Navios Maritime Midstream Partners' (NAP) CEO Angeliki Frangou on Q4 2015 Results - Earnings Call Transcript

| About: Navios Maritime (NAP)
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Navios Maritime Midstream Partners LP (NYSE:NAP) Q4 2015 Results Earnings Conference Call January 27, 2015 8:30 AM ET

Executives

Angeliki Frangou - Chairman and CEO

Erifili Tsironi - Chief Financial Officer

Ted Petrone - Vice Chairman

Analysts

Noah Parquette - JPMorgan

Greg Luis - Credit Suisse

Amit Mehrotra - Deutsche Bank

Shawn Collins - Bank of America

Operator

Thank you for joining us for this morning’s Navios Maritime Midstream Partners’ Fourth Quarter 2015 Earnings Conference Call.

With us today from the Company are Chairman and CEO, Ms. Angeliki Frangou; Chief Financial Officer, Mr. Erifili Tsironi; and Vice Chairman, Mr. Ted Petrone.

As a reminder, this conference call is also being webcast. To access the webcast, please go to the Investors section of Navios Midstream’s website at www.navios-midstream.com. You will see the webcast link in the middle of the page, and a copy of the presentation referenced in today’s earnings conference call will also be found there.

This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Midstream. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Midstream's Management, and are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements.

Such risks are more fully discussed in Navios Midstream’s filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Midstream does not assume any obligation to update the information contained in this conference call.

The agenda for today’s conference call is as follows. First, Ms. Frangou will offer opening remarks; next, Mr. Tsironi will review Navios Midstream’s financial results; then, Mr. Petrone will provide an industry overview; and lastly, we’ll open the call to take questions.

Now, I’d like to turn the call over to Navios Midstream Partners’ Chairman and CEO, Ms. Angeliki Frangou. Angeliki?

Angeliki Frangou

Thank you, Laura, and good morning to all of you joining us on today’s call. We are pleased to report our results for the fourth quarter and full year of 2015. For the full year we reported net income of $27.1 million or $1.33 per share. VLCCs translate into upside for Navios Midstream through the profit segment in these Navios charter agreement.

Notwithstanding our excellent performance, the collapse of oil price has introduced significant volatility into the MLP space. The yield is about 10% and the Marine MLP yield reflects an average yield of 15.7%.

In addition to members of the marine MLP space have effectively eliminated distribution, so that they could redeploy capital towards growth CapEx that remains confronted.

Given the significant uncertainty, we announced a distribution for the quarter of $0.4225 per unit to shareholders of record on February 09, 2016 and elected not to further increase the distribution at this time.

As a result Navios Midstream's annualized distribution will be $1.69 per unit offering a current yield of 17.6%. Our coverage ratio for the distribution is 1.48 times for the quarter.

Turning to Slide 4, although we maybe in the middle of an economic uncertainty, Navios Midstream is a solid company. Navios Midstream fleet is 100% fixed for 2016 and 2017. In addition, Navios Midstream enjoys potential upside reported sale. We generated $8 million in 2015 or $0.39 net income per unit.

Also from a balance sheet perspective, Navios Midstream has no forward growth CapEx requirement and not this much are billed until 2020. So we can enjoy a significant cash flow generation.

Yet our sector has not avoided the prevailing economic uncertainty. Oil oversupply has caused dramatic price declines in the energy and commodity complex.

As discussed a moment ago, the entire MLP sector is under pressure. At the same time they will be suffering divergent monetary policy. U.S. is tightening monetary policy, while Europe and others are loosening and China is transitioning from an infrastructure focused to a consumer-based economy. Together, this has created a challenging investment environment globally.

Despite all this, the VLCC market fundamentals continue to be healthy and they continue low price oil bodes well with oil consumption and transportation. In 2015, we enjoyed 116% in Greece in average VLCC earnings to $64,846 per day and a 41% increase in average VLCC three-year time at a rate to $42,700 per day.

