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

Executives

Brian Kerr – Investor Relations

John Tavlarios – President and Chief Executive Officer

Jeffrey Pribor – Chief Financial Officer

Peter Georgiopoulos – Chairman and Chief Executive Officer

Analysts

Jonathan Chappell – JP Morgan

Douglas Mavrinac – Jefferies & Company

Natasha Boyden – Cantor Fitzgeral

Scott Burk – Oppenheimer

Daniel Burke – Clarkson Johnson Rice & Co

Charles Rupinski – Maxim Group

Robert MacKenzie – FBR Capital Markets

General Maritime Corporation. (GMR) Q2 2009 Earnings Call July 30, 2009 10:00 AM ET

Operator

Good morning everyone and welcome to the General Maritime Corporation Conference Call to discuss the Company’s 2009 Second Quarter And Six Months Results. As a remainder today's call is being recorded. We will conduct a question-and-answer session after the opening remarks, and then 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 US callers and 1-719-457-0820 for non-US callers. To access the replay, please enter the passcode 8944754.

At this time, I would like to turn the conference 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 2009 second quarter and six months 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 web site.

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, 2008, and in subsequent reports on Form 10-Q and Form 8-K

All share and per share amounts discussed in this conference call, unless otherwise noted, have been adjusted to reflect the exchange of 1.34 shares of our common stock for each share of common stock held by shareholders of General Maritime subsidiary, our predecessor company, in connection with the Arlington combination.

Now I’d like to introduce Mr. John Tavlarios, President of General Maritime Corporation.

John Tavlarios

Good morning. Welcome to General Maritime’s earning conference call for the second quarter and six months of 2009. With me today are Peter Georgiopoulos Chairman; Jeff Pribor, our Chief Financial Officer; John Georgiopoulos, Executive Vice President and Peter Bell, Head of Commercial Operations.

As outlined on slide 3 of the presentation, I’ll begin today’s call by discussing the highlights of the quarter and year-to-date followed by Jeff’s review of our financial results for the three and six months ended June 30, 2009.

Following this, I’ll provide some remarks on our company outlook and an overview of the industry. We’ll then be happy to take your questions.

I’ll begin on slide 4. General Maritime’s past success expanding and extending its contracted revenue streams continued to provide benefits to shareholders during the second quarter. Specifically, the sizeable time charter coverage that General Maritime maintained during the quarter enabled the Company to achieve a level of stability in its results as tanker rates began to weaken. In terms of our financial performance, we’ve recorded net income of $7.3 million or $0.13 basic and diluted earnings per share for the second quarter.

Well Jeff will discuss our financial results and more detail, later on the call. I’d like to note that these results include realized and unrealized gains and losses on trade bunker and currency derivatives.

Excluding 400,000 of these items, we’ve recorded adjusted net income of $7.7 million or $0.14 basic and diluted earnings per share for the three months ending June 30 2009. for the six months ended June 30 2009 we record net income of $26.2 million or $0.48 basic, $0.47 diluted earnings per share.

For the second quarter, we declared a $0.50 per share dividend. Including the second quarter 2009 divided, General Maritime has now declared cumulative quarterly and special dividends of $21.49 per share to equates to more than $1 billion in dividends distributed to shareholders since January 2005.

Commencing with the third quarter 2009, we intend to distribute quarterly dividends with the target amount of 12.5 cents per share. On slide 5, we detailed our new dividend policies.

The adoption of our new dividend target is the result of our Board's voluntary reassessment of our dividend policy based on current market conditions. The $0.50 per share annual fixed dividend target is intended to create a visible and consistent dividend stream supported by the company’s contracted revenue stream, which we believe is prudent during the time of uncertain economic growth.

Importantly in the voluntary adoption of our new adoption of our new dividend target positions General Maritime to continue it’s traditional distributing cash to shareholders during in challenging market environment while further positioning the company for future growth and industry leadership.

By implementing a more conservative pay out ratio, we believe we have strengthen our financial flexibility to answer into future value creating transactions and take advantage of strategic growth opportunities a top priority for our company.

