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Scorpio Tankers Inc. (NYSE:STNG)

Q3 2013 Earnings Conference Call

October 28, 2013 12:00 PM ET

Executives

Brian Lee - CFO

Emanuele Lauro - Chairman and CEO

Robert Bugbee - President

Analysts

Jon Chappell - Evercore Partners

Gregory Lewis - Credit Suisse

Doug Mavrinac - Jefferies

Ben Nolan - Stifel

Omar Nokta - Global Hunter Securities

Herman Hildan - RS Platou Markets

Eirik Haavaldsen - Pareto Securities

Fotis Giannakoulis - Morgan Stanley

Operator

Hello, and welcome to the Scorpio Tankers' Incorporated Third Quarter 2013 Conference Call. (Operator Instructions) I would now like to turn the call over to Mr. Brian Lee, Chief Financial Officer. Please go ahead.

Brian Lee

Thank you for joining us today. On the call with me are Emanuele Lauro, Chairman and Chief Executive Officer; Robert Bugbee, President; Cameron Mackey, Chief Operating Officer.

The information discussed on this call is based on information as of today, October 28, 2013, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For discussion of these risks and uncertainties, you should review the forward-looking statement disclosures in earnings press release that we issued today as well as Scorpio Tankers’ SEC filings, which are available at scorpiotankers.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, Brian. Thanks everybody for being here today. You all know by now the format of these calls. We value the question and answer part, so after a brief statement which I will make and will end followed by a brief statement by Mr. Bugbee we’re going to go open the floor for questions.

Today it’s an important day for Scorpio Tankers not only of course we are releasing our third quarter results but more importantly today we’ve announced the agreement to invest in Dorian LPG. It’s a happy transaction that we are announcing today. We’re happy to announce it and to help and support Dorian LPG in its consolidation effort. We look forward to work together with Dorian in the future making sure that this venture will be a success. We are very happy to have [Tim Dop] with [Mr. Petraeus] and his management team in the company that he founded. We are delighted to have found a partner like Mr. Fabricant in this venture. Their track records, knowhow, and experience speak for itself. But we are extremely pleased to start today what we believe will be a successful venture.

We are convinced that this was the best asset and capital allocation for the shareholders of Scorpio Tankers and we look forward to having the chance to prove our convictions going forward.

With this I give the word to Robert if he has anything to add and then looking forward to your questions.

Robert Bugbee

Thank you very much Emanuele. Thank you everybody again for attending. First of all we’re going to try and keep this call to within sort of 45 minutes or so. There is a lot of people on the call I know everybody’s time is valuable. I would just like to add that -- a couple of things; first, the actual quarter itself, the way we looked at this is that we had to pay the price in this quarter for the charter into the LR2 as we fully expect that these vessels would be a tough sledding in this third quarter but they’re very nicely set up for the fourth quarter first and second.

I think though that we can see from the results on the MRs which are more or less the same as the year up to date on that second quarter is that our ability to handle the MR fleet as well as what we’ve stated before about the ability of these new building is really coming through in those numbers.

When we look forward to what we’ve done here in the LPGs, I really like to think of Emanuele’s words, I mean Dorian in terms of operations there is no better I mean the first class when it comes to their relationships with their customers we have spent a long time with those customers going through different operation et cetera. And now with the combination of their own family experience capital work combined with the strong support from not just the institutional shareholders but now to industrial partners that have not just in Scorpio a lot of complementary experience, and contacts, and customers, but also in SECO really the preeminence sort of logistics U.S. capital market company, we really want to do the best we can to help John Hadjipateras and his team in literally taking that leadership position.

We ourselves in Scorpio as a management believe that size matters, believes that believe in strong leadership positions in any market that we are in and we believe that that is absolutely the best structure for our shareholders to have great value.

