Oct 23, 2017
Executives
Hugh Baker - CFO Emanuele Lauro - Chairman & CEO Robert Bugbee - President Cameron Mackey - COO
Analysts
Gregory Lewis - Credit Suisse Jon Chappell - Evercore Fotis Giannakoulis - Morgan Stanley Amit Mehrotra - Deutsche Bank Magnus Fyhr - Seaport Global Noah Parquette - JPMorgan Herman Hildan - Clarksons Platou
Operator
Hello. And welcome to the Scorpio Bulkers Inc.
Third Quarter 2017 Conference Call. I would now like to turn the call over to Hugh Baker, Chief Financial Officer.
Please go ahead, sir.
Hugh Baker
Thank you, Operator. Thank you for joining us today.
On the call with me are Emanuele Lauro, Chairman and Chief Executive Officer; Robert Bugbee, our President; and Cameron Mackey, our Chief Operating Officer. The information discussed on this call is based on information as of today, October 23, 2017 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 statement disclosure in the earnings press release that we issued today, as well as Scorpio Bulkers' SEC filings, which are available at scorpiobulkers.com.
Call participants are advised that the audio of this conference call is being broadcast live on the web 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.
Now I’d like to introduce Emanuele Lauro.
Emanuele Lauro
Thank you, Hugh, and good morning, everybody. Thanks for joining us today.
Back in July we have announced we were reinstating principal repayments to their original form. We were describing that as significant because it would have allowed us to really have all options in hand including but not limited to the restoration of the ability to pay dividends.
Today three months down the line, the dry cargo market has improved further, the rate environment is strong, and the BDI is at its three-year highs. Demand is growing and supply is in check.
Our company is generating positive cash flows and we're seeing profitability being a realistic short-term goal. Because of this, today we have announced the dividend distribution of $0.02 a share.
We are looking at making this distribution a sustainable one. We have started doing daily steps as part of the shareholders returns are concerned.
This market stability has allowed management to take positive structural measures to improve the status of our company. We believe that the company steps are providing financial flexibility, as well as greater potential for shareholder returns and value creation going forward.
In general, we remain optimistic for the dry cargo market recovery and look forward to further strengthening our position in the market in what is an improving rate environment. With this, I'd like to turn the call back to Hugh.
Hugh Baker
Thank you, Emanuele. I'd like to refer you all to the supplementary presentation we put on our website in respect of today's earnings release which provides - which supplements the information provided by the earnings press release.
The third quarter was a positive and eventful quarter for the company. We made a net loss of $10.7 million, a loss per share of $0.15 but earnings before interest tax and depreciation and amortization EBITDA was $12.4 million and we made positive cash flow from operations.
We initiated a quarterly dividend of $0.02 per share and I can advise you that in terms of cash that it's approximately $1.5 million per quarter, $6 million per year. Our pro forma liquidity position and that is pro forma for the acquisition of the six Ultramax vessels is $90.8 million.
During the quarter we agreed a loan financing to finance up to 60% of the market value of six Ultramax vessels, a loan of $85.5 million and we also performed the Japanese lease financing of one of our vessels SBI Rumba with a 10-year term and an expected fixed interest rate of 4.24% which raises an additional 6 million of liquidity for the company. During the quarter we purchased six Ultramax Bulk Carriers for $142.5 million and we took delivery of the time chartered-in Ultramax vessel.
Our board also authorized us or provided authorization for us to repurchase up to 50 million of stock should we choose to do so. During the third quarter we saw the company benefit from rates which remains strong in Q4 and we’re now benefiting from the further improving rate environment right now.
We’ve now booked 52% of our Kamsarmax days for Q4 at an average of 11,180 per day and 53% of our Ultramax days at approximately $10,495 per day. As Emanuele has explained, the current rates are higher than that and the market is strengthened as the quarter has progressed.
