Robert Bugbee: Well, on the interest, it’s the interest itself is going to come down into a level but I would think you’d be dropping the net cash breakeven between the debt — between principal and interest somewhere in the region of $4,000, $4,500 a day.
Omar Nokta: Yes, that’s significant.
Robert Bugbee: Huge.
Omar Nokta: Yes. So I guess maybe just one final one. Just in terms of once you finally get there, so today it’s March 31 or perhaps in the spring, it definitely feels like it’s sooner, much sooner rather than later. What happens once you get to that point? How do we think of the strategy of deploying capital? Is it buybacks? Is it acquisitions as you’ve got, obviously, the share price looks very attractively priced relative to NAV. Just give me a sense, if you don’t mind, kind of what happened?
Robert Bugbee: I don’t think — look, we’re not interested in speculative new buildings. We don’t — we don’t need to buy any ships — to earn enough money. We’re making considerable cash flow, excitable earnings on the fleet we have. We don’t have — because we don’t have extraordinary maintenance CapEx or whatever. We’ve done all the scrubbers that we intend to put in, et cetera. So one way or other, it’s — the capital is going to go to us as shareholders at that point. And it’s a pretty pointless activity to anticipate what will happen later. It’s — I don’t even think that an NAV calculation would be relevant for a company that is — has a new fleet and very low leverage. You should be moving away from — it’s not a question of how do we close the NAV gap.
The NAV gap is, let’s say, the least of our valuation worries of that kind of structure, we should be looking to close some form of free cash flow valuation gap because you would expect that any multiple you want to put on free cash flow would increase as you lower or improve the actual investment itself. So we’ve got a lot of work to do in that regard.
Omar Nokta: Yes. No. It sounds like a very interesting setup as we get into the next few months. I’ll turn it over.
Operator: Next question comes from Ken Hoexter with Bank of America. Please go ahead.
Ken Hoexter: Great. So Robert, first, I wanted to check on the winter is going to come. Was that a scientific pool? I just want to check on the math there. But I just wanted to understand the phenomenal rates, right? If you think about scrapping activity still somewhat moderate, anything that drives the scrapping or demolitions going forward just in this rate environment? Maybe is there anything different this cycle? Do we see them just sticking around longer? And I’m setting that up in the backdrop of a rising order book that’s gone from 2%, 3% now to 10% or 11%. So I guess, ultimately, if maybe that’s the winter that’s kind of the overhang that is coming in a different kind of winter backdrop? Just want to understand your thoughts there.
Robert Bugbee: I think the first thing you want to do is to look at the order book in perspective of that were not always orders that are LR2s are going to end up trading as LR2s or even [indiscernible] built as LR2, the contract is the ability to build an LR2 but some may not be coated and many are likely to go into the Aframax trade anyway. But first of all, I don’t think the order book is in product is as high as 10% or 11%. And the order book is not 1 year. The order book is stretched over a period of 2004, 5 and now pretty much 3/4 of 2006. So the order book is still very contained, even if it’s around 2%, 3% average through that period. The exact point at which we know that James has been very conservative talking about the number of ships that turn 20 and that’s been the point of scrapping.
But we also know that when these ships turn to 16, 17, that they’re not able really to be competitive and trade properly in the premium clean petroleum fleet. So we think the order book is very contained at the moment and it’s going to be because you just don’t have the yard capacities and the question is whether our owners want to do things. So that’s our perspective and that’s what’s creating the prospect for a multiple years of a good market and the proof of people’s expectation and what they’re willing to pay for secondhand modern ships which have been rising a lot in the last month and the forward time charter book. So we’re in a pretty good shape. We haven’t had a bull market like this in the last sort of 30, 40 years where there’s been so little yard capacity at this stage in prompt in the curve.
Ken Hoexter: So let’s flip that around 2 then. Are you seeing vessels may be actively leaving and going to dirty given the rates are in higher over there?
Robert Bugbee: Well, there’s 2 things. They’re not just because we’ve got an older product tanker — they’re not just higher in certain cases there. But it’s easier to trade. The other reason we’re seeing that is the whole of this Russian will the dark fleet, the Russian trade people like us can’t participate in the people who we are buying to be buying the older ships because they don’t have the same criteria to carry dirty trade or sanction trade. So it’s much of the fleet that’s being bought and being removed from, let’s say, the international market or free market has gone into those things. But what’s — and that drove their prices up. But what’s interesting in the recent developments in the last 3 months, has there been a lot of activity from our practice of more modern product tankers as evidenced today by Tom’s acquisition of their LR2s and evidence in the last 3, 4 months of many vessels built 12, ’13, ’14, ’15, ’16, there’s been change in hand because buyers in the non-Russian trade have had more confidence in securing longer time charters for 2, 3, 4 years and more confidence in the length of the stronger market, along with their ability, of course, to order new shares.
Ken Hoexter: So just, I guess, for my second one, then you mentioned kind of selling vessels. Maybe talk about your philosophy on what gets you to do that versus in this kind of market, maybe just locking those older vessels up for longer time charters. Obviously, you still have stayed on the spot exposure. So is there a thought to shift and lock in at these levels with some of the older vessels and then sell them off? Or it sounded like you have maybe thoughts on selling some in the near term.
Robert Bugbee: I think the older vessel is like an easier situation. You’re getting enormous price, you’re getting a record prices for these things. And you — your ships that you are your modern — your modern ships or we have don’t think we have any problem there to serve customers and you’ll see us probably out of 2 or 3 time charters here. We do that fairly regularly on — we like to keep a lot of spot vessels but we’re happy to keep 10% or so in the time charter market. But with the older vessels, it’s great off you go if the ship is already 11 years old, 12 years old or then fine, you’re getting a great price and you can put the money to work brilliantly in either reaching that deleverage target or as we’ve been doing in before buying stock pretty [indiscernible].
