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Executives

John Tavlarios - President

Peter Georgiopoulos - Chairman

Jeff Pribor - Chief Financial Officer

John Georgiopoulos - Executive Vice President

Peter Bell - Head of Commercial Operations

Brian Kerr - Investor Relations

Analysts

Jon Chappell - JP Morgan

Doug Mavrinac - Jefferies & Co.

Gregory Lewis - Credit Suisse

Scott Burk - Oppenheimer

Sal Vitale - Sterne Agee

Rob McKenzie - FBR Capital Markets

Justin Yagerman - Deutsche Bank Securities

Presentation

General Maritime Corp. (GMR) Q2 2010 Earnings Call July 29, 2010 10:00 PM ET

Operator

Good morning everyone, and welcome to General Maritime Corporation’s conference call to discuss the company’s 2010 second quarter results. Today's call is being recorded. We will conduct a question-and-answer session after opening remarks and then instructions will follow at that time.

A replay of the call will be accessible anytime during the next two weeks by dialing 888-203-1112 for U.S. callers and 719-457-0820 for non-US callers. To access the replay, please enter the code 469-219-8.

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 second quarter and six-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 relating 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 earnings 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, 2009 and its 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 acquisition.

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

John Tavlarios

Good morning. Welcome to General Maritime’s second quarter 2010 earnings conference call. With me today are Peter Georgiopoulos, Chairman; Jeff Pribor, Chief Financial Officer; John Georgiopoulos, Executive Vice President; and Peter Bell, Head of Commercial Operations.

As outlined on slide 3, of the presentation, I will 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 months ended June 30, 2010. 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 4. During the second quarter and year-to-date period, General Maritime completed several important value creating transactions, which positioned the company, strengthened its industry leadership and take advantage of the positive fundamentals of the tanker industry.

By acting decisively for shareholders, General Maritime has once again taken important steps to meet critical objectives related to growing and diversifying its modern fleet, significantly increasing the company’s earning power and further strengthening its balance sheet and financial flexibility. Following a review of our financial performance of the quarter, I will discuss these important strategic accomplishments in more detail.

For the second quarter, we recorded a net loss of $14.3 million or $0.25 basic and diluted loss per share. Decrease in net income was primarily resulted of 18.1% decrease in TCE as well as an $11.2 million increase in net interest expense. Jeff will discuss our financial results of the second quarter in more detail later in the call.

Our Board of Directors have adopted a new dividend policy under which the company intends to declare quarterly dividends with a target amount per share of $0.08 per quarter based on the current number of shares outstanding. The new dividend policy is based on an unchanged aggregate amount of dividends to be paid by the company on an annualized basis of approximately $30 million divided by the new share count after our follow-on equality offering.

For the second quarter, we declared an $0.08 per share dividend. Including the second quarter 2010 dividend, General Maritime has declared cumulative quarterly and special dividends of $21.95 per share. This equates to more than a billion dollars in dividend distributed to shareholders since 2005.

During this past quarter, we agreed to buy seven modern double-haul vessels including 5 VLCCs and 2 Suzemax for a total purchase price of $620 million. This acquisition marks a significant point in our history as we take advantage of asset prices, which are significantly off their peaks and opportunistically grow our fleet.

I’d like to highlight a number of important strategic and financial benefits we expect from these acquisitions, which we believe will create long-term value to the company and shareholders.

First, we expect to grow our fleet by 50% on a tonnage basis and expand our presence in the favorable VLCC market. Second, we expect to further improve the age profile of our modern fleet from 9.9 to 8.4 years determined as of the time we entered into acquisition agreements. And third, we expect to broaden and diversify our service offering with a fleet consisting of 7 VLCCs as well as 12 Aframax, 13 Suzemax, 6 product tankers. We believe the company is in a strong position to take advantage of the favorable long-term fundamentals of each tanker section, which General Maritime operates and expand our commercial opportunities with current and potential charters.

During the second quarter, we also continued to receive strong support from both leading shipping banks and the equity markets. Specifically, we entered into a $372 million credit facility with Nordea and DnB NOR to finance 60% of the purchase price of the seven modern double-haul vessels.

We also successfully completed our first equity offering since our IPO, with gross proceeds of $207 million, which was up-side due to demand for the offering. In addition to highlighting General Maritime’s leading industry position, the company’s ability to enter into the credit facility and successfully complete the equity offering were notable for a number of reasons.

First, we successfully financed the acquisition in a timely manner despite challenges that persisted in the equity and credit markets. Second, we de-leveraged of the company’s balance sheet during a time when we significantly increased the size of our fleet representing both an important and unique accomplishment.

Finally, we continue to implement our balance deployment strategy during the quarter. As of the end of the quarter, we had 45% of our vessels on time charter. Later on in the call, we’ll discuss our flexible deployment strategy in more detail.

On slide 5, we highlight the progress we continue to make increasing our financial flexibility in growing our fleet subsequent to the closing of the second quarter. In July, we closed on the third amendment to our $750 million credit facility and in doing so, took important steps to position the company to continue to remain in compliance with its financial covenants.