In respect to cash flow and profitability, I'd like to explain the math behind our cash flows. If rates increase by $1000 per day, than our annual cash flows improve - for 52 ships times 365 days per year, times $1,000 a day, gives us an additional $18.98 million per year As a result of our improved cash flows and strong liquidity position, we're comfortable with the cash flow generation and the affordability of our dividend.
With that, I'd like to pass the call to Robert Bugbee.
Robert Bugbee
Again I just like to say two things. First of all, Emanuele comments to the guidance of the present book base for this quarter where he understates the strength of the present market.
The present market is significantly stronger not just in its actual rates for the spot market but also for it's future rates you can fix forward, meaning you can fix the ship 356 months at a much higher rate, and the paper markets are higher than our trial positions and this is a very positive sign if anything since we last spoke in July, we ourselves despite being bullish and confident than have underestimate the strength of the market in each of the months that have gone through that time. The other part is the significance of that movement is that if we take Hugh's figure here that 1,000 a day translates to $0.02 a month in change, and so when you go through your calculations, some of you must have already done that, you can see that we're gaining confidence not just by the macro side of the world with GDPs fairly strong, the diversity of our cargo which means that we're not really we’re not China dependent or we are not dependent upon the one commodity like iron ore it’s really diverse, but we're also seeing that confirmed across the time charter markets and our present market and in our cash flows itself.
And with that, [I've got nothing] more to add, I just like to open it up for questions now.
Operator
[Operator Instructions] Our first question is from Gregory Lewis of Credit Suisse. Your line is open.
Gregory Lewis
I just wanted to touch base, I guess congrats on getting the dividend reinstated, as part of the plan when you made the decision of changing other covenants with the banks or the paybacks. Just as we think about going forward as you think about capital allocation, we recently saw the acquisition of six vessels.
Just as you think about future uses of cash as we hopefully see a recovery in 2018, how should we think about self balancing the decision to position the balance sheet, take on more vessels, return cash to shareholders, just curious on your thoughts around that?
Emanuele Lauro
I think we have a progressive year for dividend and as we've indicated we have a very constructive view of the market going forward over the next months. We also have very constructive view as to assets and markets right now.
We think that the assets are - haven't really yet reflected the underlying strength than there is in the market. We should have had a little plateauing in price structures and certainly as this cash flow becomes more secure and company's themselves are generating cash.
And the tightness of the supply side as we look forward over the next 12, 24 months we would expect that there is room for prices to go up and we have reason amount of liquidity so we can look at that. As to the stock or anything like that, that's a lot dependent upon really on two things, as most of the prices when it's liquidity are going to have theoretical idea of what you do and practice - you may not be able to do but in general we are working an environment what we believe there is a long way to go in drybulk here and we've certainly haven't got - we haven't got half way through the game yet where it was only a year, year and a quarter ago that the entire industry was 50-year low.
We've had great sequential quartering and yes.
Gregory Lewis
And then just as following up on the same, you added vessels as typically Scorpio has been pretty good at trying to opportunistically timely market with in-charters and just if you can provide with any color on how that market is, well how that flying further opportunities, our ship owners that have kind of seen rate flow for the last two, three years are they willing to out-charter the vessels just…
Emanuele Lauro
I think that, look we took one ship in - a few weeks ago that we announced and I think that as I said, we were not bullish enough you know in hindsight we should have be taking more at that point. To this point we’re not actually looking to time charter in vessels that market to those vessels that we were taking in with those sort of high 10 levels, you're now having to pay $14,000, $15,000 a day for five, seven months to.
So the market has now changed to it is better to - on math it is better to acquire vessels right now then it would be for us to charter in vessels.
Operator
Thank you. Our next question is from Jon Chappell of Evercore.
Your line is open.
Jon Chappell
I think the dividend kind of speaks for itself that you guys are dealing from a much better position of strength then even six months ago. But I had a question about the other announcement from Friday that was reiterated this morning on the Japanese financing.
