Operator: We will take our next question from Ken Hoexter with Bank of America.
Ken Hoexter: Good morning. Kevin and Stewart. It’s amazing that this discussion so far in terms of finally getting rid of all that that debt and you’re going to be debt free in a few weeks. It’s just such an exciting turn. I want to talk about the market though. We haven’t talked much about the market. It seemed like rates right now are about $60,000 a day or kind of trended, I guess, even in the back half of last quarter for both Afra, Suez and you’re kind of averaging 50,000. I think the stock move this morning is kind of showing a little bit of that disappointment in where rates are in the first quarter to date and then even where you averaged in the fourth quarter. Maybe run through, was that maybe some more moves of clean versus dirty? I don’t know [Audio Gap] for the market through the quarter, if that makes sense.
Kevin Mackay: Yes, I can’t speak to the TNK share price movement today or but in terms of the market, I think I would characterize it as being a slightly less robust fourth quarter than what we had the year prior, but still a historical level. TNK’s performance in the fourth quarter was hampered slightly by some of our positioning at the end of Q3 with our Suezmax fleet, where we bunch up some ships and ended up having to take rates that were significantly lower at the back end of the third quarter than what we’ve seen since then. And that impacted our results for the fourth quarter. But as you can see from our first quarter to date numbers, averaging $50,000 across both segments, they’re extremely healthy numbers. They’re back up to close to 2022 early 2023 levels.
And I think that is a function of the fact that the market is strong, demand is strong and ton-mile is being expanded by all of those issues that I highlighted in the presentation. So, I think our view is the market should stay strong. There’s obviously going to be volatility. You mentioned $60,000 a day. The LR2s have been at that level, but they’re slowly coming off. The Aframaxes in the U.S. Gulf have been $80,000 a day at points during the first quarter and have come off since then. Other areas, the Far East is still holding fairly strong. So, I think we’re going to see while the fundamentals are strong, you’re still going to see volatility. So, capturing that and making sure that our fleet deployment is in the right areas at the right time to capture that volatility is going to be important to maintain the kind of returns that we had last year.
And I’m confident that looking at what we’ve been doing thus far in the first quarter, we should continue to perform well quarter-over-quarter. And I don’t really focus on an individual quarter because as I said, a lot depends on where the fleet is ends up being positioned based on the voyages that we fix. But over a series of quarters, I’d expect us to be robust in terms of our performance.
Ken Hoexter: Yes. I mean, it’s a great run through, Kevin. And I’m not arguing the robust. It certainly is robust. I mean, that’s obviously what’s generating the cash flow. I’m just arguing or trying to understand why such a consistent difference or underperformance relative to kind of Clarkson averages, which would be kind of the average of all the lanes. And I think I got it now from the end of third quarter that impacted fourth quarter. But was there more of that as you entered the first quarter? Or are you seeing then the next level of bookings improve from where you were? Just trying to understand if there’s going to be an acceleration or you mentioned a couple of pullbacks versus other regions that are really strong. So, is that just a more a factor of where your vessels are?
Kevin Mackay: I think it’s a factor of a broker’s assessment of the market looks purely at a singular voyage. And when you’re trading a fleet of 50 ships, some ships sit in demurrage, some ships are held up waiting to go through canals. A lot of operational factors come in that impacts your final returns. There’s also the timing. It’s not a straight average that you’re getting that a broker calculates based on daily rates. It’s fixing a certain amount of your fleet at a certain point in time in that quarter and that has an impact. Sometimes as I’ve said in the back end of third quarter, not a very good impact. Other times, the impact is really positive. So, I wouldn’t look at broker assessments and then judge every ship owner’s performance necessarily against that on an individual quarter.
Ken Hoexter: And then I guess two quick Stewart questions. One, can you talk about the new breakeven level as you get past this final debt paydown, maybe just how we should think about that? And then secondly, you mentioned it’s not the right time to buy yet. You want to keep looking at the market. Do you go back to the special dividend policy or do you enhance the buyback? Do you have like a favorite move in the interim if you’re starting to build the cash that you were just talking previously about?
Stewart Andrade: Yeah. Thanks, Ken. In terms of the breakeven level, so once we repurchase these final vessels, expect the breakeven level to be between $15,500 and $16,000 a day, depending on a few factors, but that’s about where it is. So above that level, we would generate free cash flow, positive free cash flow. And just to be clear, that’s an all in number includes CapEx, maintenance CapEx and everything else. So that’s a fully baked number. In terms of capital allocation, when we announced the capital allocation policy three quarters ago, we did characterize the special dividends as something that we would use periodically to return more capital to shareholders. We certainly haven’t changed that. So, it’s not really a matter of going back to it.