In addition, the $372 million credit facility with Nordea and DnB as discussed earlier has been executed and is currently being syndicated. Finally, in July we took the liberty of the Genmar Zeus, 2010 billed VLCC, which is one of the seven vessels we recently agreed to acquire.

On slide 6; we detailed the company’s dividend policy. As I mentioned earlier, the company declared an $0.08 dividend per share for the second quarter. We also established the $0.08 level as our quarterly dividend target based on the current number of shares outstanding, which we believe positions the company to distribute dividends to shareholders while maintaining the conservative payout ratio, remain cash flow positive with after anticipated distributions and continue to opportunistically grow the fleet.

In continuing to achieve long-term growth, it is important to note that we will not wave it from our proven approach as solely pursuing acquisition, opportunities that [meet] strict or written requirements as we have consistently done since the company’s founding.

On slide 7, we highlight our current contract coverage. Currently, we have 14 of 32 vessels under fixed contracts representing 44% of the fleet and approximately $110 million for contracted revenue for 2010. Going forward, we tend to continue implementing our flexible fleet deployment strategy with a focus on operating between 40% and 50% of our fleet on time charters.

In light of our near-term view of the tanker market, we believe our flexible deployment strategy positions the company to take advantage of future rate increases while maintaining a level of stability and results in covering a substantial portion of our fixed cost.

Turning to slide eight, we provided an expected delivery schedule for the seven Metrostar vessels. We are pleased to have begun taking delivery of our newly acquired vessels in addition to the Genmar Zeus, which was delivered in July. We expect to add the remaining six double-haul vessels to our fleet between August 2010 and April 2011 as detailed in the chart on slide eight.

Notably, five of the remaining, six vessels are scheduled to be delivered to start contributing to our earnings within the next three months. After delivering on July 2, the Zeus was put on a voyage expected to generate a TCE of approximately $40,000 per day. The next two ships to deliver, the [Inaudible] each come with time charters expiring in the first half of 2011 at $33,500 and $32,500 per day respectively.

Consistent with our past success, we intend to draw upon our established management infrastructure to seamlessly integrate the vessels into our fleet, while we continue to provide leading charters with service that meets the highest operational standards.

I now would like to turn the call over to, Jeff.

Jeff Pribor

Thank you, John and good morning everyone. Beginning on slide 10, I would like to review our second quarter results. For the three-month ended June 30, 2010, the company recorded a net loss of $14.3 million or $0.25 basic and diluted loss per share. For the prior year period, the company recorded net income of $7.3 million or $0.13 basic and diluted earnings per share.

The decrease in net income was primarily due to 18% decrease in our fleet TCE compared to the prior year period as well as a $11.2 million increase in net interest expense. Our net interest expense increased to $19 million during the quarter ended June 30, 2010 compared to net interest expense of $7.8 million for the prior year period.

The increase in net interest expense is primarily due to the new $300 million senior note issuance in the fourth quarter 2009, as well as a re-pricing of our credit facility from LIBOR plus 200 to LIBOR plus 250 also from the fourth quarter of 2009.

To annualize 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 number of voyage days for the applicable time period. You will find the total number of voyage days used in this capitation in the appendix to our press release.

On slide 11, we provide a second quarter 2010 TCE analysis. Full fleet TCE decreased 18% to $22,633 from $27,649 for the prior year period. The primary reason behind this decrease was that during the second quarter 2009, all the companies do make it around time charters that were raised above today’s current sport rates. EBITDA for the quarter of June 30, 2010 was $27 million compared with $37 million for the prior year period.

I would now like to discuss our balance sheet as detailed on slide 12. As of June 30, 2010, our company had $115.2 million in cash. Our total debt outstanding was $992.9 million as the company paid down $750 million revolving credit facility by $26 million in Q2.

Turing to slide 13, we provided second quarter expense analysis. To analyze expenses, we look at the daily cost per vessel. Per day vessel cost increased 3% from $8,359 to $8,602. Our two VLCC as well as certain Handymax and Panamax vessels with fixed fee contracts from the prior period came to an end, experienced higher current market rate contract cost. Additionally, daily vessel operating expenses on certain Handymax and Panamax vessels still on fixed fee contracts from the Arlington acquisition experienced annual contractual fee increases.

More specifically, daily vessel costs on the VLCCs were up 39% from $8,956 to $12,482, Panamax daily costs were up 18% from $6,422 to $7,582 and Handymax vessels were up 6% from $6,288 to $6,674. The other expenses on the Suezmax vessels were essentially flat at $8,552 versus $8,415 last year, while daily expenses on the Aframax vessels were down 4% from $9,221 to $8,813.

General and administrative expenses decreased 3% to $9.4 million. Partially contributing to this reduction was a decrease in personnel costs in our New York office as well as a decrease in operating costs of our Portugal office due to an increased strength of the U.S dollar against the Euro.

