General Maritime Corporation Q2 2008 Earnings Call Transcript

General Maritime Corporation (GMR)

Q2 2008 Earnings Call Transcript

July 31, 2008 10:00 am ET

Executives

Brian Kerr – IR

John Tavlarios – President and CEO, General Maritime Management LLC

Jeff Pribor – CFO

Peter Georgiopoulos – Chairman and CEO

Peter Bell – SVP and Head of Commercial

Analysts

Doug Mavrinac – Jefferies & Co.

John Chappell – JPMorgan

Natasha Boyden – Cantor Fitzgerald

Charles Rupinski – Maxim Group

Terese Fabian – Sidoti & Co.

Daniel Burke – Johnson Rice

Presentation

Operator

Good morning, everyone, and welcome to the General Maritime Corporation conference call to discuss the company’s 2008 second quarter and six-month results. Today’s call is being recorded. We will conduct a question-and-answer session after the opening remarks, and instructions will follow at that time. A replay of the call will be accessible at any time during the next two weeks by dialing 888-203-1112 for U.S. callers; and 719-457-0820 for non-U.S. callers. To access the replay, please enter the passcode 8241112.

At this time, I would like to turn the conference over to Mr. Brian Kerr. Please go ahead.

Brian Kerr

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

There are also 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, 2007, and in subsequent reports on Form 10-Q and Form 10-K.

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

John Tavlarios

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

As outlined on Slide 3 of the presentation, I will begin today's call by discussing the highlights of the quarter followed by Jeff's review of our financial results for the three and six months ended June 30, 2008. Following this, I will provide some remarks on our company outlook and an overview of the industry. We'll then be happy to take your questions.

I will begin on Slide 4. During the second quarter year-to-date, we are pleased to have posted strong financial performance for shareholders while declaring our 14^th consecutive dividend and taking steps to grow our modern fleet by entering into agreements for the purchase of two additional vessels.

In terms of our financial performance, we recorded a net income of $20 million, or basic and diluted earnings per share of $0.69 and $0.67 respectively, excluding other expense which was principally comprised of non-cash loss of our freight derivatives.

While strong market conditions had a positive impact on revenues for the quarter, other expenses in the quarter from our freight derivative contracts led to the company posting net income of $5 million or $0.17 basic and $0.17 diluted earnings per share for the quarter.

EBITDA for the second quarter was $25.4 million. Jeff will discuss our financial results for the quarter as well as for the six months 2008 period in more detail later on the call.

During the second quarter, we also continued to draw upon our significant time-chartered coverage to declare a $0.50 per share quarter dividend which positions the company to once again meet its fixed annual dividend target rate of $2 per share. Including this most recent dividend, General Maritime has declared cumulative quarterly dividends of $26.28 per share since initiating its dividend policy.

I’d like to note that we continue to pay sizeable dividend to shareholders during the time in which we maintain significant financial flexibility for future growth.

Turning to Slide 5, we provide a chart that details our time charter coverage. As of June 30, 2008, the company had 15 vessels or vessel equivalents fixed on time charter representing 67% time charter coverage and $180.1 million in contract revenues for 2008. We are pleased with the considerable success we have had increasing our contracted revenue and cash flow streams, which we believe continues to benefit shareholders in a number of ways. First, our sizeable revenue and cash flow supports our fixed annual dividend target of $2 per share. Second, our approach enables the company to retain the ability to benefit from improved rate environments in the future, so we can continue to best serve our shareholders.

I’ll now provide an overview of our fleet. As I mentioned earlier, we took steps to grow our fleet by entering into agreements in May for the purchase of two additional vessels. Specifically, we contracted to acquire two 2002-built double hull Aframax vessels for $137 million.

The addition of these vessels which we expect to join the fleet at the end of the third quarter into the fourth quarter of 2008 will enable the company to grow its double hull fleet in a manner that meets our strict return criteria, expands our earning power and strengthens our high quality fleet.