We also see increasing demand for transportation of crude oil volume and distance and the time charter activity has increased in line with the increase in VLCC charter rate. 72 long-term time charters fleets were done in 2015 excluding the long term fleet for the past three years combined.

Please turn to Slide 5. During 2015, we closed $205 million term loan B, the proceeds were used to refinance an existing investment and to finance a position of the two VLCCs.

The term loan B provide us within an operating financing diversification from our existing lending charter. The term loan has also favored including interest of LIBOR plus 4.5% a five-year bend in amortization of only 1%. The loan is also repayable starting June 2016 and offers favorable covenants compared to loan facilities plus a less ABG maintenance of 85%.

We also acquired two VLCCs for $100 million. These vessels has deployment and expected to generate a $9 million base EBITDA of 18.7%. Navios elected to charter out at $42,705 per day through December 2016 and has Navios backdrop of $35,000 per day for two years thereafter. Since the rim is chartered out at $29,635 net per day plus profit sharing through March 2019.

Please now turn to Slide 6. We have a proven ability to grow our cash flow. We grew our fleet by about 50% about six months after our IPO. We gained an option to buy another five VLCCs from Navios Acquisition fleet of modern vessels at fair market value.

This along with Navios Midstream ability to purchase tankers directly from third parties provides potential additional opportunities to grow our distribution further.

Slide 7 demonstrates our liquidity position. We have about $38 million in cash and $198 million of debt. Our cash position will grow as Navios Midstream matures and the growth pipeline materializes. Our leverage profile is conservative with 33.5% net debt to capitalization and no significant debt maturities until 2020.

And at this point, I would like to turn the call over to Erifili Tsironi, Navios Midstream's CFO. Eri?

Erifili Tsironi

Thank you, Angeliki, and good morning all.

I will briefly review our financial results for the fourth quarter and year ended December 31, 2015. This financial information is included in the press release and is summarized in the slide presentation on the company's website.

During the quarter, we increased our cash flow generation due to the strong VLCC market. For the quarter we recognized $3.5 million of net income from our profit sharing arrangements. The figure for the full year is $8 million.

Moving to the financial results, as shown in Slide 8, revenue for the fourth quarter of 2015 amounted to $25.8 million, including $3.5 million of net income from profit sharing. In Q4 2015 we achieved an average time charter equivalent rate of $45,940 per day. All our vessels are fixed on long-term time charters with an average remaining duration of 5.3 years.

Other expenses, including management fees and general and administrative expenses amounted to $6 million. Our OpEx for the vessels excluding dry-docking are fixed at $9,500 per day per vessel until November 2016. For the fourth quarter of 2015, EBITDA was $19.4 million and net income was $9.1 million or $0.44 per unit.

Navios Midstream generated an operating surplus for the quarter of $12.9 million. Replacement and maintenance CapEx reserve for the period was $3.6 million.

We also present the historical results for the quarter and year ended December 31, 2014. Our results for 2014 are not comparable given the changes to our capital structure post IPO. For periods prior to the IPO, our initial fleet of four VLCCs was owned by Navios Maritime Acquisition Corporation and was financed through the 8.18 senior notes due 2021. These notes were not assumed by Navios Midstream.

Moving to the full year 2015 operations, time charter revenue for the year amounted to $83.4 million, including $8 million of net income from profit sharing. During 2015, our vessels achieved an average time charter equivalent rate of $45,924 per day. Other expenses for the year, including management fees and general and administrative expenses amounted to $20.1 million.

For the full year 2015, EBITDA was $62.2 million and net income was $27.1 million. Net income was negatively affected by a one-off $1.7 million non-cash write-off of deferred financing fees associated with the prepayment of our previous credit facility. Navios Midstream generated an operating surplus in 2015 of $42.4 million.

Replacement and maintenance CapEx reserve for the period was $11.7 million. Our fleet continues its excellent operational performance. Vessel utilization during 2015 was 99.7%.