Now that means what this deal means for us is that one could actually argue right now that Scorpio’s balance sheet now that we’ve just -- we've got the new long the new case show lone and we no longer have the capital commitments on the debt side of the LPG, one could argue that we are over equitized for the first time in our lives. And this I believe the deal could become the pivot where the company changes from its investing phase, now we've really appreciated the trust that you have all given us the shareholders in funding the growth of Scorpio Tankers and getting us the best fleet that's out there in the product market. And this could be the pivot where really we change from that heavy investing phase to the beginning of the harvesting phase, we will remain disciplined. We really -- no we’re not going to see us go out and order a whole bunch of product tankers in 2016 et cetera. We will obviously continue to look for fundamentally strong strategic and accretive acquisitions like we've seen with our latest deal with [indiscernible] Valero and JPMorgan, we're extremely happy with that partnership.

Otherwise where we sit right now, we are looking forward to winter, every sign we have is that we're going to have a stronger winter than last year. The adjacent markets like palm oils, vegetable oils they are stocking up very nicely as we approach winter. And there is certainly we know that we’re entering that period where there really isn't that much on the gross deliveries because of the lack of investments that the industry has gone.

Later in the year I think we will come closer and closer to have 250 in [indiscernible] with the regulations that are coming. With those few comments we'd like to open it up now to questions.

Question-and-Answer Session

Operator

(Operator Instructions). And we'll go first to Jon Chappell with Evercore Partners.

Jon Chappell - Evercore Partners

My question Emanuel and Robert has to do with the Dorian relationship. Obviously you guys are quite incentivized for this venture to do well. So I am just wondering what's the Scorpio management commitment going to be to Dorian? Are you going to have somebody on the Board? Are you going to be involved in strategy discussions, capital structure discussions or you are going to be silent but very supportive minority shareholder?

Robert Bugbee

Well first of all we are really confident in a management of Dorian and John Hadjipateras and his team to run their company. There is no point in us investing in another company to this level than we do all the work, I mean otherwise it would have been better for us just to set up a company ourselves.

We are expecting Dorian and have no reason not to think that they're going to continue their excellent work on a day-to-day basis. We also believe that we -- in team work and we believe that we will be there to provide not just financial support but we will turnover should that management wish any information and expertise or contract list or health that we may have in pure commercial side and with regard to strategic we will obviously really enjoy sitting down with the brains that there are at that table with everybody sharing the goal to create the greatest possible return possible and the best VLGC company out there. It has a fantastic start, it's going to have a great balance sheet, it's clearly got the best fleet that's out there. And it's got a very one of our attractions with even though Dorian itself is new to the public market, you can quite clearly see very professional setup on that Board, their existing Board members and their positions going forward. At this particular point apart from the press announcement we have made, we would like to extend courtesy of the exact answers to your questions to Dorian to explain that to the market first.

Jon Chappell - Evercore Partners

That makes sense, my other question Robert you mentioned very important point about the pivot part of the company right now and with the capital commitments now much more tempered without the VLGCs and all the financing that you have with the operating cash flow that you would expect it to start to generating, and the order books basically fill to the point where you don't want to order probably MRs anymore. Are there really other opportunities out there like what you’ve done with [indiscernible] and Valero as far as cash -- shares for shifts. Or do you really start ramping the dividend once you turn to pretty significant free cash flow positive basis assuming it should be early next year.

Robert Bugbee

Well I'll answer the first, the first opportunities first, there are a pretty limited product tanker order books, it doesn't matter what size they are, whether they are from LR2s all the way down to the [indiscernible] that are available to delivery within our sort of timeline of mid-2015. So the answer is yes, there are opportunities to so that. But the answer is also that just by definition of the actual consolidation of those new eco-ships that exist at the moment. I mean bear in mind the number that the shelves have the Vitol's have and our customers have, we're likely to see those opportunities come from some form of strategic relationship where both the customer and ourselves think it’s beneficial rather like the last year that we did. And -- but there are some of those -- there are some that I think could come to fruition. But correct, they are limited. So that is why I feel that this could be -- it doesn’t mean -- it’s very hard to tell over the next six months whether we'll be buying a few more ships that are coming to the water within that 15 period or whether we won’t be. But either way I do see this as the pivotal point between that full investment period and then the return to capital from shareholders.