Our outlook for the rest of 2010 is detailed on slide 14. These items do not include the new fleets, but we will provide some guidance for the acquired ships shortly. Our guidance for the direct vessel expenses for the remaining two quarters to 2010 is $12,128 per day for our two existing VLCCs, $8,278 per day for our 11 Suezmax, $8,419 per day for our 12 Aframax, $6,890 per day for two Panamax and $6,522 for our four Handymax.

We expect our G&A for the remaining two quarters of 2010 to be $19 million, $4 million of which is noncash restricted stock amortization. These estimates our in line with our previous quarterly call. We estimate $45 million of depreciation and amortization for the remaining two quarters 2010, also which has not changed since our last call.

In the second quarter, we had 125 off-hire days due to scheduled drydocking and unanticipated off-hire for maintenance on certain vessels. We estimate approximately 198 additional scheduled off-hire days for dry-docking in the remaining two quarters including 73 days in Q3 and 125 days in Q4.

Now, for the newly acquired ships to aid with remodeling, we would anticipate that the VLCC, DDOE per day would be around $10,000 and the Suezmax DDOE per day would be around $8,000.

Looking at an average age and the average purchase price, you get approximately $4 million of additional depreciation per year per VLCC and for the Suezmax in the same basis would be approximately $3 million with additional depreciation per vessel per year.

Using 60% debt financing times of purchase price of vessels paid with the new facility at LIBOR plus 300 basis points, you would get interest expense of approximately $2 million per year for each VLCC and approximately $1.6 million per year for each Suezmax. So hopefully that will help you with your modeling.

Continuing on slide 15, we outlined our current debt profiles. On our $750 million revolving credit facility, we repaid approximately $26 million during Q2 and currently have around $700 million of the $750 million available. We have about $580 million of that swapped at a weighted average rate of 4.2% and an all in cost of 6% including the margin.

The chart on this slide also provides the duration of each swap. In addition to our credit facility, we also have $300 million senior notes outstanding. These notes were issued in November 2009 at a 12% coupon. The new $372 million credit facility is in place to provide debt financing for the recently announced Metrostar acquisition. This facility is expected to be grown upon delivery of each vessel. The facility has quarterly amortization and a margin of LIBOR plus 300. At the end of second quarter 2010, we had not yet drawn on this facility though.

On slide 16, we provide description of our dividend history. For the second quarter 2010, we have declared an $0.08 quarterly dividend. We are pleased to have been able to declare a quarterly dividend of over $1 billion since we first started paying dividends in May 2005, including this recently declared dividend. The dividend is payable on or about September 3, 2010 with shareholders of record as of august 21, 2010.

That concludes my remarks. Now, I would like to turn the call over to our President, John Tavlarios.

John Tavlarios

Thank you, Jeff. Turning to slide 18, I would like to talk about the current market conditions and the outlook for the third quarter. As of July 28, 2010, we have 47% of our available Suezmax spot days fixed at $34,921 per day and 26% of our available Aframax spot days fixed at $20,781 per day.

Currently, VLCC, TCE rates are around $20,000 per day. Suezmax TCE rates are around $18,000 per day and Aframax TCE rates are around $14,000 per day. As of July 27, 2010, the [Amerex] FFA curve for VLCC is $27,973 for August and $32,070 for September. For Suezmax, the FFA curve is $19,787 for August and $21,634 for September and for Aframax $14,000 for August and $14,819 for September.

We now like to give a brief industry outlook. While the effects of the global recession, OPEC quarter cutbacks and significant tanker audit book continue to make themselves felt, tanker markets thus far in 2010 continue to show marked improvement over those of full-year 2009.

Tanker rates began in 2010 with a seasonal up tick aided by strong fundamental demand to eastern locations. While winter seasonal influence has dissipated by the end of the first quarter, rates held steady at moderate levels through the early and mid stages of the second quarter followed by strong counter seasonal increase in rates in June.

Overall, while the 2008 OPEC production cuts designed to right size inventory levels, remain in place and continue to exert downward pressure on tanker demand. Slipping OPEC appliance continue to be beneficial to tankers. On the supply side, while 2010 is expected to be another substantial year for tanker fleet growth, that’s why tanker deliveries are behind schedule and scrapings continue to offset new capacity. As a result, the prospect is that year-end fleet growth will be well below initial expectation.

Turning to slide 19 through 21, we discuss current trends in oil demand. Looking at oil demand for 2010, the consensus among experts is converging on growth in the range of 1.8 million to 2.1 million barrels per day or 2.1% to 2.5% depending upon the forecasted source.

OPEC production cuts efficiently remain at 4.2 million barrels per day set in September 2008. However, OPEC compliance eroded from an estimated 66% in July 2009 to 46% in June 2010 making effective cuts around 1.9 million barrels per day. As anticipated, inventory built during the second quarter on a seasonal basis built in the second half of the year we believe increasing demand will lead to a correction.

Inventories are projected to continue working off from peak level since in Q2 and Q3 of 2009 as a result of increasing fundamental demand, especially from China combined with seasonal effects. As an example of this continued positive momentum, OECD inventories in terms of four days covered were estimated to be 58.8 days at the end of Q2 down from 64 days in July 2009 and expected to continue declining to 55 days within range of historical averages by year-end 2010.

