate we generate.

Jonathan Chappell

Okay. No, that helps. I was looking for nan dispersed connected nan existent complaint versus nan caller one, and I figured it would beryllium overmuch little successful this situation successful this equilibrium sheet. Kevin, your past constituent connected superior allocation, things are happening really quickly here. The 4th fourth was amazing, nan first 4th moreover better. If I conscionable look astatine this floor plan you put on, connected Slide 9 and not moreover having to extrapolate beyond, whatever, 40 days from now, that first quarter-to-date mean complaint free rate travel balanced for nan quarter, your nett indebtedness astatine $345 cardinal would beryllium trim by much than half conscionable by March 31.

What's nan timing connected nan imaginable displacement successful this superior allocation? I mean, I cognize this is thing we've asked successful nan past. I cognize it's thing we've been talking astir for years now. The dense lifting connected nan equilibrium expanse is done. You're successful a phenomenal position. Your operating leverage is incredibly strong, but you do benignant of guidelines retired arsenic 1 of nan very fewer tanker companies that haven't started nan superior return machine. And arguably, you're successful nan champion position to do it retired of immoderate of them. So what tin we deliberation astir nan timing and nan magnitude here?

Kevin Mackay

Yeah. That's fair, Jon. It's a bully question. Talk astir 2022 first. As you said, things person moved very quickly, and nan Q4 was a awesome quarter. It's surely amended than our first expectations going into it. So that really allowed america to adjacent disconnected what we've been saying each past year, which was our attraction and our channeling of our rate procreation would spell to paying down indebtedness and strengthening nan equilibrium sheet. So we're really pleased pinch nan measurement we've been capable to adjacent disconnected our 2022 plan.

We now request to look astatine 2023, and we started nan twelvemonth disconnected highly well, moreover amended connected nan Aframaxes successful Q4. So nan indebtedness is coming down very quickly. And we do admit that successful this position, pinch this level of rate procreation and pinch a guardant position that nan marketplace should stay strong, maybe, possibly not astatine these levels, but surely beardown passim nan year, that does spend america optionality different than conscionable looking astatine equilibrium expanse strength.

So arsenic we beryllium down pinch our Board, we will beryllium talking astir 2023 and what we do pinch nan cash. Part of that chat will beryllium astir nan 3rd limb aliases nan 3rd shape that I deliberation Stewart has spoken astir connected erstwhile telephone past twelvemonth astir building that financial capacity to beryllium capable to do immoderate important fleet renewal erstwhile nan opportunity arises. But I deliberation we besides tin talk astir different options. So that is surely thing that we scheme to do.

Jonathan Chappell

Okay. Just retired of curiosity, move connected the, erstwhile is nan adjacent committee meeting? .

Kevin Mackay

Our adjacent committee gathering is successful March.

Jonathan Chappell

Okay. Great. Well, acknowledgment for nan time, Kevin. Thanks, Stewart.

Kevin Mackay

Thank you, Jon.

Operator

We'll spell adjacent to Ken Hoexter pinch Bank of America.

Unidentified Participant

Hey, Stewart. Hey, Keving. Hi. This is Nathan dialing successful for Ken. Just wanted to get a spot much colour connected really nan squad is seeing nan macro situation arsenic good arsenic spot marketplace here. We noticed that location were immoderate simultaneous charter-in, charter-outs complete nan 4th quarter, earning a very decent spread. Would you mind possibly talking a small spot astir nan readiness of these opportunities and what your position is connected for illustration early charter retired opportunities? Thanks.

Kevin Mackay

Yeah. Hi, Nathan. I deliberation we covered a batch of crushed successful our prepared remarks and our position conscionable astir nan macro environment. I deliberation 1 of nan things that is really missed successful articles and wide position connected nan tanker market, there's a position connected nan cleanable space, and there's a fewer connected nan crude space, but it's a batch much nuanced than that. And we're trying to item that wrong nan crude space, nan existent beneficiaries of nan macro developments that we've seen successful 2022 and what we expect to proceed successful 2023 is that nan midsized Aframax and Suezmaxes are nan existent beneficiaries of nan ton mile growth.

And that is why we consciousness that nan durability of those fundamentals are there, and this isn't -- nan spikes that we're seeing aren't seasonal aliases aren't short-term sanctions benignant of related there. They're acold much durable than that, which is what's giving america a spot much assurance arsenic we look forward. In position of our successful and retired charter, it's 1 of those devices successful our toolkit that we person utilized very good successful nan past.