Now we have been very clear in the past that clearly the way that we were already indicating, we are already guiding the horses to what we are doing. We doubled our dividend this quarter. This is the third quarter I think in a row that we’ve increased the dividend and you know a basic use of abacus or just using your own fingers would tell you that, if we have the ability to return capital in form of dividends, fairly aggressively, if we chose that route, that obviously one of the alternatives to Dorian, I mean we are going to be there and help its development and we are going to be a very good shareholder and a very good partner, and take it through its IPO process.

But clearly the top two, 1A and 1B of alternatives is going to be distribution of the only ship that we have in form of a dividend to our shareholders in a tax efficient form ultimately which is the dividend. Or you cannot say that they stopped. So if -- but if you’ve also clearly, publicly stated that we would have no problem, that if we feel that on evaluation basis the market is just the same as OMI isn’t giving you the valuation that we internally believed going forward, not analyst reports or anything, we would have no problem in starting to buyback the stock either. So in this sense it depends upon how we are valued as to what route we take in terms of that harvesting and distribution.

Operator

Next we will go to Gregory Lewis with Credit Suisse.

Gregory Lewis - Credit Suisse

Robert, could you provide a little bit about the genesis of what brought Scorpio in partnership with Dorian. Was this something that Scorpio was actively looking at? Was there potentially other, there is a handful; there is a couple of other LPG players out there, that in other words, had you looked at shifting or joining with anyone else or is this the setup with Dorian?

Robert Bugbee

Yes, we got the question. As any of us, including yourself know who are married, that wonderful question of how the two of you meet and get together; you may get a slightly different answer from the girl and the boy. But we made it very clear that we felt that our alternatives were to why the partner in a consolidating form with one of the potential players to go with our own, partner with one of the existing cargo operators, but we made it very clear that we weren’t there to divest our investment because we we’re very, very constructive on that VLGC market, that we were willing and open to both dancing with somebody, as well as ultimately marrying.

And I think that we are little - we have talked to all operators. We’ve talked to, over the last three months or so. We have had more extensive talks with some and others. We have talked to all of the major customers. We have run multiple calculations on doing it ourselves. But rather than say what the others didn’t have, we were convinced that Dorian, because of what we have said before, their operational fundamental strength, their setup with regard to their partners and their investors, their desire to mirror us in the new building, eco design and build - and they’re very client focused. This is the company that is built around performing for the customers, seeing the customer as the customer and providing a service.

So they were the guys who had the, one of the first people to move in terms of getting the eco design vessels. They basically beat us by a month in doing that. We are building at the same shipyard. So first of all you had a very strong synergy in terms of how to service customers, how to develop a fleet, what was the best yard to go to, and not kind of the pennywise and pound foolish in that process. Then there were tremendous synergies related to your views to corporate governance. We are putting a lot of our shareholders and our capital in this Company and when you look at the present board of Dorian, it is beyond the reasonable doubt that they’re go manage their company appropriately in a modern way and have experience of building industries themselves.

So all in all, the boy always has to - we made it clear, the boy always has to ask the girl to dance, but when this boy asked us to dance and they do in a very nice, they didn’t make a big public fiasco about it, they did it in a very matured and nice way and we sat down and this is where we resulted. Even with that, we did a full analysis. As we see, we engaged [indiscernible] Weinberger as advisors. They did a very, very objective view and all our alternatives et cetera, et cetera.

Gregory Lewis - Credit Suisse

And then just real quick, just turning to the market real quickly, it looks like the LR1 in MR markets are little bit weak here as we head in towards the winter. Is there anything we should be thinking about in terms of what could sort of get these rigs moving higher in the near term? I mean, it’s just function of?

Robert Bugbee

Sure, you should change your mindset rather than thinking these rates, we entering into winter you should sit there and go -- actually they’re pretty strong on a historical basis and a balanced basis in terms of the market, and we are now every close to winter. If you see the general balance of this product market, anytime there is any demand put into one of these markets, they tend to rip up pretty fast. So we’ve had a fairly warm start to the winter in the northern hemisphere. We have not had any hurricane. So it’s perfectly -- we have had extensive sort of refinery turnaround as a result of how hard they were going over the summer.