It seems like sale and leaseback transactions were a thing from maybe a year ago or maybe for different segments right now or balance sheets aren't where they need to be right now and they're freeing up liquidity and so little bit more expensive capital. Can you just speak to why you decided to go forward with that transaction and if there's others like them that you see it possible?
Emanuele Lauro
Well I think just - we just ask Hugh what he thinks the cost of capital is.
Hugh Baker
Jon, I mean I think the starting point is that - it was a favorable cost of capital for us I think 10 year money in 4.25% it seems pretty good.
Emanuele Lauro
So when we look at that, 10 year money 4.25% is pretty cheap especially when you can swap that out and especially you could do for us for a lot bunch of things. You could take that money there and you could buy your - stop buying your baby bond back on just the straight debt for debt basis that virtually almost twice the cost of that capital.
So this is a very opportunistic view. It's obviously correct, it’s a strong balance sheet and the strength of the balance sheet enables you to do sale leaseback efficiently in terms of price – actual pricing as you can see.
Jon Chappell
So with the plan then to do something like buyback with baby bond with it or are there other transactions like this is available for it?
Robert Bugbee
We would just do these one at a time and when certainly not going to put our hand either way. I think it's just evidence of the different pricing that when someone is looking at secure, real underlying security, you’re seeing that people the lenders are willing to lower their margin, they’re being willing to give us good advance rates and now you've got a Japanese lease company that’s being willing to also lend us pretty effective levels.
Jon Chappell
That kind of leads to my second question to then, as you do look at other opportunities out there, you mentioned yourself just now Robert that purchases probably make a heck of lot more sense than charters end at the current levels. You are able to get the 60% financing on these last six ships which I think obviously kind of went hand-in-hand with your willingness or ability to return to normalized amortization schedules.
Two parts, one is that 60% kind of how you think about transactions going forward. And two given the 90ish million of liquidity today that's probably maybe a handful of vessels, how do you think about kind of sizing the fleet in the early innings of the cycle?
Robert Bugbee
I think you want - it’s not so much sizing of the fleet it’s maintaining the balance sheet, I mean I think - you will learn from experiences and I think of thinking ourselves, I think the investors and I think the shipping market themselves are changing. And I think that festival - we’re not there as investor ourselves looking to leverage off the balance sheet to the maximum point where we're expecting now shipping companies to carry much less leverage than they did in the past cycles, that they have to be aware that on the rainy days if they have dividends, the dividend needs to be paid.
And it's a - you’re going to be carrying less overall leverage in the company. So you might do this deal at 60%, but you're still going to keep your overall leverage in the company on a LTV basis at considerably lower.
Operator
Our next question is from Fotis Giannakoulis of Morgan Stanley. Your line is open.
Fotis Giannakoulis
Robert I just want to follow up or Hugh I want to follow up on Greg’s question and I try to understand how are you going to think that dividend payment going forward is this going to be some sort of a formula or as the market turns profitable it has already turned profitable actually in the spot market. And when you start showing stronger earnings are your income statement shall we see this dividend be linked in some way?
Robert Bugbee
Well I think the beauty of the situation now as we signaled a couple of things. We've signaled that we think we can afford a dividend, we think that the market is going up and as we alluded to on the last call, we hope we’d be in a position where we’re in that situation and I think that we will spend your exact type of dividend will depend a little bit on the next three, four, five months the next quarter or two and to discuss it and we’d love to hear the opinions of yourself and others analysts and other shareholders over that period.
Fotis Giannakoulis
And can I ask you - regarding the size of your fleet when you started you made an effort to be in the larger sizes of dry bulk vessels. Is the size of the fleet right now the 52 vessels that you have sufficient size, is the size that you envisioned or you’re going to try to expand the fleet with [latter] ships?
Robert Bugbee
I don’t think we're going to - I don't think that any appetite any desire for the company to buy Cape size vessels. I think that we get a lot of the benefits of - the Cape scenario rule of trade.