On slide 6, we highlight our current contract coverage. The company has 21 versus under fixed time charter contracts representing 68% coverage and approximately $240 million in contracted revenue for 2009.

Turning to slide 7, we included charter details our physical time charter coverage. Consistent with our goal to maximize cash flow, General Maritime has over $400 million in contracted revenue through 2013, including the approximately $240 million for the current year, that I mentioned a moment ago.

Importantly all our contracts are with leading oil and transportation companies. Going forward we intend to remain diligent in implement our flexibility fleet deployment strategy and operate a portion of our fleet on contracts with high quality counterparties. We believe this focus positions the Company to provide shareholders with a degree and earnings visibility during the time on the fleet market remains challenging. As well as deserve the ability of benefit from an improving rate environment in the future.

I’d now like to turn the call over to Jeff Pribor.

Jeffrey Pribor

Thank you John and good morning everyone. Beginning on slide 9, I’d like to review our Q2 financial results. For the second quarter 2009, excluding other the company recorded net income of $7.7 million or $0.14 basic and $0.14 diluted earnings per share for the three months ended June 30 2009 compared to $20 million or $0.52 basic and $0.50 diluted earnings per share for the three months ended June 30 2008.

The decrease in net income excluding other expense was principally the result of lower TCE realized in the current quarter versus the prior year period. As well as lower utilization. Other expense, which includes realized and unrealized gains and losses on freight, bunker and currency derivatives was $0.4 million for the quarter of June 30 2009 compared to $15 million in the prior year period. Net income was $7.3 million or $0.13 basic and $0.13 diluted earnings per share for the three months ended June 30 2009 compared to net income of $5 million or $0.13 basic and $0.12 diluted earnings per share for the prior year period. The increase in net income was principally the result of reduction in other expense to $0.4 million for the quarter ended June 30 2009, from $15 million for the prior year period.

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 earned by our Suezmax vessels decreased the applicable time period and you will find the total number of voyage days used in this competition in the appendix next to our press release. On slide 10 we provided second quarter 2009 analysis. On slide 10 we provided second quarter 2009 TCE analysis.

Full Fleet TCE, including time charters, fell to $27649 for the quarter ended June 30, 2009 compared to $37384 for the prior year period. The TCE earned by our Suezmax vessels decreased 4.1% to $35876 from $37416 in the prior year period. And our Aframax vessels decreased by 44.5% to $20731 for the quarter ended June 30, 2009 versus $37347 for the prior year period.

The company’s total average daily spot rate decreased 80.7% to $8137 compared to $41633 in the prior year period. For the quarter ended June 30th 2009. EBITDA was $37 million compared to $25.4 for the quarter ended June 30, 2008. Depreciation and amortization for the quarter ended June 30, 2009 was $21.9 million this compares to $13.9 million for the quarter ended same quarter in 2008.

This increase is primarily attributable to delivery of two Aframax vessels and the Arlington fleet of vessels since the prior year period. Our net interest expense increased to $7.8 million during the quarter ended June 30, 2009 compared to a net interest expense of $6.6 million for the prior year period. The increase in net interest expense is primarily due to our increased debt position from the Arlington transaction which is offset by lower interest rate environment would now like to discuss our balance sheet which is detailed on slide 11. As of June 30, 2009 our cash position was $48.6 million and our debt was $940.5 million.

Turning to now to slide 12, we provide a second quarter 2009 operating expense analysis. To annualized expenses we look at the cost per vessel day which is just for changes in the size of our fleet, per vessel a day cost are calculated by dividing total expense by the aggregate number of calendar days that we owned each vessel during the period. Daily direct vessel operating expense is increased by 1.4% to $8359 per vessel a day for the quarter ended June 30, 2009 compared to $8240 for the prior year period.

The increase was attributable to higher crew costs, insurance, as well as higher costs for maintenance and repair. General and administrative expenses decreased by $3 million to $9.7 million for the quarter ended June 30, 2009 compared to the prior year period. The primary reasons for the decrease were reduction in personnel cost in the New York office and elimination of cost associated with operating our corporate aircraft.

