Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

John Tavlarios - President and Chief Executive Officer

Peter Georgiopoulos - Chairman and Chief Executive Officer and President

Jeff Pribor - Chief Financial Officer

John Georgiopoulos - Chief Administrative Officer

Peter Bell - Head of Commercial Operations

Brian Kerr - Investor Relations

Analysts

Doug Mavrinac - Jefferies & Company

Jon Chappell - J.P. Morgan

Scott Burk - Oppenheimer

Daniel Burke - Johnson Rice

Stephen Williams - Simmons

Natasha Boyden - Cantor Fitzgerald

Terese Fabian - Sidoti

General Maritime Corporation (GMR) Q3 2008 Earnings Call October 30, 2008 10:00 AM ET

Operator

Good morning everyone, and welcome to the General Maritime Corporation conference call to discuss the company’s 2008 third quarter and nine-month results. Today’s call is being recorded. We will conduct a question-and-answer session after opening remarks, and instructions will follow at that time. A replay of the call will be accessible any time during the next two weeks by dialing 1-888-203-1112 for U.S. callers and 719-457 -0820 for non-U.S. callers. To access the replay, please enter the pass code 9614375.

At this time, I would like to turn the call over to Mr. Brian Kerr; please go ahead, sir

Brian Kerr

Welcome, ladies and gentlemen to the General Maritime Corporation conference call to discuss the company’s 2008 third quarter and nine-month results. I would like to remind everyone that this conference call is now being webcast at the company’s website, www.generalmaritimecorp.com.

There are additional materials related to our earnings announcement including a slide presentation on our website. You should be aware that in today’s conference call, we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements.

For a discussion of factors that could cause results to differ, please see the company’s press release that was issued yesterday and the company’s filings with the Securities and Exchange Commission, including without limitation the company’s Annual Report on Form 10-K for the year ended December 31, 2007 and its subsequent reports on Form 10- Q and Form 8-K.

Now I would like to introduce Mr. John Tavlarios, President and Chief Executive Officer of General Maritime Management, LLC.

John Tavlarios

Welcome to General Maritime’s earnings conference call for the third quarter and first nine months of 2008. With me today are Peter Georgiopoulos, Chairman and Chief Executive Officer and President of General Maritime Corporation; Jeff Pribor, Chief Financial Officer; John Georgiopoulos, Chief Administrative Officer; and Peter Bell, Head of Commercial Operations.

As outlined on slide four of the presentation, I will begin today’s call by discussing the highlights of the quarter, followed by Jeff’s review of our financial results for the three and nine months ended September 30, 2008. Following this, I will provide some remarks on our company outlook and an overview of the industry. We will then be happy to take your questions.

I will begin on slide five. During the third quarter we continued to draw upon our sizeable time charter coverage which enabled the company to post strong results for shareholders and declare its 14 consecutive dividend. Complementing our strong financial performance we entered into an agreement to combine with Arlington Tankers, which we believe will create long-term value for shareholders.

In terms of our financial performance, we recorded net income of $22 million, or basic and diluted earnings per share of $0.76 and $0.74 respectively, excluding our other income of $1.4 million. Other income included a $2.6 million unrealized gain associated with the change in fair value of our freight derivatives and a $1.2 million loss associated with the monthly cash settlements of our freight derivatives.

During the third quarter our significant time charter coverage enabled the company to declare $0.50 per share quarterly dividend, with positions General Maritime to once again meet at fixed annual dividend target rate of $2 per share. Including this most recent dividend General Maritime has declared cumulative quarterly dividends of $26.78 per share since initiating its dividends policy in January of 2005.

Turing to slide six, we provide a chart that details our physical time charter coverage. Currently, the company has 15 vessels and one vessel equivalent under fixed time charters representing 73% time charter coverage, $184 million in contract revenue for 2009. Please note that this table includes a new time charter completed since the second quarter call. In September we chartered the Genmar Progress and Aframax Tanker for one year charter at a rate of $39,000 per day.

In October General Maritime took delivery of the Genmar Electra, the first of two recently acquired Aframax Tankers from company’s associated with Euronav, bringing our current fleet on the water to 22 vessels. We are please by the company’s continue success growing its modern fleet in a disciplined manner and look forward to receiving delivery of final vessel from this acquisition in December of 2008.