So for us we really think this is glass is half and full. We don’t know whether that market will start ripping next week or it will start ripping a week before Thanksgiving or two weeks before Thanksgiving, but it’s coming and then I think the question then will be to ask how high does it go?

Gregory Lewis - Credit Suisse

Okay great and then just still like in other words, I guess over the week or I guess at the end of the last week there was the refinery fire in Illinois. Is something there?

Robert Bugbee

Not really, that’s just kind of noise. I mean, in terms of refinery news last week, it was -- what we were looking at was the continued pressure, the European refiners have to remain competitive and the continued confidence we have in for example Saudi refineries coming up online and the latest data are the palm oil and vegetable explores but those are things, I agree there it maybe some minor effect but that in terms of the fundamental thesis here is just noise.

Operator

We will go next to Doug Mavrinac with Jefferies.

Doug Mavrinac - Jefferies

I just had a follow-up to your last point, Robert, because that’s actually the way we were looking things, is that, the MR market has held in pretty good given that we have 2.5 million barrels a day of refining capacity and down globally. So kind of as a follow-up to that or within that theme, what do you expect to happen to raise this kind of across all asset classes when you have, if you’re entering that period right with relatively descent rates and if you have 2 million to 2.5 million barrels a day of refining capacity coming back, how will that affect the broader market? How will that affect the EUD U.S. market?

Robert Bugbee

I think, it’s a great question, but again with respect, the statement is we have 2.5 million barrels refined. If we go into this next couple of months, yes, you’ve got tremendous demand increase on the product side, but you still got demand increases on the palms, the vegetable oils. You’re going to have supply dislocation, because you’re going into northern hemisphere winter. So, I really, it may be a flippant comment but it is what we feel, which is, the question is going to become how high is it going to get in January, February, March. In other words, we are very confident; it’s going to be higher than the last year than in first quarter. It just what happens is this the year that you get the breakout or do you have to wait till next year.

Doug Mavrinac - Jefferies

Got you, very helpful, and then following up to another point that you made earlier, when you talked about the order book for products, tankers being small, regardless of asset class, can you talk about why you have to look at the overall products anchor market to figure out how much new capacity is being added, rather than just focusing on what the headlines seemed to be focused on, or that was just the MR asset class? Can you talk about the substitute ability and all that sort of stuff?

Robert Bugbee

Sure, well the first thing, look at MR market where you’ve got superficially a double digit number of vessels on order. If you look at historically, you still got gross supply coming in for the next 2.5 to 3 years coming in at 4 to 4.5% per annum, which is really low compared to the trialing 15-20 years. It’s only people think that it’s high MR order book but they’re seeing all these headlines of people ordering them but the headlines themselves, if you’re looking at the map you still got a lot of constraint.

Next year in the order book - and the following year and we’ve got a lot of capacities that’s already been taken out in other vessel classes in ’16. When we look at the substitutability, there is almost nothing. There is a tiny percentage of Hendy product that is in order that’s the size below MR. There really is almost nothing. In the LR1 which is the size above it and the LR2 market is extremely contained and the reason why this substitutability, it’s fungible. If you drive MR rates up to a certain point, you then make a LRs competitive. If you don’t have any LR fleet chips you are going to either drive it up into the LR2 rate or drive it into MR rate.

The importance also of looking at the MRs, when you have the LR1s above they has almost nothing on orders Hendy’s below that have nothing on order is that Hendy market is the most environmentally and operationally challenging market in the world. It is the ones doing the grunt ground work in the North Sea and our Hamburg ranges, calendar in the winter and at the same time has been most environmentally sensitive charters such as the [indiscernible] and the BPs of the world when it comes to vetting and 215th [ph] position.