The Cape size vessel has actually moved up more than any of the other classics. So I think in terms of value in the market related to new building replacement or just what’s happened I think that the Ultramaxes and the Kamsarmaxes which were in have lagged the case.
So, and then as the Cape size market is pretty dependent upon iron ore and China whereas we like the fact that the Ultramaxes and the Kamsarmaxes are so much more diverse, we know we really like the features of that as we see a whole world one of the big thing - is the whole of the world is growing et cetera. We’re able to triangulate more effectively, we are able to put a commercial stamp on that.
So I think you can be very confident that to the extent that we will do acquisitions, we will keep it to the Kamsarmaxes or smaller.
Fotis Giannakoulis
One more from me, if you can comment why we haven't seen vessel values keeping up with charter rates? Usually there was a pretty good correlation but it seems that NAV's and vessel values have been stuck like the last couple of months despite the fact that the chartering market has grown much higher.
Do you expect that this is going to change or is it period that owners are not willing to pay more?
Robert Bugbee
Well I think it would take a little bit time that’s why there is an opportunity right now and that’s because first of all lending is much more constricted. I mean there aren’t really many companies that are in compliance, I think the second one that went into full compliance with the - or normalized wasn’t gold motion and they only did that this week.
If you look at the private market, people are really being taken a beating in dry cargo. I mean they’re literally recovering and the cash flow that they’re taking in has been use to pay bills.
So they haven’t been many equity deals so the market itself hasn't had the capital infusion in there and it is blown through all of its capital reserves to immediately react to pricing. And then I think it's going to as the next month proceed with the continued stronger market, I think that yes more buyers will emerge and prices will be full as upwards.
And then you’re going to have really interesting thing because we've inspected obviously a lot of ships, purchased the six we inspected, we inspected a lot of ships around that. And I can tell you that there are ships that are built 15, 16, 17, 14 that are in a mess that the owners were scrimping and cutting back on their operating costs that it's going to turn pretty quickly from efficient buyers to insufficient vessels that are modern vessels that are available to buyers quality.
Operator
Our next question is from Amit Mehrotra of Deutsche Bank. Your line is open.
Amit Mehrotra
So Robert may be a question on the field, I just want to get your thoughts on at this point in the cycle when the balance sheet is in a good position and you guys are turning cash flow positive and hopefully increasingly so, and asset values are increasing. I wanted to get your sense on what you think the value is for a shipping company and Scorpio bulkers particularly to remain a publicly traded company.
Robert Bugbee
Not sort of - really a discussion I want to have in public considering that inside is own nearly 25% of this company.
Amit Mehrotra
But with respect to sort of where the balance sheet is today, the question is that you could kind of create more value by owning this company privately as opposed to remaining a public entity I mean any thoughts in terms of the strategic value of the company being public whether it's equity – access to equity capital?
Robert Bugbee
If I argue from the public side only, okay then the company is pretty high up there then its peer group. It's got a fairly open, fairly open shareholder risk and less compelling to positions.
It hasn’t got any sort of real overhang in private equity sponsors. Its access to the debt side and to leasing is pretty good as it because of it access to the public markets.
So it creates - has a lot of advantages to shareholders being in the public market.
Amit Mehrotra
And then I just wanted to ask another maybe higher level question as it relates to your comment. You mentioned before I think earlier on the call about [cadences] of learning from your experiences, and I think that's an interesting comment because you could argue that with the experiences of the past I guess could make the company a little bit more cautious as opposed to being a little bit more aggressive at the low point in the cycle.
So I totally get that you want to write a nice balance sheet and I think that's the right strategy. But I guess as your tipping point in terms of the balance sheet being over equitized versus maybe often we leveraged and so, I just want to understand maybe from the perspective of LTV a different point of the cycle - how are you willing to go given your outlook for the market?