Including these two most recent vessels, our fully double-hull fleet is expected to have an average age of approximately nine years, down 23% from 11.7 year, three years ago. As we have in the past, we intend to continue to draw upon our modern fleet as well as our high-caliber crew to meet stringent operations standard and exceed expectations.

Turning to slide seven, I’d now like to provide an overview of our agreement to combine with our Arlington Tankers. On August 6, 2008 we entered into an agreement to combine with Arlington Tankers in a stock transaction. Pursuant to the terms of this propose transaction at the time the proposed transaction is completed, General Maritime’s shareholders will received 1.34 shares of the combined company for each General Maritime share they hold and Arlington shareholders will receive shares in the combined company on a one for one basis.

Following the closing of the proposed transaction which is expected by year’s end and is subject to shareholder approval and other customary closing conditions, General Maritime’s shareholders will own approximately 73% of the combined company. We remain extremely excited about the transaction, which we believe will create a leading tanker company that has the appropriate size, dividend strategy, chartering strategy, balance sheet and vision to best serve shareholders over the long-term.

The combination of Arlington and General Maritime is expected to create a leading publicly traded large market capitalization tanker company including the following key highlights.

A young diverse fleet that operates in the crude and product tanker sectors; a stronger balance sheet to provides a platform for growth; a partial payoff dividend policy that focuses on distributing and attractive fixed dividend target while retaining capital for growth.

A balance chartering strategy that provides $450 million of revenues contracted to 2013 and the management team with a strong reputation for operating shipping companies, which has experienced with consolidation. I would now like to discuss each point more detail. Following the closing of the combination, the combined company will have a young diverse fleet of 31 vessels, with an average age of eight years and presence in both crude and product segments. The fleet is expected to consist of 25 oil tankers, four product tankers as well as tow tankers that can be use for transporting both crude and refined products for leading oil companies.

I’m please to report that on October 20, General Maritime entered into an amended and restated credit agreement reflecting the support of the company’s lenders with respect to the proposed combination with Arlington. The amended and restated credit agreement modifies the company’s existing credit agreement among other things to give effect to the proposed transactions, will be effective only if the proposed transaction is consummated in certain other conditions are met.

The combined company is also expected to have a balance fleet deployment strategy, which would reflect approximately $450 million of revenue contracted through 2013. Regarding the combined company’s dividend policy we intend to establish a target dividend of $2 per share annually, which we believe would be supported by the combined company’s contracted revenue stream that I mentioned a moment ago.

I would like to also highlight that in addition to targeting $2 per share annual dividend we intend to imply a partial payout strategy which we believe would be favorable for both distributing and attractive dividend and capitalizing our future growth opportunities.

Before turning the call over to Jeff, I would like to note that we plan to headquarter the combined company, which will be named General Maritime Corporation in New York City and expect that will be led by Peter Georgiopoulos as Chairman myself as President, Jeff Pribor as CFO and John Georgiopoulos as Executive Vice President, Treasurer and Secretary.

In addition to a strong management team with a proven track record, the combined company is expected to be overseen by an experience and majority independent seven members Board including one current Arlington Tankers Board member.

I would now turn the call over to Jeff.

Jeff Pribor

Thank you John and good morning everyone. Beginning on slide nine, I’d like to review our third quarter financial results. For the third quarter of 2008 excluding $1.1 million of other income we reported net income of $20 million or $0.76 basic and $0.74 diluted earnings per share.

Including other income net income was $23.5 million or $0.81 basic and $0.79 diluted earnings per share compared to September 30, 2007 net income of $10.9 million or $0.36 basic and $0.35 diluted earnings per share. The increase in net income was principally the result of higher TCE and utilization rates realized in the current quarter versus the prior year period. Other income included a $2.6 million unrealized gain associated with changes in fair value of our freight derivatives and a $1.2 million loss associated in monthly cash settlements of our freight derivatives.

To analyze revenue, we look at net voyage revenue per vessel day referred to as time charter equivalent, or TCE. TCE is calculated by dividing net voyage revenue by voyage days for the applicable time period. To find a total number of voyage days used in this computation is in the appendix to our press release.