Including the two vessels we contracted in May to acquire, the average age of our fully double hull fleet is expected to be approximately 8.7 years, down 29% from 12.4 three years ago. We intend to continue to draw upon our modern fleet and high-caliber crew to meet stringent operational standards and exceed customer expectations.

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

Jeff Pribor

Thank you, John, and good morning everyone.

Beginning on Slide 7, I’d like to review our second quarter financial results. For the second quarter of 2008, excluding $15 million of other expense, we reported net income of $20 million or $0.69 basic, $0.67 diluted earnings per share. Including other expense, net income was $5 million or $0.17 basic and $0.17 diluted earnings per share, compared to a June 30, 2007 net income of $11.8 million or $0.38 basic and $0.37 diluted earnings per share.

The decrease in net income was principally the result of increases in other expense compared with the prior year period. Other expense included a $10 million unrealized loss associated with the change in fair value of our cash freight derivatives, a $4.9 million loss associated with the monthly cash settlements of our freight derivatives and $0.3 million of loss associated with other derivative financial instruments.

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

On Slide 8, we provide a second quarter 2008 spot TCE analysis. Full fleet TCE including time charters increased 10.8% or $37,384 for the quarter ended June 30, 2008, compared to $33,739 for the prior year period. The TCE earned by our spot Aframax vessels increased 35.2% to $42,313 for the quarter ended June 30, 2008 from $31,285 for the prior year period while our spot Suezmax vessels decreased slightly to $38,698 from $39,118 in the prior year period.

The TCE earned by our time chartered Aframax vessels increased by 13.1% to $33,602 for the quarter ended June 30, 2008 from $29,722 for the prior year period, while our time charter Suezmax vessels remained relatively flat at $37,296 from $37,133 in the prior year period.

For the quarter ended June 30, 2008, EBITDA after other expense was $25.4 million, compared to $31.4 million for the quarter ended June 30, 2007. Depreciation and amortization for the quarter ended June 30 was $13.9 million, compared to $12.7 million for the same quarter last year. This increase is primarily attributable to the delivery of two Suezmax vessels since the prior year period.

Our net interest expense remained relatively flat at $6.6 million during the quarter ended June 30, 2008, compared to $6.9 million for the prior year period.

I'd now like to discuss our balance sheet, which is detailed on Slide 9. As of June 30, 2008, our cash position was $42.7 million, and our debt was $611 million. With close to $300 million in liquidity, we are very excited about our strong balance sheet and feel that our capital structure gives us the stability and flexibility we need to continue to find and execute future growth and consolidation opportunities.

Turning now to Slide 10, we provide a second quarter and six-month 2008 operating expense analysis. To analyze expenses, we look at the cost per vessel day, which adjusts for changes in the size of our fleet. Per-vessel-day costs 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 expenses increased by 32% to $8,240 per vessel day for the quarter ended June 30, 2008, compared to $6,237 for the prior year period. The increase was attributable to higher crew costs, insurance, lubricating oil and maintenance and repair as well as a one-time expense of $1.3 million attributable to a write down of a general average insurance claim related to the February 2005 incident associated with the Genmar Kestrel.

General and administrative expenses increased 9.6% to $12.6 million for the quarter ended June 30, 2008, compared to $11.5 million for the prior year period. This increase was attributable to severance costs.

Our outlook for 2008 is detailed on Slide 11. We have not changed our estimates for daily direct vessel operating expenses. Our guidance still remains at approximately $7,255 per day for Aframax vessels and $7,225 per day for Suezmax vessels for the remainder of the year. These amounts do represent an increase over 2007 actual expenses which are attributable to increased costs experienced industry wide associated with crewing, insurance and lube oils.

We expect our remaining six-month G&A for 2008 to be $22.1 million. Of this total G&A expense, $16.5 million is a cash expense with the balance of $5.6 million being amortization of restricted stock, a non-cash expense. We continue to project approximately $28 million in depreciation and amortization for the remaining six months of 2008.