Robert Bugbee
I mean that's interesting. We have to philosophical base whether it’s actually possible to have a shipping company to be all record highs.
And the fact the - I think what we’re saying is that I think it’s - we are in a different environment than we were in the last cycle. We have investors, we have shareholders, we have potential future shareholders that are first looking to make sure that they have some consistency or visibility in their investment, some consistency visibility in their dividend.
You have the lending community that is not going to be as free with their lending as it been in other cycles. And so yes, I think that shipping itself is going to - we’re seeing it every single day that the available debt side is going to be much less than it's being in the cycles previously.
Amit Mehrotra
But you guys have I would say disproportionate access to capital obviously given the history and the size of the fleet. And so could you put a little bit more tangible sense around - would you be comfortable in taking the net leverage or the LTV uptick closer to 60% from the kind of mid-40s today just or do you want…?
Robert Bugbee
That these are all hypothetical position they’re all weird things, okay because where do you start part of the reason our LTV is 40% today is not just the cash generated it’s because our values have gone up. So where is the argument stop, there is a value enough does it mean that if the value in Ultramax is $100 million, instead of $24 million, $25 million we should have $60 million of debt on that.
Amit Mehrotra
Right, that’s fair point.
Robert Bugbee
In other words you don't want to chase your leverage upwards consistency is going to be about - there is a point where you just must not take your leverage up on a book - on your book basis and you actually have to take your overall LTV, keep your overall LTV under control. Right now yes, I think there is room to go we’re still below the half way mark in the drybulk recovery and sure I wouldn't mind if you took on a little bit more leverage.
But we expect asset prices to move up at least 30% here, does that means that you should move - keep your leverage up correspondingly probably not if you're going to give yourself as a shareholder, give your lenders and your constituents shareholders the feeling of able to weather any storm.
Amit Mehrotra
One quick one for me for you I guess maybe. You talked about the cash balance as of October 20, I was wondering if you could just offer what the gross debt balance was and what the perspective new buildings or how they would be financed between debt and existing cash.
And then Hugh also you talked about the all-in breakeven I guess being $7,500 a day. Could you just update that number in terms of what it may go up to once the debt amortization kicks in a little bit I think it was 11,000 but I'm not exactly sure?
Thank you.
Hugh Baker
Just talking a little bit about the liquidity, we have $48.8 million of cash. We have $79 million of undrawn debts under our $409 million credit facility which is freely available, and we can draw on that at any time.
And then we have $128.5 million due under the six Ultramax vessels. We have a little bit of $6 million of extra liquidity coming from this Japanese lease financing that we’re doing and we have $85.5 million of debt on the new ships that we haven’t drawn down yet.
So that's where we come up with this pro forma liquidity position of $100 million. Currency borrowed you can work this number out, it is very subject to the length of - the timescale on which you choose to amortize your debt so we look at - we tend not to look at overall breakevens has been that significant.
The OpEx plus interest, plus G&A has a better metric because obviously the debt component can be - I would say adjusted depending on what results you want to get. In terms of net debt company has around $606 million of gross debt and obviously that nothing else that would even come up with some around $520 million.
I can take a look at the numbers and we can discuss them offline if you want.
Operator
Our next question is from Magnus Fyhr of Seaport Global. Your line is open.
Magnus Fyhr
Just one question on kind of chartering strategy going forward. You fixed one vessel spot rates have improved, what's your thoughts how much of this is seasonal and how much can you kind of capitalize on four to six months market being very strong and fixed some ships away?
Emanuele Lauro
Well difficult as we said so we think that the - yes that the market itself is an overall getting stronger and we'll move stronger. So we’re not to bothered maybe we’re happy to work one or two ships, we’re working one ship right now in the mid 14s that is for five months.
Now that’s going to be November, December, January, February and March covering the first quarter that’s obviously a highly profitable number, that’s $4,000, $3000 above the guidance for the first part of this quarter. And you don't have a problem and that's the ship that is in a week chartering position that ship is delivering in the Far East.