Our slide 10, we provide a third quarter 2008 spot TCE analysis. Full fleet TCE including time charters increased 24.8% to $37,651 for the quarter ended September 30, 2008, compared to $30,477 for the prior year period. The TCE earned by our spot Aframax Vessels increased a 117.4% to $39,244 for the quarter ended September 30, 2008 from $18,039 for the prior year periods, while our spot Suezmax Vessels increased 234% to $62,903 per day from $18,835 in the prior year period.

The TCE earned by our time charter Aframax Vessels increased by 19.7% to $33,325 for the quarter ended September 30, 2008 from $27,836 for the prior year period. While our time charter Suezmax Vessels remained relatively flat at $37,274 from $37,277 in the prior year period. For the quarter ended September 30, 2008 EBITDA was $44.1 million compared to $31 million for the quarter ended September 30, 2007.

Depreciation and amortization for the quarter ended September 30, was $14.2 million compared to $12.5 million for the quarter ended the year earlier. This increase is primarily attributable to the delivery of one Suezmax Vessel since the prior year period. Our net interest expense decreased to $6.4 million during the quarter ended September 30, 2008 compared to $7.6 million for the prior year period.

I’d now like to discuss our balance sheet, which is detailed on slide 11. As of September 30, 2008, our cash position was $61.8 million and our debt was $611 million. In October, the company drew down a $150 million in a revolving credit facility in preparation for the delivery of the two Aframax Vessels acquired from Euronav and any potential closing cost associated with the successful closing of the Arlington Tankers merger.

As of October 29, 2008, our net debt position was $615.4. Accordingly, we expect to have ample availability under our $900 million credit facility post-delivery of the final Aframax Vessel from Euronav in December 2008. We feel that our capital structure gives us the stability and flexibility we need to continue to find and execute future in consolidation opportunities.

Although I would emphasize that the second Aframax and all potential closing costs associated with Arlington Tankers transactions have already been funded accordingly we have no remaining finance requirement.

Turn to slide 12, we provide a second quarter and third quarter 2008 operating expense analysis. To analyze expenses, we look at the cost per vessel day, which adjusts or changes in the size of our fleet, per vessel day costs are calculated dividing total expense by the aggregate number of calendar days that we owned each vessels during the period.

Daily direct vessel operating expenses increased 14% to $8,122 per vessel day for the quarter ended September 30, 2008 compared to $7,125 with prior year period. The increase was attributable to higher crude cost, insurance and maintenance and repair. General and administrative expenses increased 4% to $10.4 million for the quarter ended September 30, 2008, compared to $9.9 million for the prior period.

Our outlook for the fourth quarter 2008 is detailed on slide 13. We have changed our estimates for daily direct vessel operating expenses to reflect our nine months 2008 realized costs. Our guidance is at approximately $8,000 per day for Aframax vessel made $1,100 per day for our Suezmax vessel. These amounts represented an increase over 2007 actual expenses and are attributable to increase costs, which are experienced industry wide associated primarily with crewing, insurance and lube oils.

We expect our remaining Q4, G&A for 2008 to be $11 million, of the total $11.0 million expense $8.2 million is a cash expense with a balance of $2.8 million being amortization of restricted stock, a non cash expense. We project approximately $14 million in depreciation and amortization for Q4 2008.

We estimate a remaining eight off-hire days for the fourth quarter related to an aframax vessel that entered drydock in the third quarter and completed in the fourth quarter. Total costs associated with our 2008 drydocking program are anticipated to be $6.5 million and costs of $3.5 million of budget for the capital improvement of our fleet.

On slides 14 and 15, we provide a description of our dividend policy and our dividend history. The company has a fixed target dividend of $0.50 per quarter and $2 annually. The company intends to declare these dividends in May, August and November and February of each year.

We are pleased to have enable to declare dividends of $26.78 since we first started paying dividends in May 2005, including a one time special dividend of $15 and our recently declared $0.50 dividend relating to the third quarter of 2008 and payable on December 5, 2008 to shareholders of record as of November 21, 2008.

That concludes my remarks. Now I’d like turn the call back to John Tavlarios.