Turning to Slide 9 for the balance sheet highlights. Cash and cash equivalents was $37.8 million as of December 31, 2015, compared to $30.9 million as of December 31, 2014. Long-term debt net of deferred finance cost and net of discount including current portion was $197.8 million.

Our long-term debt relates to the term loan B facility concluded in June 2015, which was utilized to refinance our previous credit facility and to acquire two additional VLCCs. Net debt-to-book capitalization at the end of 2015 was at the comparable level of 33.5%.

As shown in Slide 10, we declared a cash distribution for Q4 2015 of $0.4225 per unit, which translates to $1.69 on an annual basis. This distribution provides our unitholders with a yield of around 17.6%.

The cash distribution is payable on February 12, 2016 to unitholders of records on February 9, 2016. Total distributions for the quarter amount to $8.7 million. Our common unit coverage for the quarter is 3.28 times and our total unit coverage is 1.48 times.

I would like to remind you that for U.S. tax purpose, a portion of our distribution is treated as return of capital. Also, we report the cumulative annual distributions to common unitholders on Form-1099.

I will now pass the call to Ted Petrone, our Vice Chairman to discuss the industry section. Ted?

Ted Petrone

Thank you, Eri. Please turn to Slide 10.

Navios Midstream has over $500 million in long-term contracted revenue with top tier companies. We have 5.3 years of average remaining employment with strong counterparties:

Cosco Dalian, wholly owned by the Cosco Group, a Chinese state-owned enterprise; Formosa Petrochemical, a Taiwan Stock Exchange listed company, with a market cap of approximately $23 billion; and SK Shipping, which dominates one-third of South Korean crude oil transportation. We have significant upside through profit sharing which was approximately $8 million for 2015.

Turning to Slide 12, Slide 12 shows the 2015 cash flow cushion from our low breakeven. We expect to earn an average contracted daily rate of $40,798. Our average fully loaded cost was $18,619. As you know, that daily operating cost includes dry docking, general and administrative expenses, interest expense and capital repayment.

Navios Midstream enjoys vessel operating expenses significantly below the industry average. Currently, Navios Midstream’s daily OpEx is about 8% below the industry average.

We achieved these operational savings through a management agreement with Navios Holdings, which creates economies of scale and in turn lowers its operating expenditures. The operating cost under this management agreement are fixed at current levels until November of this year.

Turning to Slide 13, as you can see on the left hand graph, longer term time charter rates have increased dramatically since the middle of 2014, the average year-to-date VLCC earnings stood at approximately $75,000 a day at the end of last week, well above the 10-year average.

As global demand for energy continues to grow; major oil companies and oil producers should seek to secure more vessels on long-term charters whether always be seasonality continued healthy rates are projected going forward even after taking into account this year’s order book.

As noted on the right hand graph, there were 72 fixtures of longer term charters in 2015, which is 2.4 times in number of long-term charters in all of '14. The deals in 2015 surpassed the number of long term deals in 2012, '13 and '14 combined.

Please turn to Slide 14. World crude oil consumption has generally grown for 30 years, with declines in ‘08 and ‘09 due to the global financial crisis. Starting in 2010, world crude oil and refined product consumption returned to this pattern of growth.

The main structural drives going forward are moderate VLCC fleet growth for '16 and '17, increasing demand from the Asian economics particularly China, as well as a boost in the U.S. and Eurozone GDP that comes from declining energy prices.

VLCCs should see higher rates sustained due to falling fuel cost, increased consumer demand, the effects of filling SPRs and commercial storage around the world as current oil prices remain below long term inflated-adjusted averages.

Turning to Slide 15, the IMF projected global GDP growth for '16 and '17 at 3.4% and 3.6%, respectively led by emerging and developing markets growth of 4.3% in '16 and 4.7% in '17. Increases in world GDP growth year-on-year have generally led to higher time charter rates for VLCCs as we have seen since the middle of last year.