Also, for the remaining six months of 2008, we have a total of one drydock remaining with approximately 93 associated off-hire days. Total costs associated with our 2008 drydocking program are anticipated to be $6.5 million and costs us $3.5 million in addition to our budget for capital improvement of our fleet.

On Slide 12 and 13, we provided description of our dividend policy and our dividend history. The company has a fixed target dividend of $0.50 per quarter or $2.00 annually. The company intends to declare these dividends in May, August, November, and February of each year. We are pleased to have been able to declare dividends of $26.28 since we first started paying dividends in May of 2005, including a one-time special dividend of $15 and our recently declared $0.50 dividend relating to Q2 2008 payable on August 29, 2008 to shareholders of record as of August 15, 2008.

I'd like to conclude my remarks by going through an estimated 2008 breakeven summary on Page 14, which demonstrates General Maritime's strong financial position. With our substantial time charter coverage and approximately $180 million in 2008 contracted time charter revenue, General Maritime has a very favorable free cash flow and net income breakeven. Even including our projected quarterly dividend, the company's spot fleet would only need to earn approximately $4,800 per vessel day in order to break even.

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

John Tavlarios

Thank you, Jeff. Complementing the strong results we provided shareholders during the first six months and year-to-date 2008, we’re pleased to have maintained significant financial flexibility which bodes well for the company to further its leadership in entering into value-creating transactions.

Since May 2005, we returned over $1 billion to shareholders which includes sizeable quarterly and one-time dividends as well as 8.8 million repurchased shares. In continuing to meet the critical objective of entering into value-creating transactions, we intend to remain true to seeking opportunities in areas which have served the company and shareholders well in the past.

Turning to Slide 16, I’ll discuss our approach in more detail. First, we continue to actively seek growth opportunities for our shareholders. I’d like to underscore that in further implementing our growth strategy, we will focus on adhering to a set of strategic financial criteria and adding more modern vessels that increase our earning power.

Complementing our focus on growth, we intend to return value to our shareholders by distributing consistent dividend through our fixed annual dividend target which remains at $2.00 per share. We also intend to maintain our opportunistic approach in the purchasing of shares when we believe our stock to be undervalued.

Turning to Slide 17, I would like to briefly discuss current market conditions. With 41% of our available spot days booked for the third quarter, our Aframax fleet is averaging over $42,000 per day. With 49% of our available spot days booked for the third quarter, our Suezmax fleet is averaging over $70,000 per day. The market has shown continuous improvement over the third quarter and current TCE rates for Suezmax tankers in the West African trades are over $100,000 per day. Aframax TCE rates particularly in the Caribbean are about $70,000 per day.

Turning to Slide 18, we give a brief industry outlook. The typical seasonality associated with the second quarter did not develop this year and the tanker market remained tight during this time. Midway through the third quarter, we continue to see unseasonably high freight rates, outpacing rates for both the second quarter and overall first half of 2007.

The continuing impact of somewhat lower oil demand in the North American market resulted from the economic downturn in the U.S. coupled with the high price of gasoline has been offset by ongoing strong demand from the BRIC nations.

In particular, pre-Olympic stock building by the Chinese continues to support the already strong oil demand in that country. Simultaneously, announced increases in Saudi production in June and July have helped buoy VLCC rates, with some of that production going to long haul western destinations.

The strength in the VLCC market has led the way for the other tanker sectors and rates remained firm across the market. Without a sharp drop in oil demand, the balance of the year appears strong considering that oil and tanker demand typically peak during this time.

On the supply side, new buildings additions were partially offset by removals of single hull vessels especially in the VLCC and Suezmax segments thus far this year. After deletion from the fleet due to scrapping and conversion, VLCC fleet growth is expecting to be a modest 16 vessels or 3% for 2008. The Suezmax fleet will see fleet growth of just 4 vessels or 1%. However, the Aframax fleet will have somewhat higher growth in 2008 as a total of 51 new vessels will enter the trading fleet representing 7% net growth.