Such OECD statistics of course don’t reflect data from China, which showed robust oil demand growth. Chinese imports rose to 5.44 million barrels per day in June, the highest level on record representing year-on-year growth of 34%.

World resourcing of this oil is coming from increasing distances, most notably the Atlantic basin. Over a third of Chinese imports in Q2 were from West Africa, Venezuela and Brazil, all significantly longer routes than Arab Gulf to China. This effect particularly benefits the VLCC class as it is estimated that China alone required 2 million barrels equivalent to one VLCC per day to meet its import requirement in 2009. Thus far in 2010, the phase is even greater. After 206 calendar days, there have been 274 VLCC fixings to China that may explain the strength of that sector year-to-date.

On slide 22, we discussed the current supply picture. While gross tanker fleet capacity continues to grow as new tonnage is delivered, fleet rationalization measures continue to offset net fleet growth. So, far in 2010, 166 new vessels totaling 21.2 million deadweight tons or 4.8% of year-end fleet capacity has been added to the tanker fleet. However, as in 2009, we expect the full-year delivery schedule to shrink from a combination of slippage and cancellations.

On the vessel removal side, 2010 has seen increasing tanker scrapings and conversions. The total amount of tonnage removed from service this year has been 11.2 million deadweight tons offsetting more than half of tanker additions. Looking forward, the arrival of the IMO deadline for single-hull tankers will further accelerate tanker demolitions and conversions in the later quarters of 2010. Additionally, we expect current high scrap steel prices to continue to support scrap values and incentives to accelerate removals.

As a summary in the second quarter following the dissipation of seasonal effects, tanker rates settled at moderate levels through the early and mid stages of the quarter. However, in the late stages of the quarter, rates rallied on a strong counter seasonal basis as robust parties demand, incremental floating storage and gradually increased OECD demand outweighed seasonal influences. So, far in the third quarter, often a seasonally slower quarter, rates have been under renewed pressure as floating storage particularly in [Oreana] is unwound.

Looking forward, we expect rates to slowly regain strength and settle at moderate levels as the OECD gradually works down oil inventories. We think it is likely that OPEC member state compliance will continue to deteriorate through 2010 leading to the eventual reversal of OPEC quarter cutbacks as early as October 2010.

As a result, we believe conditions, as we move through mid 2010 to the later stages of the year will continue to be markedly better than those in 2009 and that a more pronounced recovery in the late third quarter and fourth quarter is a very credible scenario.

Most importantly to our shareholders, whatever the slope of the curve, General Maritime remains well positioned having entered 2010 with approximately 45% time charter coverage for the year. This enables us to maintain a strong balance sheet, pay down debt, and take advantage as we clearly did in the second quarter of acquisition opportunities while also leaving substantial opportunity to profit from raising rates.

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

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Jon Chappell out of JP Morgan

Jon Chappell – JP Morgan

Hey, good morning. Jeff, I have one more covenant question for you. I actually hope that they were done by now, but with this recent amendment I just want a little bit of a clarification, the pro forma EBITDA from the new ships is obviously a huge win given the 10-year average rates, but does the pro forma of that EBITDA start on the beginning of the third quarter regardless of when the ship gets delivered or does that kick in once the ship is officially delivered to you?

John Tavlarios

Hi, Jon. First of all just to make sure everyone that is listening is on board to the question you are asking, the amendment to the existing credit facility states that we will be able to use pro forma EBITDA for the ship as they are delivered, and the answer to your question is it’s not from the beginning of Q3, for each ship it’s from the moment it’s delivered.

If you look back 12 months and we use 10-year average rates for VLCCs or Suezmax, average spot rates depending on which ship it is to get the pro forma EBITDA, like it’s from day delivered, Jon.

Jon Chappell – JP Morgan

Okay, this may be tough to answer, it’s kind of subjective but you are getting a majority of the ships in the fourth quarter, so by the end of the third quarter it appears that you are just out of that 6.5 times net debt to EBITDA coverage, but it looks like you will be clearly be below in the fourth quarter. Do you think the banks would be lenient knowing that in one quarter down the road that you will be fine as far as the ability to continue pay dividend is concerned?

Jeff Pribor

Yes, I mean we will talk to that. I mean, I don’t want to get into a specific forecast, but I think that within -- it depends on what rates you like to use, but we came up with what looked very comfortable I think by.

Peter Bill

Bottom John, we are not worried about it at all, just answered your question to make it short.

Jon Chappell – JP Morgan

Yeah. Thanks Peter.

John Tavlarios

You’re welcome.

Jon Chappell – JP Morgan

One more question and I intent to follow-up to it depending on the answer, but Peter Bell or John Tavlarios or anybody I guess. What are you looking for chartering the VLCC’s, and what I mean by that is, you guys obviously have a lot of experience in Suezmax’s and Aframax’s, but not a whole lot of experience with spot market VLCC’s. Are you going to add anybody to the team? Are you looking for maybe charters like you got the division or you can do an index related charter? How do you plan on chartering those going forward?