As we summation assurance successful nan market's expertise to make income, we're consenting to spell retired and return positions connected vessels pinch owners that we person bully relationships pinch that are making -- possibly looking for a spot much information arsenic rates move up. And we tin return those vessels and waste and acquisition them wrong our programme and make a very patient margin. Obviously, arsenic nan spot marketplace creeps up, nan clip charter marketplace besides starts to creep up successful tandem. And arsenic we look astatine managing nan consequence reward, if you will, we do look astatine hedging immoderate of nan positions that we return in.

So for example, we took successful a vessel early this twelvemonth astatine astir $30,000 a time and automatically flipped it retired astatine $48,000 a day. So we're locking successful a dispersed complete nan first year, which pays down nan plus and gives america a inexpensive alloy going into nan 2nd twelvemonth pinch an action to widen it for a 3rd year. So that's benignant of really we look astatine really we play nan successful and retired charter successful a marketplace for illustration this, but it's surely thing that we've done successful nan past to bully use. And arsenic Stewart mentioned successful nan finance slide, our mark-to-market connected these charters if nan marketplace stays strong, could adhd different $60 cardinal to our warfare chest.

Unidentified Participant

Got it. That's helpful. And conscionable arsenic a follow-up, location were immoderate little mentions astir nan emergence of an illicit fleet pursuing nan December value headdress connected Russia seaborne exports. Could you possibly talk a small spot astir nan magnitude of that and really it's affecting nan capacity and scrapping from your purview? Thanks.

Kevin Mackay

Sure. The illicit fleet, arsenic you telephone it, generally, I deliberation we thin to telephone it nan protector fleet. It's vessels that are owned by one-off companies successful various parts astir nan world, nan Middle East, China, for example, and they waste and acquisition Russian lipid aliases they transportation Russian lipid from exports retired of Russian ports into chiefly China and India. In position of standard and size, I cognize connected nan Aframaxes, there's astir about 150 Aframaxes that are successful that trade, that nan search services person listed. I deliberation connected nan Suezmaxes, it's astir 70. If I remember, possibly Christian has a much meticulous number, but it's a important size of fleet is servicing that trade.

The bully point is that those ships are being pulled retired of nan regular trades, that companies for illustration Teekay Tankers are consenting to participate in, and that's why you're seeing nan spikes that we're getting than we had successful nan 4th quarter, and we're enjoying now successful nan first 4th arsenic well.

Unidentified Participant

Great. Thanks, Kevin and congrats again connected nan awesome quarter.

Kevin Mackay

Thanks, Nathan.

Operator

We'll spell adjacent to Omar Nokta pinch Jefferies.

Omar Nokta

Thank you. Hi, Kevin. Hi, Stewart. I wanted to conscionable travel up connected Jon's statement of questions. Obviously, things person been overmuch stronger than anticipated, and they're happening very quickly. You are connected gait to get into, I would say, a nett rate position present successful a not-so-distant future, which really does benignant of headdress nan -- aliases astatine least, closes nan book connected your years long, I would say, efforts to trim debt.

And from your comments, it sounds for illustration present successful '23, you're preparing to displacement superior allocation. You're going to beryllium sitting pinch your Board perchance arsenic soon arsenic March, arsenic Jon asked. I guess, possibly you, Kevin, and benignant of arsenic management, americium I reference correctly that your penchant successful position of shifting that superior allocation is towards renewing nan fleet versus paying retired dividends?

Kevin Mackay

No, I wouldn't categorize that astatine all. I deliberation we person to beryllium realistic. Teekay, for illustration immoderate vessel owning company, has assets pinch finite lives. And arsenic we make income, we person to beryllium prudent astir reserving immoderate of our net to put successful renewing our fleet and renewing our business. But we're afloat alert that a superior allocation strategy aliases plan, which we do talk to our Board astir each meeting, tin see different options. And arsenic we proceed to make nan levels of rate travel that we've seen successful nan 4th quarter, and present truthful acold successful nan first quarter, it does springiness america nan options to look astatine different avenues.