Our outlook for 2009 is detailed on slide 13; we’ve not changed our estimates for daily direct vessel operating expenses. Our guidance still remains at approximately $8150 per day for the Aframax vessels and $8200 per day for our Suezmax vessels these amounts represent an increase over 2008 actual expenses and are attributable to increase costs experienced industry wide associated crewing, insurance and maintenance and repair.

We expect our remaining six months of G&A for 2009 to be $19 flat of this total $19 million G&A expense $14 million of cash expense the balance of $5 million being amortization of restricted stock which is of course net non-cash expense, we project approximately $44.5 million in depreciation and amortization the remaining six months of 2009. Turning to drydocking for the remaining six months we have a total of three drydocks remaining two Suezmax vessels and one Aframax vessels.

These drydocks have approximately 190 associated all five days with approximately 100 days expected to be in the third quarter and the remaining 90 days expected to be in the fourth quarter of 2009. Total costs for the year 2009 drydocks and program are anticipated to be $21.5 million and cost of $6.5 budgeted capital improvement of our fleet. On slide 14 we provided a description of our dividend history as John mentioned previously in the call. The company has a new dividend policy with an annual target of $0.50 or $12.5 quarterly. The company intends to declare these dividends in April, July, November and February of each year.

We are pleased to have been able to declare dividends of $21.49 since we first started paying dividends in May of 2005. Including the one time special dividend of $11.19 and our recently declared 50% dividend relating to Q2,which is payable on September 4,2009 to shareholders of record as of August 21, 2009. I would like to conclude my remarks now by going through an estimated 2009 break even summary on page 15, which summarizes, which demonstrates General Maritime financial position.

With our substantial time charter coverage of approximately $240 million in 2009 contracted time charter revenue. General Maritime has a very favorable free cash and net income break-even. . Including our projected quarterly dividend, the company’s spot fleet would need to earn, zero and approximately 14,000 per vessel per day in order to break even.

For the six months ended June 30, the average daily spot rate was $18, 628, so for the remaining six months the number will be under $10,000. That concludes my remarks. Now let us turn the call back to our President John Tavlarios.

John Tavlarios

Thank you, Jeff. I’ll continue on Slide 17, as we further positioned the company to successfully operate during the challenging rate environments for the tanker market. We remain focused on strategies that have served us well. First we remain committed to effectively managing our assets to the shipping cycles in an effort to deliver stable financial results to shareholders. In addition we intend to take advantage of the company’s strong liquidity to enter into value creating transactions.

Growth remains the critical component of our strategy and we continue to actively see additional acquisition opportunities that meet our strict return criteria. We believe that as the result of the current market environment these opportunities may become more readily available.

The General Maritime aims the positions itself to capitalize on its enhanced financial flexibility to further consolidate the industry in a prudent manners we have consistently done in the past. In accomplishing this important objective we intend to continue to concentrate on certain – certain transactions that have the potential to create enduring value for the company and its shareholders. Further expand the earnings power of our modern high quality fleet and then answer our industry leadership.

Complementing our long term growth strategy we intend to continue to maintain an unrelenting commitment to effectively redeploying General Maritime's cash flow to maximize returns to shareholders. As part of this effort we planned to look for opportunities we purchased shares, we believe our stock is undervalued and utilize our cash flow to further reduce debt until the right the acquisition is identified.

Turning to slide 18, I would like to briefly discuss current market condition. The 31% of our available spot days booked for the second quarter, our Aframax fleet is averaging $10,000 per day. The 40% to 46% of our available spot days booked for the second quarter as soon as max fleet is averaging $12, 000 per day.

Current Aframax TCE rates worldwide around the $50, 000 per day range while TCE rates for Suezmax tankers are around $60,000 per day. Turning to slide 19, we give a brief industry outlook the effects of the global recession continued implementation of OPEC quarter cutbacks and the significant order book have made themselves felt during the second quarter. Apart from a brief period tanker rates have been at very low levels and into July.