Overall, however, supply growth is relatively lower than originally expected and other factors including floating storage, port delays, and slow steaming have served to further reduced tanker supply.

Looking ahead to the balance of 2008, we note that the IEA has once again lowered its forecast of global oil demand for 2008 to 900,000 barrels a day or 1% above 2007. We believe this forecast could continue to be revised downward in the coming months, depending on how much the slowdown in the U.S. economy spreads to the rest of the world.

Even allowing for some ton-mile expansion, our base case expectation remains that demand for tankers will grow in the 2% to 4% range. While this is well below the top line increase in tanker capacity of 8%, as we have noted before, deletions from the tanker fleet are a determining factor on freight rates going forward.

So far this year, it appears that deletions have reduced net growth of the overall crew tanker fleet to below 3% which has had a positive impact on tanker rates bringing them on average to level significantly higher than 2007.

Whether this can be sustained for the remainder of the year, especially with the somewhat back-end loaded order book, it’s difficult to predict. Ultimately, rates in the second half of the year may depend less on macro factors, which are reasonably well-known and more on the marginal supply of vessels which will depend on decisions by individual owners of older single hull tonnage whether to continue to operate the vessels or sell them for scrap or conversions.

We remain satisfied with the commercial position of our fleet, with substantial time charter coverage through to 2010. This coverage provides very low breakeven costs on our remaining spot employed vessels to cover all operating and financial costs as well as our expected dividend. At the same time, we have enough spot exposure to profit the positive rate developments such as we have seen in the first seven months of this year.

We would now like to open up the call to questions.

Question-and-Answer Session

Operator

(Operator instructions) We will hear first from Doug Mavrinac with Jefferies.

Doug Mavrinac – Jefferies & Co.

Great, thank you, good morning all. I just had a few questions for you all. First, John, you were talking about the strength in rates and some of the reasons from the strength in charter rates. One thing that we’ve noticed as well is that, not only the spot rates that are strong, but it’s the time charter rates that are strong. My question is, how firm do you guys believe the recent strength in the time charter market to be, i.e., or the number of charters that are included sufficient to say that there’s a lot of conviction in the current time charter rate environment?

John Tavlarios

We’ve seen strengthen the 1- to 2-year time chart market, I mean, numbers that are being thrown out there are strong numbers and we do feel that sentiment has sent – people expect the strong market until 2009. I mean that, sort of, seems to be the sentiment out there.

Doug Mavrinac – Jefferies & Co.

Right. And it is possible to discern how much of this strength in the time charter market is attributable to the strength in spot rates versus maybe the increase in conviction that the IMO phase out is going to have some teeth especially after that oil spill in late 2007.

John Tavlarios

Well, I think it is the combination. I think really what’s driving them right now is again the demand and the outlook for 2009 just being stronger.

Doug Mavrinac – Jefferies & Co.

Yes, okay. Great! And then, one final question. How has that improved charter rate environment, or if it has, cause you guys to may be readjust your thoughts related to either the employment of your Aframaxes in the spot market and/or any acquisition decisions that you may make? And then, how do you balance those thoughts against what your outlook may be?

John Tavlarios

Our outlook obviously because we are looking at newer tonnage, our outlook is beyond a year or two, so when we are looking at something that makes good financial sense for the company, it’s with a much longer outlook. On the time charter side of our Aframaxes, our strategy at that time was to put away our Suezmaxes, but we found we are near to now the three-year time charters, and we are to be opportunistic on our Aframaxes and that has actually worked very well for us.

Doug Mavrinac – Jefferies & Co.

Okay. Thank you very much John.

John Tavlarios

Thank you.

Operator

We will take our next question from John Chappell with JPMorgan.

John Chappell – JPMorgan

Thank you. Good morning.

John Tavlarios

Good morning, John.