John Tavlarios

Thank you, Jeff. Complimenting the strong results we provided shareholders during the first nine months and year-to-date 2008, we’re pleased to have entered into another transaction which we believe will create value for shareholders agreement to combine with our Arlington Tankers. Following the closing of the proposed transaction, we believe that the company will remain well positioned to continue to provide customers with a modern fleet that meets the highest operation of standards.

We believe the combined company will also remain in a strong position to create shareholder value as general maritime has since May 2005, returning over $1 billion to shareholders in quarterly and one time dividends and share repurchases. In continuing to meet the critical objective of entering into value creating transactions for shareholders, we tend to continue seeking opportunities in areas in which we have served the company and its shareholders well in the past.

Turning to slide 17, I’ll discuss our approach in more detail. First we intend to continue to actively seek growth opportunities for our shareholders. I’d like to underscore that in further implementing our growth strategy we’ll focus on adhering to a set of stringent, financial criteria and adding modern vessels that increase our earning power.

Complementing our focus on growth, we intend to return value to our shareholders by distributing dividends under our fixed annual $2 dividend target. We also intend to maintain our opportunistic approach in purchasing shares and we believe our stock to be undervalued.

Turning to slide 18, I’d like to briefly discuss current market conditions. 47% of our available spot days booked for the third quarter; our Aframax lead is averaging $33,000 per day. With 44% of our available spot days booked for the third quarter our Suezmax fleet is averaging $54,000 per day. Currently TCE rates for Suezmax Tankers in the West Africa trade are over $60,000 per day. Aframax TCE rates particularly in the Caribbean are about $23,000 per day.

Turning to slide 19 and 20, we give a brief industry outlook. Tanker rates for the third quarter remain robust after an unseasonably strong second quarter. Following hurricanes Gustav and Ivan rates were bolstered by discharge delays as well as increased need for import with the damage to domestic crude production. Also, as with the first half of the year conversions and other removals remains an important source of strength in the third quarter keeping fleet growth relatively flat. These positive factors we’re partially offset by lower U.S. demand for oil due to weaker economic conditions and gasoline prices that were higher until very late in the quarter.

Looking ahead to the remainder of 2008 the IEA has again revise its forecast and now expects that when 2008 is complete, global oil demand will have grown by an average of 440,000 barrels per day or 0.5% compared to its estimate 1% growth at the time of our last earnings conference call.

In reaction to this lower demand environment and to recent decreases in the price of oil, OPEC announced 1.5 million barrels per day cut in production quotas. This cut may begin to effect tanker demand later in the fourth quarter or early in 2009. However, as noted earlier in this call not withstanding these factors, rates in the fourth quarter today have held up well and we would expect that normal pattern of increase seasonal demand to keep a positive rate environment to the remainder of 2008.

Looking ahead to 2009 we note that the IEA and OPEC forecast global oil demand growth of just less than 1% with expected declines in developed markets offset by continued well lower growth and demand in developing markets. In these turbulent economic times, there is certainly a risk to even this modest growth forecast. However, in any event we have always believe that has we approach the 2010 single hull restrictions, the principle change for tankers is on the supply side and we have prepared for it with our time charter strategy.

In particular 2009 is the peak of the delivery cycle with the tanker fleet according to PIRA expected to grow more than 10%. This level of fleet growth suggests a lower rate environment in 2009, regardless of ones view of oil demand. Of course, there are the variables, which can improve the rate outlook that’s happened in 2008. In particular the pace and timing of scrapping by owners of single hull tankers as we approach 2010 deadline could have a significant effect on rates.

More importantly, whatever shapes the curve takes; we believe more strongly than ever that General Maritime is properly positioned its fleet with substantial time charter coverage through 2010. This coverage provides very low breakeven spot employed vessels to cover all operating and financial costs as well as our expected dividend. We believe this will position us to maintain a strong balance sheet, pay down debt and when the appropriate opportunities are available, fund the acquisitions of new assets.

We now like to open the call to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Doug Mavrinac - Jefferies & Company.