The IEA has raised its forecast of global oil demand eight times in 2015, from an original 93.3 million in January to 94.5 million barrels per day. This total represents a gain of 1.2 million barrels a day on 2014. I note this as the IEA tends to be conservative in its forward projections. For 2016 the IEA forecasted growth of 1.2 million barrels per day.

Please turn to Slide 16. As noted in the top half of Slide 16 in terms of ton miles, the moving of crude from West African and South American to Chinese about as many VLCCs has the movement from the rating goals, even of the rating goals shipped 1.9 times more oil to china.

The growth in VLCC ton miles will continue as China imports more crude from Venezuela, Brazil and West Africa as it diversifies its sources of oil given current demand in the U.S. any decline in crude production should lead to increase imports and in ton miles.

Ton mile should also increase due to the flattening of the Brent WTI differential, which should encourage exports of U.S. light sweet crude and imports of heavier seller crudes.

Our rate include when it starts to ship should go to its traditional buyers in the Far East and in Europe. The expansion of West to East crude trade movements can be seen in the bottom part of the slide, which shows spot VLCC fixtures from low ports west of Suez headed to the East has shown growth significantly in the past three years increasing ton miles once again.

Please turn to Slide 17. China is the world's second largest consumer of oil importing more than half of its requirements. China's imports have more than doubled since January 2009, representing a 15% CAGR.

Crude imports reached 7.8 million barrels per day in December at all-time high. Chinese crude imports remained elevated in 2015 averaging 6.7 million barrels per day, which represents a 0.5 million barrels per day increase over 2014. Additionally refinery openings going forward will add to about 400,000 barrels per day in crude demand.

As you can see on the upper right and in the table below, on a per capita basis, U.S. oil usage is 7.3 times that of China. European usage is 3.4 times and world usage is 1.6 times. If China goes to world per capita consumption levels, China will require an additional 285 VLCCs assuming all crude is imported by sea which represents an expansion of the existing fleet by about 45%.

Please turn to Slide 18. Refinery expansions in both the Asia and Pacific and Middle-East regions is a key driver to VLCC demand. As the Middle-East refines more crude in its expanding refinery network there will be less crude available for export.

As a result, the new refineries being built in the Far East will have to source crude for further away. New refineries stockpiling requirements and SPR storage should be met by shipments on VLCCs.

The upper graph spotlights the additional crude demand that is likely to come from the Chinese completing their remaining 150 million barrels as for place two of their strategic petroleum reserves. The IEA estimates that China will complete 110 million barrels of SPR storage this year plus a further 35 million of commercial storage.

Today worldwide additions to storage this year are expected to be 231 million barrels with new Chinese capacity likely to account for more than 50% of this expansion. Current projections of China’s crude oil imports probably surpass the U.S. in 2015 growing to about 13 million barrels a day by 2035 as the country continues the urbanization, industrialization and modernization of its economy.

Please turn to Slide 19. In 2015, non-deliveries were 31%, 6.3 million deadweight delivered against an expected 9.9 deadweight and scrapping amounted to 1.1 million deadweight, besides from modest fleet growth of 3.1% in 2015.

Forecast of net fleet growth for 2015 is approximately 40 VLCCs with but the majority coming in the second half. So deliveries are expected to be less than the number of VLCCs needed for the expected increase in demand.

Thank you, I would like to turn the call back over to Angeliki.

Angeliki Frangou

Thank you, Ted. This completes summary of presentation and we will open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Noah Parquette of JPMorgan.

Noah Parquette

Thanks. I just wanted to touch on the distribution decision, can you maybe talk a little bit more about that, obviously you have great coverage on the cash flow side, is it really just a function of the MLP market and what's happening now or is it more a long term outlook on the VLCCs maybe some more color there would be very helpful. Thanks.

Angeliki Frangou

That’s a good question. The way we show this that the MLP market with early on certainty that we see that's not give any credit to it. So having 20% or 21% yield really doesn’t anyone paying attention to that.