Jeff Pribor

John, first of all we have enough experience in house to handle it and what we are going to do is probably a combination. I mean we think there is good opportunity in the market. It will be an opportunistic fixed number when the time comes or some sort of a profit sharing scheme or continue to trade spot. I mean right now, we are comfortable with the overall profile of the company and we are going to continue to be opportunistic, so.

Peter Bill

Yeah, we are not concerned about our chartering guys. We think that there is no issue of them chartering VLCC’s and we’ve had two VLCC’s for two years, so we are not worried about it at all.

Jon Chappell – JP Morgan

Okay. Thanks Peter, John and Jeff.

John Tavlarios

Thank you.

Operator

Our next question comes from Doug Mavrinac out of Jefferies & Company.

Peter Bill

Hi Doug.

Doug Mavrinac - Jefferies & Co.

Hello guys. How are you doing this morning?

Jeff Pirbor

How are you?

Doug Mavrinac - Jefferies & Co.

Very good, very good, thank you. Just following-up kind of on that last question, but in a different way. John during your comments you were mentioning that you are going to target about 45% to 50% Time Charter contract coverage going forward. My question is, is that across each asset class or was it just any asset class or do you prefer spot exposure in some asset classes and Time Charter coverage in others, such that the fleet overall is about 45% to 50%.

Jeff Pirbor

We look at our overall fleet balance, but then again in each asset class we look at whatever the opportunity is at. So it might be a line to past. As you know we thought the opportunity was to tie up our Suezmax’s and we know the majority of them were tied up, while our Aframax’s were mostly in the spot market. So it’s really what the market gives us and then we just adjust according.

Doug Mavrinac - Jefferies & Co.

Yes, it’s still nimble, opportunistic and just whatever the market provides essentially.

Jeff Pirbor

Exactly.

Doug Mavrinac - Jefferies & Co.

Okay, perfect, great. Then moving on, in terms of kind of maybe a little bit more macro in nature. You guys have a big presence in every single asset class now and you have a lot of open tonnage. So you are probably in a pretty good position to determine kind of what sort of demand there is from charters for Time Charter contracts and whatever rate across we may make from that.

Have you seen an increase in demand from the charters to increase their secured employment, essentially more or less kind of trying to lock in here or have you not seen much in the way of demand, a change in demand for time charter contractor recently.

John Tavlarios

There’s been a little bit more, but I can’t say there is anything significantly that’s changed, but there is especially with us now stepping into the VLCC market and the fact that we are in the product market, its expanded the amount of charter that we talk to, and due to the diversity of the fleet I think there is more desire to try and do things in all asset classes. So there is more a dialogue with us, but our position is pretty much the same.

Peter Bill

I wouldn’t say Doug that there is a more inquiry in general in the market, but what we have seen recently as we have taken on the VLCCs and the company has gotten bigger again, we have seen more people coming to us for more project type deals. So in other words saying, hey guys we like X segment of the market or we like this or can we do something here. So it’s a little bit more to build a deal around a project as opposed to saying, we’ll take one of your Suezmaxs for a year.

Doug Mavrinac - Jefferies & Co.

Got you. Alright, very interesting. Thank you for that Peter. And then just final question before I turn it back over. Obviously you guys have been amongst the most active, probably the most active in terms of doing acquisitions here over the last several months, and as part of that you’ve also gotten increased pledges from your lenders, successfully gotten those, but you are saying your experience in dealing with some of your lenders.

Is there any read across that we can get in terms of kind of the current environment in the ship lending market? Is it as tight as it was? Is it open for good companies? Kind of what is your read across in terms of how is the ship-lending environment right now?

Peter Bill

I mean just having done, I don’t know, a couple of billion of dollars of deals across tankers and bulkers, what we see is banks are open for the right clients. They are not open the way they were couple of years ago and even for the right clients I don’t think that they are at 75% or 80%.

I think they are very comfortable in the 60% level, but it’s really for sort of I would call the top tier clients. Fortunately we fall into that category and so the one thing we found is that you’ve got to scratch a little bit harder than you did before and you got to dig a little bit deeper and maybe spread out your contacts a little bit more.

You know maybe we got a little bit lazy years ago when we would just call our two main banks and the deal was done in a minute over the phone, now you have to work out a little bit more, but again I think for the good clients the banks are there to support us.

Doug Mavrinac - Jefferies & Co.

Perfect. That’s all I had. Thank you very much Peter.

Operator

Our next question comes from the Gregory Lewis out of Credit Suisse.

Gregory Lewis - Credit Suisse

Thank you and good morning guys. John and Peter, I think you both kind of answered my question in your own sort of way, but have you considered putting as you take delivery of these VLCCs and even some of the Suezmaxs, as you build up both these segments, have you considered looking at entering any of these assets and pools?

Peter Bell

I mean, we’ve looked at pools in the past and frankly we outperform most of these pools. So I don’t know why we get into some sort of key structure that is going to detrimental to us. I think we are quite comfortable marketing our vessels ourselves. If we found something that via pool that was doing a better job than us, well listen, we are doing the best thing for shareholders, so we’ll gladly look at it. But right now I think we’ve handled our vessels quite well, and we are going to continue to do that for now.