John Chappell – JPMorgan

John, just to get a little bit more granular on the market, the Black Sea, especially in the Suezmaxes was explosive in the last month. Was that an anomaly? Or do you think that was pure supply-demand that had driven that all-time record high in the Suezmax?

John Tavlarios

We really think it was supply-demand.

John Chappell – JPMorgan

All right, so you think that it could be maintained, may be not at 200+ but at least maintained to the end of this year?

John Tavlarios

Yes, we think it could last through the end of the year, but it was really more of a timing issue than anything else.

John Chappell – JPMorgan

Okay. Jeff, on the balance sheet and the cash flow, how do you feel about the leverage of the company as you go into 2009? We have a lot of contract roll-overs; do you think that debt paydown might be the first use of cash flow over the next several quarters?

Jeff Pribor

Well, we have been saying since doing a modest re-leveraging a little over a year ago to pay the special dividend that we felt comfortable with the level of leverage and that the uses of cash flow would be several folds, and then the first is on a daily basis to pay down debt. We also have cash available for our share repurchase program which remains outstanding and of course, the cash, our position allows us to do things like you saw us do in the second quarter, to act opportunistically to acquire two vessels. So, really it is everything John. But, day-to-day, sure, we use excess cash to pay down debt.

John Chappell – JPMorgan

And that probably made sense too with the with time charter coverage you had back when you paid the special dividend. Now, with more roll-overs though in ‘09, assuming that they get employed in the spot market and they will get on the new time charters, do you think it might just accelerate the paydown a little bit to kind of balance the leverage versus time charter coverage and secure cash flows?

John Tavlarios

Well, first of all, I would not over-emphasize the roll-overs in 2009. We begin to see roll-over in 2009 which is basically a good thing, but the way we designed the program was that, is the roll-over start in 2009 and continue through 2010. It is really a 2010 renewal period on an average, we laddered [ph] it in on purpose, but really think of it as, we took a lot of time charter coverage in ‘09 and then the real change occurs in 2010, and that is when financially and commercially we will decide what to do.

John Chappell – JPMorgan

Right. Okay, and then with the last thing, with the higher cash flows from the new Aframaxes you are taking, the new time charter you signed on the Aframax for one year, and just the stronger rate environment in general, and your coverage of your dividend now approaching more than two times, do you think a dividend hike is possible, not a special one and not a floating dividend, but a sustainable kind of uptick in the quarterly pay-out might be realistic later this year or early '09?

John Tavlarios

Well, John, you addressed those questions to me but, Peter, do you want to comment on that?

Peter Georgiopoulos

No, I think we are happy where the dividend is right now, and I think we would like to see how this year finishes up. These are the kind of things we think about all the time, but there are no plans right now.

John Chappell – JPMorgan

Okay. Thanks, Peter. Thanks, John and Jeff.

John Tavlarios

Thanks.

Operator

We will take our next question from Natasha Boyden with Cantor Fitzgerald.

Natasha Boyden – Cantor Fitzgerald

Thank you, operator. Good morning, gentlemen. I noticed in your release you have vessels employed in the Black Sea and the Far East, and you (inaudible) some vessels there. Can you just elaborate on that and give us some more clarity as to how many vessels you have out there and what vessels are expected to go on drydocking etc.?

Peter Bell

Hi, Natasha. Peter Bell, good morning.

Natasha Boyden – Cantor Fitzgerald

Hi, Peter.

Peter Bell

Good morning. We have one in the Far East right now and they trade in and out of these regions. Nothing in the Black Sea at the moment for our account, but our time charters often trade there, but in terms of our own ships, we have just one in the Far East at this time.

Natasha Boyden – Cantor Fitzgerald

Okay. I just said you have vessels positioned and not just for some drydocking, do you have any out – is that one vessel out there to be drydocked?

John Tavlarios

It's correct.