And we are afloat alert that we person shareholders that do for illustration superior return, and there's various forms of doing that. So it allows for a very patient open, robust chat pinch nan Board astir what nan champion attack is, but we're not fixed that each of it has to spell successful 1 guidance aliases another. It's mounting everything connected nan table. And arsenic we look astatine nan guardant position of our marketplace and arsenic that marketplace develops immoderate changes, it is looking astatine really we deliberation nan champion to deploy that superior for nan use of shareholders complete nan agelong term.

Omar Nokta

Yeah. Thanks for that, Kevin. That's adjacent and clear. Can we benignant of expect possibly a wide benignant of action scheme coming retired of, say, this March meeting. I don't cognize if we should beryllium -- we're reasoning excessively overmuch of this upcoming Board meeting. But mostly speaking, should we beryllium reasoning present successful nan adjacent mates of months possibly that Teekay Tankers will beryllium announcing a caller scheme of action?

Kevin Mackay

No. I deliberation what you tin expect is that nan guidance will beryllium having, arsenic we do person robust conversations pinch our Board astatine each of our meetings, and don't publication into a March Board gathering coming up. The decisions erstwhile they're made will beryllium -- we'll pass them, arsenic we did past twelvemonth erstwhile we said to nan market. And we were, I think, rather clear that we were channeling our rate procreation towards indebtedness repayment. If that changes, we will pass it erstwhile that determination is made. But I don't want to preempt nan speech aliases nan chat pinch nan Board aliases what determination they and america together planned on.

Omar Nokta

Yes. No, I wholly understand that. Okay. And past possibly conscionable arsenic a benignant of reasoning about, say, fleet renewal because it is important, arsenic you highlight, person you fixed immoderate thought arsenic to really does that fleet renewal look for you going forward? How do you spell astir -- I mean, obviously, nan equilibrium expanse and it's conscionable astir successful tip-top style arsenic it tin be. How do you deliberation astir fleet renewal from here? What's nan avenue of going younger arsenic you deliberation astir that?

Kevin Mackay

I think, arsenic always, it's going to beryllium a operation of different elements, whether it's going into nan secondhand marketplace and doing a bid of transactions aliases whether it's placing newbuild orders or, arsenic we've done successful nan past, wherever we do connected artifact transactions connected a larger scale. It could beryllium each of those. It could beryllium 1 of those. It really comes down to nan opportunities that create complete time. And our expectations for nan returns of immoderate fixed finance opportunity. So we support a very unfastened mind. We're agnostic to really we spell astir it. But it really, astatine nan extremity of nan day, has to supply bully returns and a bully investment, truthful that we tin thrust worth for shareholders.

Omar Nokta

Got it. Yeah. Thanks, Kevin. And 1 last one, and I'll move it over. You did mention successful your opening comments conscionable nan abstracted topic, nan Aframax LR2s are now blended together arsenic you study nan mean rate. And conscionable want to make judge that -- I cognize successful nan past, you've focused a batch of nan LR2s connected nan soiled trade. Is that fundamentally really it is going guardant efficaciously now, nan LRs you person are trading successful nan crude marketplace presently and going forward?

Kevin Mackay

Well, we person 9 owned LR2s. On past calls, I deliberation nan fleet that was waste and acquisition -- aliases nan LR2s that were trading successful nan cleanable market, we've accrued it to three. That has subsequently dropped arsenic nan cleanable LR2 marketplace dropped disconnected and crude stayed high. We converted a mates of ships into nan crude side. So we're down to 1 axenic cleanable LR2 astatine nan moment. I deliberation I've described this before, we really look astatine nan LR2 arsenic a fungible asset, and we waste and acquisition it connected a voyage-by-voyage basis. So location is immoderate of our LR2s that are presently soiled that we're keeping an oculus on. We're perchance cleaning up arsenic nan LR2s commencement to spike again here. But successful position of nan fleet, we don't abstracted nan 2 units out. We waste and acquisition it arsenic 1 fleet, and that's why we've changed nan measurement we study it.

Omar Nokta

Nicely. Okay truthful that quality narration will proceed to exist. Okay. Well, great. Thanks for answering my questions and congrats connected nan grounds quarter, guys. Thank you.

Kevin Mackay

Thanks, Omar. Appreciate it.

Operator

At this time, location are nary further questions. I'll move nan telephone backmost to management.

Kevin Mackay

Thank you for calling in, and we look guardant to speaking to you successful nan future.