So from the point of the company, you have a very stable company that you are fixed to 100% in '16 and '17. You have upside from the profit sharing. You have no operational debt maturities and during in market that is very robust.

Let's be honest, revenues have doubled over 115% to time charter equivalent. You have periods, so robust market, but I don’t think that today the MLP market gives you any credit on yield.

Noah Parquette

Okay. I do agree. That makes sense. And then just a second question on the Management grouping that expires -- that currently expires in the end of this year. Is that right?

Angeliki Frangou

Yes.

Noah Parquette

Can you give some kind of indication on would that be another three or four-year agreement that's put in place or will that be more an annual thing?

Angeliki Frangou

The agreement is for two years. So it's finishing on November '16 and will be extended for another two years and usually a very minor adjustment of the inflationary pressures could be on it.

Noah Parquette

Okay. That's all I have. Thanks.

Angeliki Frangou

Thank you.

Operator

Your next question comes from the line of Greg Luis of Credit Suisse.

Greg Luis

Yes. Thank you. Good afternoon. I think you absolutely did the right decision in installing the dividend here. Just as we think about the next 12 to 18 months is assuming that the MLP market remains in its current spend.

Is the focus really just on building up that cash collateral position or does it make sense even though the balance sheet is as strong as it is to potentially unwind some of the debt?

Angeliki Frangou

I think the MLP market is really living in the oil uncertainty. I think that will happen surely at one point. If in five years it doesn't resolve, yes, the company would be drawing in different direction.

But I think that we have a very stable company, a very robust industry and I want to repeat that the oil transportation is really robust. Last year the time charter equivalent for VLCCs were about $55,000. Year-to-date you're looking over $70,000. So you have to see the characteristics of this market.

And with the ability of not having committed CapEx you have the ability to see how you have to be careful watching the market, but also you have a strong company.

Greg Luis

Okay. So it sounds like the focus of any additional cash will just to build a cash reserve.

Angeliki Frangou

Also, we have good debt maturities coming in 2020. So you have the flexibility from there.

Greg Luis

Okay. And then just one other question. It's more an industry and just really curious on your thoughts it's pretty well understood now what this actions mean, let's do that. Iran will be back in the market.

Really just curious if you could just spend a couple of minutes talking about how you see the Iran sections being lifted maybe not over the next say about 12 months so sort of what you think the roadmap looks like.

Ted Petrone

It's interesting. I never wanted to put U.S. and Iran in the same sentence, but the other countries here. U.S. may stop cut back producing it's share and Iran is going to make up for it and the Iranian will obviously export that.

So there are 37Vs, right? They have 37Vs. We understood probably half of them would be doing some limited trading. The other half were in floating storage. Half of that is not going to come out.

I think it's a bit of a push here. I think their normal market has been the Far East and Europe. It looks like they've made a deal with Greece. They've made a deal with the Russians. They made a deal with the Japanese. Maybe they'll add 500,000 in the next six months a day and another $0.5 million a year from now.

So I do -- listen, and the core OpEx grew to four core. We're not going to let them take the market share. So they may be fighting for market share, but it just means more oil over the water.

I think you've got, pushing only three quarters full and there is a lot of -- in one of the slides we talked about all the land there as being built by the Chinese. So I just think Iran means it had more ships coming in the water, but really more oil is being pushed across the water also. So I think it's a slight positive for the market.

And I think there is -- I think personally this applies to the U.S. won't just be exports. It's going to be imports. WTI Brent crude has flattened, they're the same. Just last week the Brent was below WTI per second. They also lost some West African cargos from backend.

So I think there is going to be a lot of the light crude going out and the seller crude coming in. So I think that's also positive for the market. So U.S. and Iran are really they’re affecting the market so far this year.

Greg Luis

Thank you, very much.

Operator

Your next question comes from the line of Chris Wetherbee of Citi.

Unidentified Analyst

Good morning. This is [Tushar] [ph] for Chris. My first question is related to the distribution decision, if the MLP market stays as rationale in terms of its valuations and where it is right now, in the extreme case that stays like this through 2016, I just wanted to know how you think about future dropdowns this year.