Peter Bell

That is correct, but she took a cargo out there. She was positioned out there and will take one back. So, she will trade into the market and out of the market for the dry dock.

Natasha Boyden – Cantor Fitzgerald

Okay, all right. That is helpful. Thank you. Second question, you'd acquired these two Aframaxes and that’s was the first acquisitions you have done in a fair amount of time. With the rates being where they are and the charters we are seeing, the time charters, any other acquisitions that you have seen that is attractive out there? Are you looking at things?

John Tavlarios

Natasha, I hate to give you this traditional answer – Peter, you want to take it?

Natasha Boyden – Cantor Fitzgerald

I really don't want to hear (inaudible).

John Tavlarios

Go ahead, Peter.

Peter Georgiopoulos

No, go ahead. You give it, the traditional answer.

John Tavlarios

(inaudible) is we will continue to look at –

Natasha Boyden – Cantor Fitzgerald

I know. I know.

John Tavlarios

So, since you know, why do you ask?

Natasha Boyden – Cantor Fitzgerald

Because bigger things have changed; I want to hear something exciting.

John Tavlarios

The thing is, we saw opportunity and we bought these two Aframaxes, and believe me, we continue to look at opportunities that will be beneficial to the company and our shareholders.

Natasha Boyden – Cantor Fitzgerald

I guess with the credit crisis going on, are you seeing opportunities out there with potential, people that (inaudible) from their new builds? Are there more opportunities out there than there were before?

John Tavlarios

I think there is rumbling still, but I do not think those really have presented themselves yet.

Natasha Boyden – Cantor Fitzgerald

Okay. All right, that is all I have, thank you.

John Tavlarios

Thank you.

Operator

(Operator instructions) We will take our next question from Charles Rupinski with Maxim Group.

Charles Rupinski – Maxim Group

Good morning, everybody. I just have a quick question on freight derivatives exposure, where you see it, where is it now versus where you expect it to be perhaps over the next several quarters?

Jeff Pribor

As we disclosed numerous times before the primary instrument that we have is synthetic time charter that was entered into in 2006. That was a three-year instrument and expires in the second quarter of 2009. So, principally you should expect that there will be cash charges and non-cash movements relative to mark to market for that instrument for four more quarters and then it is over.

Charles Rupinski – Maxim Group

And, any plans on doing anything after that?

Jeff Pribor

It is always an option. We have every tool, but we note that there is other expense and income, sometimes it is confusing to people. So, we’ll take that into account when we look at it in the future.

Charles Rupinski – Maxim Group

Okay. Thank you.

Jeff Pribor

Thanks, Charles.

Operator

We will hear next turn Terese Fabian with Sidoti & Co.

Terese Fabian – Sidoti & Co.

Good morning. Can you talk a little bit about your view on ‘09 rates in light of the relatively high level of new vessel deliveries?

Jeff Pribor

Well, I will start. Really, '09 still feels like it is a ways away. So, ‘08 certainly surprised us in a lot of ways; I think you can see that in what we are saying in this call versus other calls; that’s a high quality problem to have to be presently surprised on the upside. So we have a cautious view of ‘09, but I think it is early to say, I think we’d probably let anyone else here on the call comment. So I think we'll probably wait till we get a little closer. Also, just remember what John Tavlarios said before, we are very happy with our positioning whatever happens in ‘09; we got sufficient time charter coverage to cover our cost and we have sufficient spot coverage, especially with the two new vessels coming on to profit from any upside.

Terese Fabian – Sidoti & Co.

Right. Well, I am also thinking of rates, in fact, to go down as some of us expect that used vessel prices might decline, and that would put you in a good position to do more acquisitions.

John Tavlarios

Yes, absolutely. They've just put us back into an opportunistic position to see what the market bears. We talk about this all the time. We have two ways that we are happy to go forward. One is values will come down and we acquire; the other is, values stay up, rates stay up and we acquire [ph]. So it works either way.

Terese Fabian – Sidoti & Co.