While compliance has slipped a bit, OPEC's production cuts to right size inventory levels continue to depress tanker demand. On the supply side the deliveries on the year continue to mount, absorbing any upward demand shifts from either floating storage or fundamental energy demand.

Looking forward to the second half of 2009, predictions by the IA and others of a decline in global oil demand for the year, have solidified, with estimates of decline ranging from $1.6 to $2.5 million barrels per day or 1.7% to 3%. OPEC production cuts officially standard $4.2 million barrels per day since September 2008.

However compliance slipped during the second quarter from an estimated 18% to 66% making effective actual comeback to around $2.77 million barrels per day. Much of these production cuts have been in sour crude grades having the effect of narrowing tanker margins by significantly increasing bunker fuel costs.

However, even with lower OPEC compliance and lower refinery utilization, inventories still should continue to draw further in the second half from peak levels reached earlier this year. We believe it is reasonable to expect demand for tankers to remain low for the rest of 2009, showing some improvement in fourth quarter as a result of seasonal tanker demand while inventories are being worked down. On Supply side 2009 was expected to be in unprecedented year for net tanker deliveries and the tonnage delivered thus far continues to mount

Roughly 273 new tankers have been delivered representing 6.8% of year end fleet capacity. Expectations for 2009 fleet growth were initially 14.2%, indicating an increasing likelihood of some delivery slippage into 2010. Scrappings for the year have so far been minimal, as a result of several factors, steel prices suffered significantly in late 2008 and 2009 to date. Additionally, ship demolition yards have been crowded with candidates from the more heavily impacted shipping sectors, most notably dry bulk in Q1 and early Q2.

However improvement in dry bulk rates have changed the situation, bringing back conversions as an exit strategy for single-hull tankers. The impending IMO deadline on single-hull tankers should accelerate tanker demolitions and conversions in late 2009 and 2010. The deadline and current rate environment create conditions in which owners of single-hull and first generation double-hull tankers scheduled for drydocking late 2009 and 2010 have strong reasons to consider removing vessels from service. Eventually, factors such as gradually recovering energy demand and supply reduction will have their effect on the market.

In the near-term, the upcoming September OPEC Summit will lead to reversal of some OPEC cutbacks. In addition, we expect OPEC member state compliance to continue to slip somewhat prior to the Summit. As a result, we believe conditions may be moderately better in the fourth quarter and that a turnaround in 2010, leading to a significantly better rate environment, is a very credible scenario. Most importantly to our shareholders, whatever the slope of the curve, General Maritime remains well positioned, with 68% time charter coverage. This enables us to maintain a strong balance sheet, pay down debt and take advantage of acquisition opportunities, which we expect will come with the trough of the market.

At this point, we'd like to open the call up for questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). And we’ll take our first question from John Chappell with JP Morgan. Please go ahead.

Jonathan Chappell – JP Morgan

Thank you, Good morning guys.

John Tavlarios

Good morning.

Jonathan Chappell – JP Morgan

Regarding the dividend policy, and this is going to be tough to quantify, but I just wanted to get some qualitative thoughts on it how much of this is just a realization that the market's terrible right now and how much of this is a transition in General Maritime back to the growth stage that it was in five or six years ago?

John Tavlarios

I think it’s a – and I think it's both of those things. I think it's several things. I think number one, the market's terrible. Well no number one, we think opportunities are going to be coming. Number two, the market's terrible or one, two, do them any way you want. And number three, I think you're crazy to pay $2.9 stock and today reach our stock. I mean, you know, it's just stupid.

Jonathan Chappell – JP Morgan

Right.

John Tavlarios

So it's all those things.

Jonathan Chappell – JP Morgan

As far as the opportunities are concerned, how close do think we are?

John Tavlarios

I think it’s still, I mean don’t expect anything this month. I think we’re talking fourth quarter into the first quarter next year.

Jonathan Chappell – JP Morgan

Okay, so you still think there’s some ways to go on the asset prices?