At least in the near term I understand, the longer term we should be coming out of this and the company’s fundamentals are robust, but just wanted to get a sense of how you think about pace of dropdowns over the next six, 12 months.

Angeliki Frangou

I can say on the longer term that is that uncertainty remains in the look on the different company, but the one thing I’d say on the way I see the mix, the company is a stable company, stable cash flows and on -- with a robust industry.

We will be viewing -- we're always monitoring the market and how it is developing the shipping market is a VLCC market and of course the MLP market. At this point the company is well funded as it sit all today. So I don’t see any vast decisions that they have to be done.

Unidentified Analyst

Okay, thanks. That’s helpful. And then just a follow-up, do you have any color and expectations for profit sharing contribution in 2016. I know you gave a charter rate target.

Just wondering if you expect given where spot market is now and how it continues to be headed through the first month of this year, if we should see similar levels or how we should be thinking about that?

Angeliki Frangou

An idea -- this is different contracts and it depends on other efficient semiannual, annual and some is in open books as alone industries. I'll say that if you have a similar kind of market around 60,000 you have around $10 million, don’t forget not all of our vessels were from the beginning.

The six vessels or if you say around 60,000 remain around 10,000, $10 million profit sharing. So that's a good guideline then we have a million of profit sharing.

Unidentified Analyst

Okay. Great. Thank you very much. That’s it for me.

Angeliki Frangou

Thank you.

Operator

Your next question comes from the line of Amit Mehrotra of Deutsche Bank.

Amit Mehrotra

Thank you. Can you hear me?

Angeliki Frangou

Yes, very well.

Amit Mehrotra

Okay. Great. Thank you. Congrats on the good results. First question Angeliki, you and the rest of the Management Team are obviously very close to the capital markets both the debt and equity capital markets and I would say I would characterize in recent past you've been both conservative as well as aggressive in terms of financing actions.

And so weather it was passing on the option for the container ship and NMM or actually even going ahead with the midstream public offering at maybe a lower price than you would have contemplated.

So in that context, in the current context of sort of the current market pricing environment, how do you think about executing on one of NAPs mandates, which is basically the go-through acquisitions and drop downs?

Do you just sort of hunker down over the next 12 months and hopefully the capital markets become more accommodative or do you utilize more of the excess cash reserves and disproportionate debt financing given the outlook for the next two year cash flows to be able to continue that inorganic growth despite the market pricing environment being what it is?

Angeliki Frangou

One the things we show a very robust VLCC market, we move in because we show that this is a correct market with a correct and we have the correct durations. We acted from my view we increased our company by 50%.

I will honestly say that the MLP market has acted poorly for much longer than any of us have ever expected. So you're looking over 18 months which is surprising.

We're monitoring that situation. The good thing is that you don’t have a stressed balance sheet. You don’t have commitments. The one thing I’m insisting and by not having a growth CapEx committed today you're not in a position that you need to act fashion. You're able to view the market and make decisions.

Amit Mehrotra

Yes. Is there a debt-to-book capital level that you are comfortable with? I would imagine it could be higher than where it is today given the outlook for the next year so where the TCU rates are contracted at or are you going to be more conservative in the unprecedented environment and stay at this low 30 level, is that more the target raise?

Angeliki Frangou

The reality that net debt to capitalization is very low is about 33, but only uncertainty has created -- it has created really an environment that prudency is rewarded. I think this is something that we need to monitor and assets and we need to monitor situation and make a decision. I don’t think that this is irrational or anything.

Amit Mehrotra

Okay. I am just going to ask one quick one and then I will hop off. Sorry it's a long-winded question. I just wanted to try and understand how NAP fits into the overall Navios complex and specifically I’m kind of interesting in how you think about from NAP’s perspective, NNAs significant limited partnership stake in the company?