So, those are the reason you have to put all of this ordering, not the headlines and the gross numbers. You have to put it in the context of the entire fleet plus the context of the historical supply in more favorable markets over the last 15, 20 years and finally put it in context. So it’s quite clear that the demand served is already accelerating higher than the supply curve.

Doug Mavrinac - Jefferies

And then just final question before I turn it over. Potential asset values, right now we’re seeing the brokers quoting resell MRs, new builds at $38 million and new orders with $34.5 million. Is that about right or they still a bit behind the curve there?

Robert Bugbee

They’re a bit behind on the new orders. They’re doubly behind them in new orders because the new orders aren’t just tied. They’re also further out in the time period. We have to put down a lot of money, especially when the yards now aren’t necessarily all the time giving favorable payment terms; you’re putting on a lot of money for a later delivery.

I think as $38 million is paid for 2013 delivery vessel. That’s done. That was done this week. Because of the consolidating nature of that market that we have said, we have explained, it wouldn’t surprise me at all if - it wouldn’t be a fair bet to take [indiscernible]. The next chip will trade high than that. It’s just simple as that.

And we really - that’s how we’re seeing it. You’re not going to see us a 401 [ph] today go out and do a stock offering on Sting [ph]. This is not a book talking; this is the factual position of what the market is. And I think that the analyst community will have to keep on their toes with regard to these valuations across all sectors because the new building market is accelerating in pricing quicker than let say data sample that you guys all have to look at and in markets that you turn to positive cash flowing, you then get that double multiplier. So, this is the point in the cycle where the quality names, it is a matter here whether we’re looking at northern and the dry cargo market or go to LNG or any of the top names. This is where the top names start to actually dislocate from the NAV calculation because the NAV calculation becomes out of date very quickly.

Operator

We’ll go next to Ben Nolan with Stifel.

Ben Nolan - Stifel

I just had one quick question for you. It relates to sort of the time charter strategy. You guys - it seems as though have been a little bit less active in the past several months with respect to time chartering and at the same time it appears as though many of the big oil traders and oil majors have really stepped up their activity level. Is it simply a matter of replacing charted tonnage with fully owned tonnage or could you maybe talk through how you’re thinking?

Emanuele Lauro

First of all, time charted tonnage is amazingly expensive on its cash breakeven as compared to the new buildings that we’re getting delivered. So, we’re faced with time chartering vessels that are, A more expensive on a cash breakeven basis and B, they are going to earn less on our headline basis because they are the non-eco, fuel efficient and new tank coating vessels. So, first on a straight business basis, we have erred towards using all capital or risk on a balance sheet to increase our positions to the market.

Secondly that market is pretty tight now and you're correct that you're seeing across the board oil majors and traders increasing their length on time charters and therefore it is scarce. It’s a competitive world. We're out there now looking to take in time charters. We’re not adverse to it at this point especially as we basically fulfilled our new building program. It’s just a competitive place to get ships.

And then finally, we have a charter book that has a lot of optionality in it in terms of extending things and the other thing is, it is all about another test area evolve, value at risk is that for us we’re very sensitive to risk reward parameters and as you march up the market and you march up your charter book you by definition are increasing your VAR whilst lowering your future reward, so we are going to manage that time charter book on a, on an opportunistic basis by being, you know keeping discipline to it, knowing that next year we are going to have an avalanche of deliveries that have much lower cash break even points and PNL points than anything we could time charter in any market right now.

Ben Nolan - Stifel

Right, that makes sense. Okay, well, I will do my part to keep it to 45 minutes and let somebody else take over.

Operator

Next we'll go to Omar Nokta with Global Hunter Securities.

Omar Nokta - Global Hunter Securities

Just a follow-up, Robert, on your commentary regarding the distributing potential of the stake in Dorian. You guys are going to be taking an active role in helping build up the company. Just to get a sense of timing, it sounds like Dorian is going to like to do an IPO in 2014. Would you envision or do you envision currently distributing the stake to existing shareholders? If you were to do that, would that happen say right after or sometime around the IPO? Or would it be when it is operationally up and running with your taking delivery of those VLGCs in 2015 or 2016?