John Tavlarios

I think the asset prices are getting close to the bottom, if you think about it the tanker market really didn't start getting bad, unlike the dry cargo, which got bad in the fourth quarter of last year and then first quarter of this year. The tanker market was good in the fourth quarter and the first quarter so really the second quarter that started really for lot of that in now you have sort of a bad market and now you're in summer so it's sort of doubly bad. So we think you're getting pretty close to those kind of, to the current number that make sense and then if you think about 2010, people say there’s a recovery, you also have scrapping because of the phase out of single hull tankers, so those things could start bringing the market back.

Jonathan Chappell – JP Morgan

Okay.

John Tavlarios

So it might be a pretty quite turnaround.

Jonathan Chappell – JP Morgan

All right so, declining asset prices can offer an opportunity that’s a good thing also declining asset prices for your current fleet I know that you said, in several so this is voluntary decision by the board but have you looked at your fleet value recently and how close are you to cover that concerned?

John Tavlarios

We have looked at it.

Jonathan Chappell – JP Morgan

And compliance.

John Tavlarios

And we’re compliance.

Jonathan Chappell – JP Morgan

Okay, the final thing just a house keeping thing for Jeff. I didn’t see a breakdown of the realized versus the unrealized from your last quarter the synthetic FFA; do you have that?

Jeffrey Pribor

Yeah you can do really pretty easily with the market if you know what the Suezmax averaged in Q2 and as we said before the synthetic is 35,500. So the cash cost $1 million and since we reported total other was 1.4 negative the you can infer the net mark-to-market was negative 1.4 so positive one of the cash negative 1.4 on the non-cash.

Jonathan Chappell – JP Morgan

Okay, great thanks for your energies.

John Tavlarios

Thank you.

Operator

Thank you. And our next question comes from Doug Mavrinac from Jefferies & Company. Please go ahead.

Douglas Mavrinac – Jefferies & Company

Good morning guys.

John Tavlarios

Good morning.

Jeffrey Pribor

Good morning.

Douglas Mavrinac – Jefferies & Company

Just a few question this morning first given your transition towards perhaps and even more aggressive growth strategy within the announced dividend reduction. What do you guys seeing as it relates to assets values in recent weeks, particularly in the Suezmax and Aframax asset class and about how far down did current asset values how far that come from peak asset values on a percentage values

Peter Georgiopoulos

Want to answer the second part first.

John Tavlarios

Well I think that we view sort of the peak at let’s take Suezmax as a example, it was 110 and 150 something in that way that, right, which some other people paid when we weren't paying that much and…

I know it was a trade loss, which was 2 or 3 weeks ago.

Douglas Mavrinac – Jefferies & Company

Yeah.

Peter Georgiopoulos

That’s the number

John Tavlarios

That’s the number and we don’t – we haven’t seen anything since now.

Douglas Mavrinac – Jefferies & Company

It’s okay, okay Peter it’s about a quite and drive to market when it comes to the SMP markets in the tankers?

Peter Georgiopoulos

Yeah and we talked about this on the Janco call a little bit where you know there are irradical values

Douglas Mavrinac – Jefferies & Company

Right.

Peter Georgiopoulos

In spite of that we said on the Janco call someone said where are you in relation to the bottom. Well, there was a theoretical bottom in the first quarter, in term of dry cargo secondhand ship prices, but there, were no trades at those numbers. I think it was more you're in a panic market. A couple of weeks ago we saw a trade for some new building, not even on the water some ships coming in the fall at $70 millin bucks down often something over a 100. so we think, we think that’s, there is a trade there, but I wouldn’t say there is a 100 ships trading there.

Douglas Mavrinac – Jefferies & Co

Right here, not necessarily market per se. Right. When it comes to the banks. How aggressive do you think they’re going to be in terms of coming back to the market or do you think it’s going to be a more or less kind of that the cash-rich owners that are able to take off lot of cash that those are going to be the guys that are able to more take advantage of weaker asset values down the road, as opposed to just credit being available to everybody?