John Tavlarios

The other thing that happens when you enter a pool, and this is hard to put a hard number on, is you sort of loose your commercial relationships, because the commercial relationships go with the pool, and what you see happening is, you might start talking to a charter about a VLCC and the next thing, they are interested in your products carriers, we are talking about an Aframax and they take a Suezmax. So having those commercial contacts and keeping in the frontline with them is sort of a benefit you can’t put a number on.

Gregory Lewis - Credit Suisse

Okay great. And then my last question, just more of a macro question. As I look at VLCC fixtures out of the Arabian Gulf for the July 16 cycle, it was like a year-to-date high. I think it was well north of 110 VLCC fixtures back in the Arabian Gulf. I mean, how do you exactly balance that with the activity that was seen out of the AG for VLCC’s and sort of the week rate environment that we are in right now.

John Tavlarios

Well, I’ll pass this to Peter Bell. He is trading the VLCC, Peter.

Peter Bell

Yeah, I mean we didn’t see a lot of activity inquiry in July, but we have a supply situation there as well and it’s that simple. We’ve just got too many ships under acquisition.

John Tavlarios

You know Greg, it’s a question that I’ve been asked for 20 years and if you think about it is, no one’s ever given me the right -- I’ve got the question, I’ve been ask the question, no one’s given me the right answer. If you say to someone, ‘oh, when the market’s booming, what’s utilization?’ ‘Oh, it’s 98%, 99%.’ ‘Oh, when the market’s terrible what’s utilization?’ ‘98%, 99%’

You think that, ‘Oh, in the down market there must be a lot of ships sitting around doing nothing.’ Unfortunately, that’s not the case and I think what you see happening is, you got to look at each one of these markets at a very specific time, and if in July there are a tone of deals that you just see happen to be sitting in the Arabian Gulf at the same time, and the fixtures just come out one by one and the VLCCs get fixed. You know, I see the market take off.

If there’s two VLCC’s or if there is one VLCC sitting there, and a bunch of pictures come out, you’ll watch the market take off, not taken off for only one ship, but all lot of that has to do with that specific market at that specific time.

Fortunately, as you look at it over the course of the year or 18 months or 24 months, you see what the market is, but at any one time its very hard, void by void to make a trend, because you just might miss. Especially in a ship like VLCC which does five or six trips a year, your stuck in a one trip, you get hit and there’s a delay and then all the ten ships are backed up and the charter rate for that ship for that voyage goes down.

Gregory Lewis - Credit Suisse

Okay guys. Thanks for the answers and have a great summer.

John Tavlarios

You too.

Peter Bell

Thank you.

Operator

(Operator Instructions) Our next question comes from Justin Yagerman out of Deutsche Bank Securities

Justin Yagerman – Deutsche Bank Securities

Hey, good morning fellows.

Peter Bell

Good morning.

Justin Yagerman – Deutsche Bank Securities

I was curious, it sounded like the new VL’s are come on at a lower OpEx than the current VL’s and then part of that’s probably the V-MAX versus the regular VL structure, but as we see this fleet of VL’s deliver, should we expect kind of a scale change in terms of how your managing costs for the operation of those vessels.

Peter Bell

Yeah, I think there is going to be a slight scale change. I mean the newer VLCC’s, it’s going to be slightly less from what we experience on the V-MAXs. So, I mean that’s probably a good indication of where we’ll be going forward.

Justin Yagerman – Deutsche Bank Securities

Yeah, so I mean I guess as we get fully delivered, you think that $10,000 number is probably a better OpEx number for the full VL fleet kind of on average as we move onto 2011 or is that something that could even come down below that in your opinion?

John Tavlarios

It could slightly come down, but I think you are talking roughly there, 9500 to 10000.

Justin Yagerman – Deutsche Bank Securities

Okay. Just curious, one of your public competitors recently announced a pretty large VL transaction as well. I’m interested if you guys had looked at that deal when you were looking at this, given that that has more time charter coverage, that your deal has more spot opportunity and if that was something you considered and maybe the pros and cons when you looked at the two?

John Tavlarios

I mean we saw, by the time it was done, by the time we saw they had already been announced. So we did not look at it before, but there was a private deal done between the principals.

Justin Yagerman – Deutsche Bank Securities

Okay, that’s helpful. I appreciate the color on that. Then obviously you guys are going to be in a period of deleveraging for a bit, but you’ve been opportunistic in the past and you guys are pretty creative in figuring out how to finance things. If the right deal came along, what are you guys looking at? What interests you in the market right now? You just made a big splash in crude. You can go back to products or are you guys going to be focusing more on crude for a while?

John Tavlarios

I think we are happy where we are right now. I mean we’ve had a bit of a busy year and I think we need a couple of weeks off, but I mean I think in September we’ll come back and hopefully we’ll have something exciting, but right now I think we are just trying to digest this deal.