Doug Mavrinac - Jefferies & Company

I just have a handful of questions for you all; first, John in your comments you mentioned how despite all the challenges that crew tanker market is facing, your rates are still holding up and even last month you guys signed the time charter contract on the progress at an attractive rate; would you describe the current uncertainty in the secondhand asset market as more of a result of the challenges facing the financial industry versus facing the shipping industry given that there seem to be some support for the crew tanker market even as I mentioned with the current challenges in front of us.

Peter Georgiopoulos

I think it’s definitely a result of the financial market.

Doug Mavrinac - Jefferies & Company

Given that, would you say that well capitalized private owners probably have some opportunities in front of them seeing as how maybe they are not as challenged as the financial markets or maybe some of the private owners that may rely on those troubled financial institutions?

John Tavlarios

I think, when just limited to private owners, I don’t think anyone is not over levered and has their company and grow order will find opportunities.

Doug Mavrinac - Jefferies & Company

Along the same lines and we talked about it in the last call for Genco, General Maritime declared another huge dividend somewhere around 17% on a risk adjusted basis. I think anyone can make the adjustment as pretty attractive. How do you kind weigh your future cash expenditure decisions towards looking at potential opportunities that exist because of the uncertainty in the S&P market, over paying out 17% dividend yield.

Peter Georgiopoulos

I think right now, you’re right. As I said on the Genco call, I’ll repeat myself my self; by paying up these big dividends we sure make a view with the market, we’ll payoff this big dividend hopefully when markets down, we’ll have a lot of charter coverage and a lot of leverage. All those things combined should protect your stock somewhat. If you think about it at Genmar, we got everything right. We sold all our older ships, we are not over levered, we have long term contracts that we paid out all these dividends.

That being said, the market has not treated us fairly and it treated as -- I mean we honestly the valuation looked like probably it was going bankrupt, which is from the truth. That being said, I think we’re going to stick to the dividend and we look at these things all the time. Opportunities, what kind of opportunities are provided to us. Right now we think there is plenty of room for us to pay dividend and that we will continue that as our policy.

Jeff Pribor

And Doug, it’s Jeff. As you see from the Arlington transaction there was an opportunity to do a deal without adding additional leverage and the dividend policy is outlined in press releases and proxy material around that transaction suggest that ample ability to continue to pay that dividend with the fixed charter covers we have.

Operator

Your next question comes from Jon Chappell - J.P. Morgan.

Jon Chappell - J.P. Morgan

The progress charter at 39,000 a day looks like a pretty attractive charter especially given the outlook that John laid out on the last slide. Any plans for chartering activity with the Electra or the other Aframax to be delivered later this year?

Peter Georgiopoulos

If deals like that are out there we’ll charter them.

Jon Chappell - J.P. Morgan

Okay and do you feel that there it’s still a pretty active charter market and the progress was done in September, a lot’s of changes in the last six weeks. Are there still one, two, three charters out there at attractive rates?

John Tavlarios

We continue to monitor that Jon. We think that the progress was a great deal for us and we think the markets dipped a little bit. There are one, two, three year time charters out there, but we think it’s slipped off a bit, but we think that will come back and again we look at things opportunistically and when we find them we’ll execute accordingly.

Jon Chappell - J.P. Morgan

Okay. Jeff you said there are no capital commitments as far as new building requirements are concerned; what about debt pay downs scheduled for next year and even let’s just assume the Arlington transaction goes through, what are the bullet payments on the debt facilities in the next couple of years?

Jeff Pribor

We don’t have debt pay downs required next year, we have the beginning of step down of the total commitment level, but given our level of borrowing and given the fact that we don’t have any additional borrowings, the need to be made for a capital commitments, we won’t be seeing any need to amortize debt at all next year.

Jon Chappell - J.P. Morgan

And Jeff, could you just remind us on the G&A run rate once again assuming opposed to Arlington transaction and Peter steps down as the CEO. What’s the new run rate of the G&A look like in that scenario?

Jeff Pribor

We’ll give a budget as soon as it’s developed, but from materials that we’ve seen before, you look at a just over $30 million cash G&A rate for the company as is and we’ve said that there’ll be synergies to the transaction of $7.5 million and that’s not all from General Maritime, but you can piece together from that that it will be much less than $30 million, probably closer to the $25 million range, but in the future we’ll have more detailed budgets when the budget process is done.