But if you're sitting with a ship in the Atlantic or in the Northern Europe right now, your first voyage can be 25 maybe even 30 in a week's time for the frontal voyage. So it's an interesting position.
You don't have to. There is luxury as our balance sheet is perhaps that we don't have to fix out tonnage in defense.
We can fix out tonnage like the one we’re working where look it make sense to fix a ship in the weak position for five months that's okay. So with no real desire to start fixing out ships for long-term here.
Magnus Fyhr
You fixed one out for 24 months, how long do you think it will take until the longer-term market will pick up. You see strength near term but the FFAs are still pretty low for next year, I mean do you see charters getting more take in, in the long term?
Robert Bugbee
Well the charters are more interested we've seen that on the fixtures that have been given out on the physical market as a warning to those people who said first time in dry cargo investing and looking at the FFAs. They should understand that in the whole of the dry cargo rally from 2003 to 2008 the market was virtually in backwardation on the FFAs.
It took a long time for the FFAs to do it because obviously there was - just the paper players themselves just didn’t want to engage on that position. So I wouldn’t take the FFAs as a especially the first and second quarter which people are now just starting to get interested in as a, and remember that seasonal.
So don’t look at these FFAs compare fourth quarter to first quarter, compare first quarter 2018 to first quarter 2017.
Magnus Fyhr
I mean you mentioned a short-term market about 14,000 a day maybe for Kamsarmax maybe little higher. So what you see the one year charter rate there, where could you fix it if you wanted to fix the ship?
Robert Bugbee
I don't know. All I know is that it’s – be around that number right, that’s my reference to weeping not looking to charter out for a year.
We previously been looking to charter in for a year or two that market has moved away now. And they’re not many people out there right now if you think what owners have done.
If you lived through the pain of 2015, 2016 and 2017 year-to-date, you’d be doing everything you could not to be forced into fixing a ship out for one or two years.
Operator
Our next question is from Noah Parquette of JPMorgan. Your line is open.
Noah Parquette
Just had a quick on the market. To come back to the end of summer where the announcement that China was banning the import coal and kind of smaller ports.
I was just curious if you guys had seen anything which your vessels that maybe a change in trade flows or a port congestion anything that you could share?
Robert Bugbee
You’re just seeing generally more activity, I mean I’ll just say it’s very, very diversified so for us whether its India, whether it is steel to the med whether its grain out of the U.S., it doesn't matter whether it’s the softer commodities or the basic commodities. It's just getting stronger and obviously there is more on the margin there is more congestion because the pellet itself across dry cargo is working better.
And you'd expect that congestion to rise over the next year or two as again as demand gets tighter.
Noah Parquette
And just a quick one on the sale leaseback, is that going to be confers as a capital lease or an operating lease or did I miss out?
Robert Bugbee
You missed it, it’s a capitalized lease, it’s definitely debt and you should look at as detrimental on our balance sheet as debt.
Operator
Our next question is from Herman Hildan of Clarksons Platou. Your line is open.
Herman Hildan
I have two questions, the first one is obviously over the last call it months of course you've been spending a lot of time creating flexibility and obviously you have a lot of different types flexibility now with buybacks and releveraging the fleet and ramping up dividends and so on. And I'm just curious - with so many options open it's hard to pin down what direction we think the company will go and obviously you're not been willing to give anymore indications on that but I’m just curious if you had kind of one direction that you want the company to take going forward or if it's kind of just if we try to create optionality and we’ll see how things develop?
Robert Bugbee
I think direction we want to go is that right I mean I think it’s pretty clear.
Emanuele Lauro
And that’s what being happening for the last couple of years whether its measured in EBITDA, whether it’s being measured in share liquidity, whether it’s being measured in price and every now and again it will go down a little bit. The profit straight from bottom left to top right to the direction that we want to take the company to me painfully clear.