Okay, thanks. I have a little question and that is on the severance cost in the G&A. Is that all finished now and do you have a number on how much of the second quarter was severance cost?

Jeff Pribor

We said that it was principally attributable to the increase versus budget; it was principally attributable to severance costs and the number was about $1.3 million. So, this has been just an effort; we mentioned the same thing in the last quarter that we had some retirement etc. to bring headcount down a little bit. I do not know, John, if you want to comment of anything more?

John Tavlarios

I have nothing to say about it at this time.

Terese Fabian – Sidoti & Co.

Did I miss that, is there going to be more, or are you not commenting?

John Tavlarios

Nothing more at this time.

Terese Fabian – Sidoti & Co.

Okay, thank you. That is it.

John Tavlarios

You are welcome.

Operator

(Operator instructions) We will hear next from Daniel Burke from Johnson Rice.

Daniel Burke – Johnson Rice

Good morning, guys. You mentioned the $300 million in liquidity, is that adjusted for the two Aframaxes or do you feel like given the cash flow generation and the increasing asset values you are seeing here over the last couple of months that even pro forma for the deployment of capital against those assets, you still have sort of $300 million liquidity, billion dollar type purchase power?

Jeff Pribor

No, it is not adjusted for that though in the sense that the $300 million previously would have supported close to a billion dollar purchasing power. We used that for sale, a little bit of that billion in these two, but we still have a great deal left, especially with the kind of extra cash we are generating right now. It is just only adds.

Daniel Burke – Johnson Rice

Fair enough, and then just the little last question would be, we are now inching closer to the expiry of the time charter book that you all have in place. I think it was put place in part to cover the company during the period during which the rate environment is expected to be a bit softer. But looking ahead, given the fixed dividend which has been a pretty successful model and I guess the answer is, of course, it depends, but is physical time charter coverage going to remain a part of the Genmar model in 2010 plus, particularly north of say, half of the fleet?

John Tavlarios

I was just going to say that, listen, it is like anything, we saw the opportunity at that time based on the direction the company was taking to put away a good piece of the fleet on time charter, that has worked well for us, and I think as they come available in 2010, we will evaluate where the market is and our sort of forecast going forward, and then we will deal accordingly. As you know, we came from a majority spot fleet to a fleet that became primary time charter. The main thing that we want to do is to continue to provide a steady dividend and be opportunistic on what the market has to offer. So, I think that is going to be our strategy in 2010, which is a little early to start deciding at this time.

Daniel Burke – Johnson Rice

Let me try to ask you one other way then, is the fixed dividend congruent with a predominantly spot fleet?

Peter Georgiopoulos

Look, one thing I wanted to say just to add on to John’s comment and it answers your follow-on question is, the way we run this company is to work the financial and commercial strategy together. That is what you do. You don't look at them in isolation and then we think that that dividend policy we have now goes well with the time charters, but we will evaluate both the financial and commercial strategy going forward as these things begin to roll off. And as I think John said a minute ago, we have the benefit of being flexible in making the right decision. It’s part of how we run the company, is being flexible based on the conditions that we see at that time.

Daniel Burke – Johnson Rice

Well, thank you.

Peter Georgiopoulos

Welcome.

Operator

And there are no further questions at this time. I'd like to turn the conference back over to management for any additional or closing remarks.

John Tavlarios

During the second quarter and six-month 2008 period, General Maritime has continued to post strong financial results, declare sizeable dividends, and expand its fleet. As we enter the second half of 2008, General Maritime remains well positioned to continue to provide shareholders with strong results. The company also continues to be poised to enter into future value-creating transactions for shareholders, as it has consistently done since going public.

In continuing to meet this critical objective, we intend to seek further opportunities to grow our modern fleet and increase our earnings power, while distributing a fixed $2 per share annual dividend. I want to thank everyone for listening.

Operator

And that does conclude today's conference call. We would like to thank you all for your participation. Have a great day.

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