Do you think sitting in NAP is it a strategic advantage, is it a limiting factor for the partnership’s ability to may be attract a diverse share capital base and actually could NNA’s LP stake ever be monetized and maybe a win-win for both NAP and NNA for it to raise cash to maybe could be used to provide increased cushion to the holding company given NM’s significant equity stake in NNA or maybe it’s the opposite where NNA surplus cash flow could be used to further consolidate NAP with that basic return?

Angeliki Frangou

I think that NAP deduct from the holding not the daughter example, so you're talking really very deductable situation. I think on NAP you have a strong dividend play on VLCCs. VLCC is a robust sector and I think that should be viewed.

Now it has never been -- you have NNA is a strong cash generation. It has VLCC provided that built in facility their ability to really do dropdowns. So I think that is very net positive. They are deducted from trying to -- I don’t see anything that is significant here between drop-back between NNA and NAP.

Amit Mehrotra

Got it. Okay. Very good thank you for answering my questions. I appreciate it.

Operator

Your next question comes from the line of Shawn Collins of Bank of America.

Shawn Collins

Great. Good morning and good afternoon, Angeliki, Eri, Ted and Lora. This is a big picture oil industry question possibly for Ted, Ted you kind of referenced it, but in December the U.S. ended its crude export ban. This was somewhat surprising.

I know it’s very early and very uncertain as to how this development may play out, but I wanted to get your initial impression on this development if you could? Thank you.

Ted Petrone

Well having listed sanctions on Iran how could we not lift our own sanctions on export, but I think it was a good political decision.

Having said that I think maybe before I answer it a little bit, we certainly will be I think exporting crude to our NATO partners. Italy and Germany already maybe some to Japan when the new canal opens towards the end of the year you might see something.

But also again I really do think WTI Brent this has brought those oil barrels back to where they were before the fracking started where there really was no differential and so you may start seeing us really importing more as you know fracking it looks like should come up a little bit more this year than last year.

A lot of those hedges were for last year for some of those companies. So I think it's more transportation not over on Vs, but I think all of it crude and I think again I think to surprise to us it could be more U.S. imports along with our exports.

And again I think Iran is going to start moving. I think they’re going to have to move it to Europe into the Far East. So it’s a lot more ton miles and some of these we’ve just seen recently ones been fixed for loading clean cargo.

So it's an interesting side venues going on in terms of oil moving over the water and it likes the volume will continue this year. OpEx is going to continue at over 32 million a day. Now Indonesia is in now and Iran is back.

So it just looks like you’re going to be pumping at least a million barrels over a day over consumption, but there is a lot of storage being built and if that runs out you have floating storage, but I don’t really see floating storage being a factor even in the first half to keep the rates high. It’s just demand.

Shawn Collins

Okay. Understand that’s great. That’s helpful. Thanks Ted. And then just a follow-on -- one follow-up question just given some of the volatility out there that’s taking place in other shipping sectors whether it’s drybulk or container or even LNG and also some financial distress at some of the Asian shipyards, just wanted to ask if you have seen any new developments in the order book or any new developments since scraping or anything given that you're a bit closer to the source then we are. Thank you.

Ted Petrone

Just one sentence on driving, it's been a lot of scraping for this year, tremendous amount of scraping going forward. The interesting about the Vs is at the end of this year, you'll have 26 Vs, they built 96 that will become 20 years of age or older.

So some people were worried about the order book, we're not. There has been a third non-deliveries for the last three years. Last year was almost a third non-deliveries in the best market since '08. So I think that will moderate and I think you'll continue to see strong numbers going forward for the crude and especially for the Vs.

Shawn Collins

Okay. Understood. That’s helpful. That’s great. That’s all for me. Thanks for the time and insight.

Ted Petrone

Thank you.

Operator

That was our final question. I will now return the call to Angeliki Frangou for any additional or closing remarks.

Angeliki Frangou

Thank you. This completes our Q4 results.

Operator

Thank you for participating in today’s conference call. You may now disconnect.

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