Pay the dividend that we have time to, so I'm sorry if we've been a little bit opaque on that.
Herman Hildan
And that's going try to ask the question differently, if you look at your company today what would you not want to change would that be kind of the breakeven that will?
Robert Bugbee
So many things that you would want change, you would not want to change the fleet. The fleet is fantastic, it’s very good quality, it's very new, you would not want to change that asset base.
Many of the shareholders you certainly wouldn't want to change, they are long-term, they’ve been in cyclical before, they have overall targets much higher than where we are. The bank group we put together is really, really fantastic.
They were so supportive of this company in the tough times and they have been immediately recognized the change to put together this recent financing at 60% LTV to break the 3% margin level. Well, I mean what a fantastic group.
Emanuele Lauro
The analyst group is pretty good to Herman, one or two exceptions that we want to changing I guess you don't want me to go into details.
Herman Hildan
You ask me about your shareholders and that includes [indiscernible] but kind of on the serious note Robert - it’s actually quite interesting with this report but show for the first time where black and white you can see that the Japanese sale leaseback it's more competitive than the traditional funding source and that's my second question is do you see although traditional lenders, less relevant than kind of financial planning going forward?
Robert Bugbee
I see the traditional lenders of shipping with those people with strong shipping experience, strong dedication, strong corporate experience in shipping. I think they're even more important to shipping companies going forward than before.
I think that your - I think our financing that we just done in terms of the sale leaseback was made easier by the overall strength of the debt balance sheet. So, I think you're going to find that the - all of those top traditional lenders are cutting back on the people literally going to list the people and they’re just saying right we don't want to do business with these people, we do want to do business with these people.
And it's going to be even more advantageous going forward for those companies that have access and good working relationships with the traditional lenders.
Herman Hildan
Just finally I guess the bonus question, do you feel that the workout situation in drybulk is more or less done then kind of put in behind this or do you still see opportunities where banks are kind of working out opportunities on the dry side which may come as an opportunity for you?
Robert Bugbee
I feel you’re going to ask whether we’re going to get bonuses this year, that’s disappointing. Anyway, I don’t think there is so much distress down the dry cargo market that was before obviously.
But where I think that opportunities will come is that there are a number of fleets out there where the shareholders aren't necessarily in distress but they're certainly wanting avenues of liquidity. Such as the private equity control fleets whether they’re public or private ultimately these guys are going to need to have to open up their ability to achieve liquidity.
Herman Hildan
And how important is it for you that it fits your current fleet to kind of…?
Robert Bugbee
I think it’s really important that's where we started from. We have a great fleet, a fleet that built in us not just where it’s today as opportunity but for tomorrow and many years to come that if we get - I mean we haven’t talked about so many things that are positive here.
But if we start to see this continued bid under oil price, if we see that OPEC is successful in this rationalization and we have a higher general oil pricing structure than we had in the trailing - in the forward 12 months and the trailing 12 months, and then we put self regulations on top, it's going to really matter that your fleet is a new eco-efficiently that's been lost a little bit in the crisis two years ago but it’s coming back every day. Capacity one, I mean that’s why it’s so great that’s why you can distribute cash back to the shareholders or to yourself or reinvest because we got great new fleet by definition your CapEx required to maintain is just so much lower.
Herman Hildan
I think that's very clear Robert thank you very much.
Robert Bugbee
And we don’t have any guillotine over your head there is a balance water treatment system then some of these fleets have, anyway we digress the goal of the company is up.
Operator
Thank you. At this time I see no other questions in queue.
I’ll turn it to Mr. Baker for closing remarks.
Hugh Baker
We have no closing remarks. Thank you very much for participating in the call and we look forward to speaking to you'll soon.
Thank you.
Operator
Ladies and gentlemen, thank you for your participation in today's conference. This concludes your program.
You may now disconnect. Everyone have a great day.