Jon Chappell - J.P. Morgan

And final question; now that the proxy is out have you had more detailed discussion with your shareholders and Arlington shareholders yet, about the willingness to go through this transaction?

Jeff Pribor

Well, as noted in the press release the draft proxy has been out for a little while. The final version will be effective we believe and expect very soon and then mailed and it’s in that time period that we would expect to get closer to the belt which we said will come before year end and probably in December. It’s as we get closer to that, we expect to have more detailed discussions with shareholders.

Operator

Your next question comes from Scott Burk - Oppenheimer.

Scott Burk – Oppenheimer

I just wanted to ask you, have you started to see any impact at all from the OPEC cuts the last couple of weeks ago. Certainly it’s not hit the physical market yet, but maybe as you’re looking at the bookings that you might be seeing for the next month?

Peter Bell

No, we haven’t seen any effect on it yet. Of course the next one is November 1, but we haven’t seen any effect on our ships as of yet. In fact, Suezmax market just in the last days actually picked quite a little bit.

Scott Burk – Oppenheimer

And I wanted to ask you also about the FFA that you have on the Suezmax. You still have that FFA that covers the one spot Suezmax that you had, correct?

Peter Georgiopoulos

That’s right, Scott.

Scott Burk – Oppenheimer

And so then the strength we’re seeing in the Suezmax market really isn’t going to translate into the bottom line for you guys until, like next year something like that?

John Tavlarios

Well yes. We will see in the spot rate; for the one spot that’s what we have, but we’ll get back a part of it with other income or expense for the derivative.

Scott Burk – Oppenheimer

And then I also wanted to ask just kind of more broadly. One other things that’s been pretty dramatic, in addition to the drop to the dropping of the stock price, but scrap prices have come off dramatically from $700 a ton all the way down to some brokers reporting $150 a ton. Do you think that effects the outlook at all for 2010 and single owners being willing to scrap their ships at that point?

Peter Georgiopoulos

No, I think that for those guys the unfortunate thing is it mandated, number one. Number two; there is not much else you can do with it. Number three, a $100 a ton historically was a pretty good price for scrap. Number four, a big reason that you’ve seen this big drop off is because as we said on the Genco call in terms of letters of credit a lot of these scrap buyers can’t get letters of credit to buy the scrap. So, a lot of it is that you are seeing that same phenomenon happen in the scrap market.

So, again I think that’s the market that’s got unrealistically whacked down, but all of that being said, I don’t think these owners of the older single-hull ships will have much for choice.

Scott Burk - Oppenheimer & Company

Okay, and then just kind of looking at, Genmar’s chartering strategy for the next year or two, given the current weakness in the market and how dramatically it’s changed, does it motivate you at all to want to try to cover a little bit more of you’re 2010 spot exposure? Maybe try to lock in some longer-term charters while tankers are still relatively strong?

John Tavlarios

Half of the fleet is covered into 2010. So, we continue to again look opportunistically to keep the balance in the fleet and to determine that from today it’s kind of difficult, but we monitor the market and if we see something that makes sense we will definitely do it.

Operator

(Operator Instructions) Your next question comes from Daniel Burke - Johnson Rice.

Daniel Burke - Johnson Rice

First, a quick question on the progress time charter. I guess I could pore through the broker reports more closely, but is this a new counterparty or are you going to back to one of the existing one that you already have for your existing relationships with?

Peter Georgiopoulos

It’s a customer that we have done quite a bit of business with in the past. It’s a new charter party, but it’s an existing customer that we have.

Daniel Burke - Johnson Rice

Okay and then just one other question backing up and looking at the tanker market. For 2009 it does look like it will be the peak in terms of new deliveries, the order book has deepened this year; 2010 looks pretty heavy as well. I am just wondering what your outlook is for the potential for cancellations in the order book on the tanker side. Obviously you don’t have quite the participation from lot of the Greenfield yards, but do you think that’s going to be something we will be talking about over the next year?