Peter Georgiopoulos

Credit is not available to everybody and I think even to the few good clients that these banks have, that they like and that they like and that they feel are their sort of top few clients, I think credit's even going to be tough for those clients.

Douglas Mavrinac – Jefferies & Co

Yeah, yeah make sense. Okay and then just thank you. And then just final question much has been said and written about order book cancellations in the dry cargo shipping market, but we haven’t seen that much when it comes to the tanker order book. Do you think this could change and what factors could effect potential schedule new building deliveries. What could make some of those, what could cause there to be more potential cancellations and we’ve currently seen?

Peter Georgiopoulos

I think where you'll see more cancellations is, because you haven’t seen this yet. Were people.

Douglas Mavrinac – Jefferies & Co

Right.

Peter Georgiopoulos

Can’t pay for the order. The financing is not available and the owner doesn’t have the 80% or the 60%, we need to finish up the order so, I think we haven’t gotten to that point yet, because the ships that have come out this year were pretty much financed already and paid off. I think it's the one that are later and next year. That there was as deposit put down, but hadn't been financed yet, and people said, oh don't worry, we'll get the financing and between the time the deposit was put down and now the world is changed. I think that's where you'll start seeing the next wave of cancellation.

Douglas Mavrinac – Jefferies & Co

Right it. 2 point early I guess fourth quarter, first quarter rates are pretty good, but now the second quarter rates have come off quite a bit, maybe now we could start to see some cash flow issues and less cash available to make those installment payments.

Peter Georgiopoulos

Right.

John Tavlarios

Doug, the other thing, as we said in our industry comments is it, it doesn’t matter where the capacity comes out. Everyone hoping for cancellations fine, but the other thing we think we'll see if rates stay this low is good old fashioned economic scrapping, where people with single hulls, who say at these kind of rates, why pay that is write-off?

Douglas Mavrinac – Jefferies & Co

Right. – great, thank you guys.

Operator

And we’ll take our next question from Natasha Boyden with Cantor Fitzgerald. Please go ahead.

Natasha Boyden – Cantor Fitzgeral

Thank you operator. Good morning gentlemen.

John Tavlarios

Good morning.

Peter Georgiopoulos

Good morning.

Natasha Boyden – Cantor Fitzgeral

I just want to follow up on the asset value issue in terms of the shipyard themselves, Peter I think you said, most of the vessels delivered this years. What we are going to be deliver that, are you seeing any resale opportunities, is it so, given the fact the many companies may not be able financial orders.

Peter Georgiopoulos

Not yet. I mean that was, I don’t know what that the reasons for those two Suezmax’s, I mentioned earlier, I don’t know why they were see I don’t know that the reason behind. Those being sold, but we are not seeing it, kind of opportunities yet in resales.

Natasha Boyden – Cantor Fitzgeral

So, and I am guessing is there a different to you between, approximately buying a resale opportunity or a distressed asset or is it purely, price and what you can achieve on the vessel.

Peter Georgiopoulos

Exactly. Products with that.

Natasha Boyden – Cantor Fitzgeral

Okay great. In terms of looking at, the growth of the company, you’ve obviously increased your sector exposure with your merger with Arlington. Is there any asset value at this point, I am sorry asset class at this point that you find more attractive than another and are you focusing on any vessel class in particular when you look at growth.

Peter Georgiopoulos

No I think it’s, the same as I said in the call this morning. I think it’s we are just going to be opportunistic and see where we can, get the best return for our dollar invested.

Natasha Boyden – Cantor Fitzgeral

Okay. Right Great. Jeff quick question for you. It looks like your cost of vessel days, the second quarter was significantly higher than what it budgeted. I know you gave some reason for that, but do you still really feel comfortable with the numbers you giving, and being able to stay on budget, given that you were so much higher this quarter?

Jeffrey Pribor

I wouldn't have said it unless I felt comfortable, Natasha. It's the budget and there's times when you have derangements for budget and you look at what do you, redo your budget or do you say, okay, we had a variance; we strive not to have that variance again. And that’s exactly the position we are in. so, we are comfortable.