Robert Bugbee

Well I think you're going to do what you're going to be as a strong, loyal and constructive partner to take them through properly the IPO process, and that doesn't mean take that through properly means that you don’t present on its night to its IPO that you're going to day after going to dividend that oil share to your shareholders, that's not really being a proper partner, so you're going to take them through the IPO and make sure the stock is trading properly and that then becomes a viable option, we are formally going to keep all of our options open but it will be based on what brutally [ph] at that point, once we feel that we have fulfilled our side of the bargain which is to be a solid partner and take it through that process, it is going to be simply what creates the best value and return for our shareholders and at the moment one could perceive that from a shareholder point of view they would like to choose themselves whether they want to keep a, be invested in the deals you see company and the product tanker company. That's one thing, I mean give the shareholders choice, and obviously we have benefits in terms of the dividend structure but I would say that it's a strong, we would obviously formally retain all our options and we can't say much more related to the timeline rather than we want to give Dorian, because Dorian who we've invested in, have the confidence in, the ability over the next days, weeks to elaborate more the timeline.

Omar Nokta - Global Hunter Securities

That's very good, thanks Robert. Just another bigger-picture question. You talked about the pivot and the harvesting and seeing limited opportunities in products. What about potentially just getting into crude? I know fundamentally it has been abysmal recently. Is that something that you are seeing any sort of semblance of an opportunity there? If so, would you look to invest in that within Scorpio Tankers?

Robert Bugbee

I think you, look, you never say never but Scorpio Tankers is quite clearly the way we expect to is any way limited in the size range of the crude that we are, I guess the crude oil is more adjacent to the product market than dry cargo, but when faced with the fact that we thought that the dry cargo would bottomed, we chose to set up a completely separate entity to invest in dry cargo. You're already hearing from their language related to the VLGC and Dorian that we fundamentally believe that. You have to have a pretty good reason to not actually allow investors choice and that single type companies in sectors are very firstly efficient, they’re more easy to understand, more easy to manage et cetera. We have quite constructive on the crude oil space itself but I think that our shareholders have been trusted us with their capital. And there is really nothing wrong in getting to a point that’s one of the benefits to the first mover advantage of getting to that harvesting in return of capital as we buyback or dividends as quickly as you can, that’s not a problem. I don’t think we can be accused of not growing a company.

Operator

We’ll go next Herman Hildan with RS Platou Markets.

Herman Hildan - RS Platou Markets

Good afternoon, guys. Quick question, on growing Dorian, is it likely you're going to do that organically through selling the options that you have to the company? And if so, at what price? And also, I guess. (Multiple speakers)

Emanuele Lauro

Yes, I get that. So we’ve made it very clear that we are transferring our interest in the VLGC market tune the investment in Dorian.

Herman Hildan - RS Platou Markets

Including the options?

Emanuele Lauro

Our entire position, our entire interest in VLGCs will be transferred to Dorian and maybe some technicalities related to options, timing, declarations or whatever as we mechanically do this transferrable all of our interests are going to be transferred to Dorian. We will not obviously it’s irrational for us to keep in a competitive position to Dorian. And we will support that company wholeheartedly in that process. This is not a step-by-step transaction this is our entire interest in one go.

Herman Hildan - RS Platou Markets

Also, can you just give a quick comment? Avance Gas at our seminar said very clearly that he wanted to merge with Scorpio. Is that out of the picture now, or is it still a possibility that Dorian and Scorpio could merge with Avance Gas?

Emanuele Lauro

We’re very happy for Avance Gas to give us a lot of stock so we don’t have much in return to give them.

Herman Hildan - RS Platou Markets

Okay, thank you.

Emanuele Lauro

I mean, that will be a question for what Dorian wants to do in the future now. It’s not of course of Avance, we’re obviously a valuable alternative but as I said I wanted to stress the positives of why we chose Dorian rather than discuss the relative merits on not of any other choice we may have had.