Justin Yagerman – Deutsche Bank Securities

Fair enough guys. Well, I’ll speak to you soon. Thanks.

John Tavlarios

Thank you.

Operator

Our next question comes from Scott Burk out of Oppenheimer.

Scott Burk – Oppenheimer

Hi. Good morning guys.

John Tavlarios

Good morning Scott.

Scott Burk- Oppenheimer

I had a question about the Suezmax fleet. The rates seem to be pretty low for the quarter, and I wonder if that just has to do with the load-to-load accounting or does that just happen, you just happen to have vessels away from where the higher start rates were?

John Tavlarios

Peter.

Peter Bell

Yeah. No, it’s a quarter-to-quarter fluctuation, and we see that in some quarters we have to avid terminations on certain dates or in certain positions. We do better in some quarters than we do in others and it’s really more to do with that.

John Tavlarios

Yeah, Scott you might have noticed that the guidance for the Q3 Suezmax to-date is pretty high. We are just starting to see the timing effects there. Kind of what we didn’t get in Q2, we are getting a little bit in the beginning of Q3.

Scott Burk - Oppenheimer

Yeah, I did notice. It looks like you captured some of that for the third quarter and I’m just wondering, how might that continue for the rest of the quarter?

John Tavlarios

Well, that’s why, one thing we changed is this quarter trend of our guidance was to give you initially the current spot rates in the Aframax, which I know everyone knows, but just to point out. We don’t have, you should care to stay at the current spot rate. Take a look at the Aframax and you use whatever you want to use for that in the quarter.

Scott Burk – Oppenheimer

Right, okay, and then just one other question; given the rates are fairly low levels right now, are they low enough where you would consider soliciting these vessel or some other method to kind of try to boost rate a little bit or is that something which you wouldn’t really engage in?

Peter Bell

No we run our voyage calculation. For every voyage that we look we run a voyage calculation and we look at what the optimal speed is given the rate environment, the cost, the length, the duration of the trip and we make each one of those decisions on an individual case by case basis. If you look at it, we absolutely do, but its not always justified.

Scott Burk – Oppenheimer

Okay, and so that [Indiscernible] that you had actually, the different voyages will actually, the VLCCs would be traveling at significantly different rates just depending on how that calculation worked out with bunker rates and things?

Peter Bell

Bunk prices, the rate, the length of the voyage, these are a number of factors that come into it, but we look at it, each one of them case by case.

Scott Burk – Oppenheimer

Okay, and then one other question about kind of your acquisition ideas going forward, and you talked to wanting to further reduce your fleet age, but I assume its going to take sometime to absorb and digest this next acquisition. When might you be ready to come back and look at additional deals?

Peter Bell

I think it should take a couple of months.

Scott Burk – Oppenheimer

Okay.

Peter Bell

But again, if something really special popped up tomorrow, I am not going to lie, we would jump all over it. So I think it depends, if you are saying, when are you going to be out there looking or always looking, I doubt anything is going to happen now. If something really special came on, of course we’d look at it, but I think we are going to try and take a little time off now.

Scott Burk – Oppenheimer

Very good. Alright, we’ll enjoy the vacation and the summer then, thanks.

Peter Bell

Thank you Scott.

Operator

Our next question comes from Sal Vitale of Sterne Agee.

Sal Vitale - Sterne Agee

Good morning guys.

Peter Bell

Good morning.

John Tavlarios

Hey Sal.

Sal Vitale - Sterne Agee

Just a couple of quick questions; one, just looking at the forward outlook for Q3. Why is there a disparity between the percentage of Suezmax rates, the 47% so far and the 26% for Aframax. Is there anything specific for the quarter there?

John Tavlarios

Yeah, it’s just a mix of -- we have a number of vessels of the Aframax class that were on Time Charter and the Time Charter expired. So it just works out that way Sal. It’s just pure math.

Peter Bill

Difference in voyage duration as well. We are fixing much further ahead on the Suezmax’s than we are on the Aframax.

Sal Vitale - Sterne Agee

Okay and then I have just another question on the second quarter, and you may have just addressed this, I apologize if I didn’t hear it, but you said basically for the Aframax and the Suezmax spot rates, they came in a litter than the rates published by Clarkson and other brokers etc., and so you are saying that one of the biggest drivers of that rather is just depending on when it was loaded and discharge. I mean is this something more or less specific to 2Q, that we should see start to reserve itself in 3Q?

John Tavlarios

Yes, and the other thing is, people make these comparison to Clarkson then Clarkson’s number is really almost an impossible number to meet. There is perfect utilization, no brokerage commission, it’s not really a representative number of what anyone actually accomplishes and I think it’s produced as a trend, but not as an absolute number.

As we had said earlier, the Suezmax quarter to quarter the voyages are longer, so you are going to have more voyages across the quarter and that’s going to distort the earnings from one quarter to the next. The Aframax’s are on shorter voyages, so they are much less likely to be impacted than heavily.

Sal Vitale - Sterne Agee

Okay, and then just switching to you know the bigger picture question regarding future acquisitions. It sounds like it might be on hold for a short period of time here, but just thinking about what financing can look like in the future for a vessel purchase, do you still have five vessels unencumbered, is that right?