Natasha Boyden – Cantor Fitzgeral

Okay. Well thank you very much.

Jeffrey Pribor

Thank you.

Operator

(Operator Instructions). Our next question comes from Scott Burk with Oppenheimer.

Scott Burk – Oppenheimer

Good morning guys.

Peter C. Georgiopoulos

Hey, good morning.

Scott Burk – Oppenheimer

I wanted to ask about the – you kind of say that you said you expect demand to remain relatively weak for the rest of the year. I just wanted to go specifically talking about the rates; on Aframaxes specifically, are there any signs of life out there that we might see some recoveries, specifically maybe going into the fourth quarter?

Peter C. Georgiopoulos

I think it's too far away to say, but I do think I mean typically, even in the worst markets, the summer is always worse than the fourth quarter. So we're at the bottom of the worst part of the year in a bad year, so you've sort of got a double whammy right now.

Scott Burk – Oppenheimer

Okay.

Peter C. Georgiopoulos

And we expect, as has happened for as long as I can remember, the fourth quarter to be better than the third quarter.

Scott Burk – Oppenheimer

Okay. And then, I actually had a question about cost, coming from a different angle than Natasha. We've seen some of the companies specifically on the dry bulk side have been able to reign in costs quite a bit due to lower crewing costs. I was wondering if there might be any potential to actually bring down the budget going forward in costs, specifically on the crewing side?

John P. Tavlarios

The crewing side, Scott, we haven't really seen, I mean, on the tanker side, the demand of the quality of the crews, there has been a shortage for a long time and we haven't seen the benefits in the downturn of the market. Keeping in mind that also last year for tankers was a pretty good year. So those cost savings, we just haven't seen yet.

Scott Burk – Oppenheimer

Okay, interesting. And then you also mentioned potentially using some free cash for share repurchases, opportunistically, obviously, you do have, you are going to have some free cash now, by our model at least, going into next year. Did you make any share purchases during the second or the third quarter?

John P. Tavlarios

No, Scott.

Scott Burk – Oppenheimer

No. Okay. All right thanks that’s it for me.

John P. Tavlarios

Thank you.

Peter C. Georgiopoulos

Thank you.

Operator

And our next question comes from Daniel Burke with Clarkson Johnson Rice.

Daniel Burke – Clarkson Johnson Rice & Co.

Good morning, everyone.

Peter C. Georgiopoulos

Good morning.

John P. Tavlarios

Hi, Dan.

Daniel Burke – Clarkson Johnson Rice & Co.

If you all do see some growth opportunities in the nearer term, say the second half of this year, are you comfortable using your available revolver capacity to finance part of that or are you reluctant to do so, given the tanker market and I guess asset values are presumably still under pressure?

Peter C. Georgiopoulos

We have the availability under the revolver and we'll just weigh that as an option for us, based on our assessment of values at the time. So the availability is there, but we'll have to look at the vessel values and just you know, we have that and we have other options. But it is one of the tools available tous.

Daniel Burke – Clarkson Johnson Rice & Co.

Fair enough. And then I think you talked a little bit about trying to increase the contract cover for 2011, but rates are now been down for a bit of time is it too late to get deals done at levels that would be attractive to you with regard to the type of one year TCE is that might be available?

Peter C. Georgiopoulos

I think is more than it’s too early. I think for 2011 we’ll just wait.

Daniel Burke – Clarkson Johnson Rice & Co.

Okay. And I apologize than for 2010.

Peter C. Georgiopoulos

No, you said 2011, didn’t you?

Daniel Burke – Clarkson Johnson Rice & Co.

I did. That I rephrase the question to 2010 the year is just flying by on me.

Peter C. Georgiopoulos

No, one question. I think is the same ad I am sorry Johnson Rob. I think is the same answer. I think we are going to wait till the fourth quarter to see what we can do.

Daniel Burke – Clarkson Johnson Rice & Co.