Peter Georgiopoulos

I think a little bit, not to the same extent as you’ll see in the dry cargo market. I think the reason is most of the yards that build tankers are yards that have been around a long time. It’s harder to build a tanker than a Bulk Carrier. I don’t know if any tanker’s being built to Greenfield yards and the tanker market hasn’t experienced the severe downturn than the dry cargo market has experienced, so I mean you may see some, but I don’t think you are going to see a wholesale canceling.

I think what the downturn will do, the way I talked about it on the Genco call, the opportunities that this downturn will create for Genco; I think where it will create opportunities for Genmar is in what where we touched on a little bit earlier, increased scrapping as people, people are going to be probably ride their ships out as long as possible towards 2010. I think you will see people scrap ahead of that in this kind of environment.

Operator

Your next question comes from Natasha Boyden - Cantor Fitzgerald.

Natasha Boyden - Cantor Fitzgerald

What do you know about the letter of credit issue within drydock market causing major problems with the cargos, not being able to trade it. Is this pulled over into the tanking market at all?

Peter Georgiopoulos

No.

Natasha Boyden - Cantor Fitzgerald

Also what’s the S&P market look like at present in the tanker sector right now? Certainly the drydock market over drydock; what is your sector look like? Are you still seeing potential opportunities, in terms of S&P; with the credit market turmoil we are hearing companies are walking away from new build orders?

John Tavlarios

Yes, they are.

Natasha Boyden - Cantor Fitzgerald

Are you seeing tanker resell opportunities and that kind of thing?

John Tavlarios

We’ve started to see some, nothing major yet, but we started to hear rumblings.

Operator

Your next question comes from Stephen Williams - Simmons.

Stephen Williams – Simmons

Just a quick one the scraping; I mean you have mentioned a couple of times that, increased scrapping activities and [Inaudible] support rates over the next year or so? I mean we’ve heard from a number of platform players over the last year or so that one of the reasons the stock market’s held up so well is because of the increasing marginalization of the single hull suite and did you guys agree with that and if that’s the case the did that not reduce the impact of scrapping as a whole going forward?

Peter Georgiopoulos

I’m sorry, but there is something wrong with phone we honestly couldn’t…

Jeff Pribor

I think you were saying recently regardless of scrapping, it’s just the obsolescence of single-hulls benefits the modern double-hull fleet. So it’s not so much a question of exactly how these guys will react to scraping that when you head in 2010 the single-hulls are increasingly less in the factor and that effectively reduces the supply of double-hulls and I think we’d agree that’s true.

Stephen Williams – Simmons

Okay. So on development it means we can’t look at it as though a big chunk of prices come out of the fleet of the single-hulls scrap, because to a large extent they’ve been obsolescent anyway, right?

Jeff Pribor

That’s right. We’re not hanging our hat on scrapping. All we said in our industry section is that the amount of it can make a difference in rigs and that’s certainly true, but we’re prepared for whatever rate environment comes next year in the time charter and that we also believe that as we get to 2010 more and more of the single-hull whether it’s scraped or just unavailable or undesirable are going to be out of the market.

Operator

Your final comes from Terese Fabian - Sidoti.

Terese Fabian - Sidoti

I have the question on the daily vessel expenses. They seem to be up a notch; are they going to be staying higher, do you think and why?

John Tavlarios

Well, I mean the only real pressure that we have and we think might have some upward pressure is just crewing cost. I mean that’s industry-wide and that’s something that clearly we don’t have any control over, but the indicators are that as an industry in general it has moved up and it might continue to do so.

Terese Fabian - Sidoti

Are the costs similar for the older vessels you have as well as some more of the newer ones, because you have some early 90s vessels?

John Tavlarios

Yes, I mean in general the crewing cost is the same. I mean you might have some sections in older vessels where maintenance repair might be a little higher, but overall as a fleet, when you’re looking at categories on a direct vessel operating expenses that is upward pressure, is the growing cost.

Terese Fabian – Sidoti

And I have a question on the timing of the delivery of the second Aframax, I’m sorry if I miss that; sometimes in the fourth quarter, beginning end?

John Tavlarios

I think probably the beginning of December.

Operator

And that does conclude our question-and-answer session and our conference for today. We do appreciate your participation. Have a pleasant day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: General Maritime Corporation Q3 2008 Earnings Call Transcript
This Transcript
All Transcripts