John Tavlarios

Yes we do.

Sal Vitale - Sterne Agee

Okay, and how much do you think that you can borrow against these vessels from the additional second hand purchases. Just trying to get a sense for the size of a potential purchase you could do in short to medium term.

Peter Bill

Well, we certainly can borrow 60% against them like we did at our new facility, but overall I will just say as we said on other calls, how we finance a new acquisition really depends on the size of it, the nature of it, there’s lots of different factors. So we’d look at every different types of financing source, but it’ll be dependant on the deals specifics.

Sal Vitale - Sterne Agee

Okay. Thank you.

Peter Bill

Sure.

Operator

Our next question comes from Doug Dobber out of FBR Capital Markets.

Rob McKenzie – FBR Capital Markets

Actually guys, this is Rob McKenzie. I had to hop through Doug’s line, because there was a technical issue. A question for you John or Peter, strategically or looking forward how long do you think the acquisition opportunity window will remain open before charter rates and vessel values raise to the point where it’s no longer interesting to be acquiring vessels.

Peter Bell

I don’t know, that’s a big question. We struck while we thought the value was right. We still think that values are in a good range, unfortunately other people think so too and don’t want to sell, so. I think that’s the balance and the trick that you’ve got us figure out; not you, all of us. But if you remember we are very aggressive acquirers.

It was a long time, from 1997 up to 2004, seven years there then we stopped, between 2004. I mean we just coupled deals, but really are in charge of big deals just recently. So I think we’ve got our ways to go. I think they are good to go on these acquisitions. The trick is finding the right ones.

Rob McKenzie – FBR Capital Markets

Okay, and on the flip side, I guess no ones asked about selling assets. I know that not necessarily something you necessarily want to do, but in terms of deleveraging or reducing the fleet age, how do you think about selling some of your older vessels, maybe for example say the vision or other older vessels that might reduce your cost structure and help reduce your fleet age in the same process?

John Tavlarios

Yeah, the vision probably won’t be one of them, but something like the Gulf might be one of the older Aframax or Suezmaxs. Yeah, of course we’d look at that at some point.

Rob McKenzie – FBR Capital Markets

On do you see that during this process or is it now just a time to acquire?

John Tavlarios

We think now is the time to acquire. We think that can probably come a little bit later on.

Rob McKenzie – FBR Capital Markets

Okay. Thanks. The rest of mine are answered.

John Tavlarios

Okay. Thank you.

Operator

And our next question comes from Justin Yagerman out of Deutsche Bank.

Justin Yagerman – Deutsche Bank Securities

It’s a bigger picture question and I guess, just looking for some insights here. You mentioned before you guys have done billions of dollars worth of deals in the last couple of months and big asset purchases. At the same time, obviously there’s been a lot of macro fear in the market, not just shipping, but kind of broader financial markets. What is it that is giving you the confidence to go out and make all these purchases and spend all this money right now? What do you think you are seeing that other investors aren’t right now?

John Tavlarios

As you said, there’s this climate of fear out there, which we think is overdone. Everyday you get some funding or some genius who for 40 years have been talking about a market collapse and then finally two years ago it collapsed and now all of a sudden the guy is held as a genius. People forget for the previous 38 years he’s been talking about a collapse that never came, and all of a sudden everybody is listening to these people and not looking at the fundamentals.

Look at the earnings of companies that are coming out; earnings are stronger, revenues are stronger. We had this terrible collapse two years ago, we are definitely not going have another terrible collapse. I don’t think we are going into a boom environment, but I think we are going into a steady slow growth environment. So the way we look at it is, I think people are pricing in a collapse into the markets. I mean you look the values or the price of our stocks or any other companies, it’s ridiculous. So people are pricing a collapse that I don’t believe is going to come, that’s number one.

I think number two, what we do think is happening is, we are buying assets on the dry side of $0.50 of what they were two years ago and on the wet side of $0.65 of what they were a couple of years ago. We think that the long-term outlook for the world is better than it was for the previous couple of years. So we are excited by that prospect and where we’ve got the -- I don’t know the right word, the courage to buy things right now, to step up to do the deals and to ride into this cycle.

Justin Yagerman – Deutsche Bank Securities

That’s really helpful. Thank you. I appreciate the time again.

John Tavlarios

Thanks.

Operator

That concludes the question-and-answer session today. At this time I would like to turn the conference back over to the company for any additional remarks.

John Tavlarios

With the flexible deployment, a diverse service offering and an increased presence in the favorable VLCC market, we are poised to take advantage of future tanker rate increases, while continuing to achieve a level of stability in our results. As we’ve done in the past, we will also continue to seek opportunistically implement our long term gross strategy, through a time when we continue to distribute quarterly dividends to shareholder.

I would like to thank everyone for participating in today’s call, and we look forward to providing you an update in the future.

Operator

That does conclude today’s conference. Thank you for your participation.

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Source: General Maritime Corp. Q2 2010 Earnings Call Transcript

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