Fair enough. And one more on the market you have a refinery of decent size that was recently shut down for economic reasons in the Caribbean at least for the short run over in Aruba is that big enough to have an impact on how the Caribbean Aframax market trades or really too small?

Peter C. Georgiopoulos

It’s really not a significant factor for the Aframax market. It’s too small.

Daniel Burke – Clarkson Johnson Rice & Co.

Okay. Great. Well thanks for the answers.

Peter C. Georgiopoulos

Thanks.

Operator

And our next question comes from Charles Rupinski with Maxim. Please go ahead.

Charles Rupinski - Maxim Group

Hello. My question have been asked and completely answered, so thank you.

Jeffrey Pribor

Thank you. We like those.

Operator

And we take our final question from Rob MacKenzie with FBR Capital Markets.

Rob MacKenzie - FBR Capital Markets

Good morning guys.

Jeffrey Pribor

Good morning.

Rob MacKenzie – FBR Capital Markets

I want to follow-up on the growth opportunity line of questioning here as well. I guess best suited for Jeff apart from the use of the revolver how do you view the availability of incremental debt potentially restructuring your debt to take advantage of perhaps may be even a slightly larger acquisition opportunity or would you be more inclined to just use either equity, be it from cash on hand or a new equity raised to finance purchases in this market?

Jeffrey Pribor

I’m sorry say what we're inclined to do, but what's really fortunate is that because of our past history and the way we behaved both to bond holders and to equity holders, we have the full suite of opportunities available to us in the capital markets, whether it's high-yield debt or equity or anything in between and bank debt, public debt, public equity, etc. So we have all those available to us and believe me, we've heard a lot of about all of our option so we have every option imaginable.

Peter Georgiopoulos

Including building up cash by what we've just done.

Jeffrey Pribor

Yes right as Peter said the first thing is now we are building up cash what we changed with these dividend policies.

Rob MacKenzie – FBR Capital Markets

Right, what would be your target structure from the financial standpoint of any new transaction your ideal?

John Tavlarios

I think, yeah we are realistic in this market, in terms of what our target might be I’m not sure but if it's achievable in this market. I think in best case you're not going to get more than 50% leverage in this market. So I think if you look if you're looking at acquisitions Jeff disagree your I mean you have to go in 50% leverage, 50% some form of activity.

Rob MacKenzie – FBR Capital Markets

That’s right

Peter Georgiopoulos

And this is overriding principle though, Rob, is that we certainly recognize that equity is the most expensive financing there is, so we don't like the idea of going and rushing out to preload the balance sheet with that,

Rob MacKenzie – FBR Capital Markets

Right.

Peter Georgiopoulos

Because it's very expensive you may not need it.

John Tavlarios

And we have a history of not diluting our shareholders.

Jeffrey Pribor

Look what we did in the last trough; we were able to double the size of the company without issuing any equity at all, and therefore, the stock went up 400%

Rob MacKenzie – FBR Capital Markets

Right.

Jeffrey Pribor

So, which is significantly more than our Peer Group. Now, Peter's point is right; we may not be able to do with that because you have to look at market conditions in each cycle. But you, if you start with that buyers towards the least equity possible and then it benefits, the rest of the equity holders as the most.

Rob MacKenzie – FBR Capital Markets

Great thank you. The rest of my questions have been answered.

Jeffrey Pribor

Thank you.

Operator

And there are no further questions at this time. I would like to turn the conference back over to General Maritime Corporation.

John Tavlarios

As General Maritime progresses through 2009.We expect to continue to benefit from our sizeable time charter coverage, enabling the company to achieve a high level of stability and its results, regardless of the rate environment. The Company's success in further strengthening its financial flexibility, also positions the Company to act opportunistically for shareholders as we seek to enter into additional value creating transactions that meet our strict return criteria. I would like to thank everyone for participating today’s call. And we look forward to providing you an update in the future.

Operator

And thank you for your participation. You may now disconnect.

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 Q2 2009 Earnings Call Transcript
This Transcript
All Transcripts