Herman Hildan - RS Platou Markets

Okay. I agree with you. Also in terms of -- where do you think the value on the resale is today? You briefly discussed earlier that new build [ph] prices are coming up and resale prices are coming up. What kind of level would you like to do a transaction?

Emanuele Lauro

No idea. But I know that stock is likely to go above steel because my comments related to net asset values and lack of capabilities, but that would possible.

Operator

And we’ll go Eirik Haavaldsen with Pareto Securities.

Eirik Haavaldsen - Pareto Securities

Hi, my questions have actually been asked, but just to clarify them. You are transferring all your VLGC and LPG assets into Dorian. Do you still count on -- just from my basic calculations, you will be the largest shareholder in Dorian. Do you still believe you are the largest shareholder in Dorian a year from now?

Emanuele Lauro

Who knows because that’s largely dependent upon when Dorian let what capital they require during that process and after they list and as I’ve said how quickly we feel comfortable that we have fulfilled being a good partner and stabilize the company. We then decide what to do with the shares.

Eirik Haavaldsen - Pareto Securities

All right, so you are not ruling out that you will participate in a potential IPO offering of Dorian in, say, early next year?

Emanuele Lauro

I think we’re not going to discuss exact positions other than we will stay quite clearly we intend to support Dorian as a good partner in our fullest efforts both financially, commercially in friendship and in partnership.

Eirik Haavaldsen - Pareto Securities

Thank you.

Operator

And we’ll go to our next question.

Emanuele Lauro

One last question.

Operator

Okay. Our final question will come from Fotis Giannakoulis with Morgan Stanley.

Fotis Giannakoulis - Morgan Stanley

Yes, hi, Robert, and congratulations for the successful wedding with Dorian. I want to ask, you have been involved in three different sectors, the LPG, the product tankers, and the drybulk market as a team. Which of these three sectors do you see that there is more upside next year? And related to the Dorian question, the Dorian transaction, there was a service fee, a 1% commission fee that was paid to the Scorpio Tankers. Is this fee going to be reimbursed, or is this going to be paid also for the sale of the fleet to Dorian? There was some discussion, some TradeWinds article that you might be considering changing this structure.

Robert Bugbee

I am going to allow the Chairman, but the second question Emanuele is the right person to answer. And the first question, look we’re very excited about all three markets right now whether it's the VLGC the products or the dry. And trying to work out which one is going on a month-to-month basis to be ahead or not is been -- you just have three first class sprinters and the gun has gone off for all three and they are running down track and all three are going to be medalist. But we’re not sure in such a short time period which one is going to win the gold. And Emanuele would you like to answer the second part with regard to the fees and everything.

Emanuele Lauro

First of all I think that more than TradeWinds articles there was piece on Scorpio Tankers that raised the concerns on the relationship between private and public. We actually welcome any scrutiny because we’re constructive people and we take that as a constructive comment or concern. Of course our shareholders have done their diligence on us. And all the transaction to answer specifically your question all the transaction which are taking place between Scorpio Tankers and its managers are disclosed in the related party transactions on our filings. So I suggest you actually have a look there on what is going to be paid or not paid.

Fotis Giannakoulis - Morgan Stanley

I am not asking about that I didn't raise any concern if I had to clarify.

Emanuele Lauro

I understand the direct question. There is -- the cost of this transaction in total, so that's the safest way to do it. That includes both the purchase and the sale and the underwriting. So the cost of purchase, so fundamentally there would have been a right for a purchase commission or a sale commission and a underwriting commission, not underwriting advisors position, the total cost. So here you can see that's not even 1% of the purchase position is going to be no more than $7 million, that is on the entire purchase fees and including advisor fees.

So you can see that there is a compromise that has been made but in terms of the actual specific details that will come in a proper filing document. And that is substantially less obviously than a theoretical much, much larger number than it could have been.

Thank you ever so much everybody for your time. Thank you again shareholders for the trust and we know nothing guaranteed but we’re very confident of the company's position going forward and we hopefully are saying you today that we’re really focused on your return for that trust you have given us. Thank you.

Operator

And that does conclude today's call. Thank you all for your participation.

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