Ken Hoexter: Great. Robert, I appreciate your thoughts as always. Congrats on the solid build-up of the cash.
Operator: Our next question comes from Greg Lewis with BTIG. Please go ahead.
Greg Lewis: I guess I wanted to talk a little bit more about Slide 11 and the free cash flow. Probably for James. As we look at the — I guess, the right side of the slide and cash flow generation, what is kind of like dry-docking off-hires, is that kind of all baked in for — are we looking at a slide for 2024 or just an illustrative slide? And if we are looking at 24, like what does that assume in terms of maintenance CapEx and just that kind of ongoing CapEx. Is that — is there kind of a number you can talk to?
James Doyle: Yes. So it’s just going to be an illustrative — so it’s not going to factor in, for example, the time charters, right which would reduce breakevens or anything like that. It is going to take the next 4 quarters of debt but it doesn’t have the off-hire in there. It is something that we could show or with the maintenance CapEx maybe next quarter, we do put it in the press release and in the presentation on a different slide, though.
Greg Lewis: Okay. Yes, absolutely. And then Robert, you mentioned thank you for the Q4 guidance as always. And also, you kind of highlighted where rates are today and it’s interesting, right, because it’s people talk about now, people talk about cash flow. I mean, just looking at where rates are right now, it looks like your cash flow yield is around 20%. And so how do you balance that free cash flow yield that the stock is trading at. And I mean, it seems like this is an attractive time to be buying back stock as just thinking about that. Is it possible that we focus more on buying back stock as opposed to deleveraging just given where we are right now?
Robert Bugbee: No. I think look, we — look, we bought $490 million worth of stock ahead, right? We said great, we’re going to anticipate the market is going to stay strong. And instead of paying down all that in debt, we said, no, the valuation and we want to buy that stock at least. We’ve got very heavy in buying stock back in the last, whatever it is, months, interest rates have weakened dramatically — and quite high. The risk out there, the little box of product tanker land is really — we’ve really got a great deal of confidence in. I mean it’s the fundamentals look fantastic. The market is fantastic even before the season starts. But we’ll be respectful and humble enough to understand that the big box world economics, world financial markets, geopolitical events is less certain that there is risk out there.
It’s — we have no interest in driving the stock up. We’ve been very disciplined in the way we bought stock. We’re not that buying at the top of the upper band, et cetera, et cetera, we’re there to buy with great value. So the default position for us is to drive this debt down to around this net debt scrap value as fast as we can because that’s going to permanently reduce our operating cash breakeven at any point going forward. And therefore, that’s going to create better free cash flow, we should be able to get a better multiple on that free cash flow. The investment itself should have much higher quality. But we’re at the same time, as we’ve shown all the year, if Wall Street sells sting down, dislocating it for its own reasons, whether it’s fear of recession in or oil will never be used again and the fundamentals remain intact, we’ll be there to buy stock and create great value for our shareholders.
And as soon as we’ve accomplished what we need to accomplish, then yes, it will be how do we return the capital to shareholders that we’re generating at that point.
Operator: Our next question comes from Frode Morkedal with Clarksons Securities. Please go ahead.
Frode Morkedal: Just a quick market question for me. The Panama Canal does that have any impact on the product tankers at all? Or I guess, obviously, it’s the larger ships in other segments that benefit directly but I suppose that canal delays could impact the MR market in the U.S. and possibly the — across the Atlantic in general, what’s your thought there?
Robert Bugbee: Sean, some of you met him some you haven’t — he’s head of our trading for the North America is ideally placed to answer this question.
Sean Hager: Yes. Thank you and thank you for the question. It’s certainly interesting times in the Panama Canal and it’s very dynamic and fluid as things are evolving kind of every day. But to answer your question, is there an impact in the MR space, there absolutely will be, I think. So you’re seeing a reduction in the number of transits that can happen and effectively like the economic impact in order to get an MR through is going up substantially starting yesterday. So in the canal, there’s a reduction of water in the reservoirs that feed the lock system to move the ships through. So traditionally, you move kind of 36, 37 ships through the Panama Canal on any given day and that’s any type of asset class of ship. And that’s already reduced to 24% today.
Panama is ending the rainy season which is what they need to replenish those reservoirs. And October is generally the rainiest month on record historically for them. And this past October has been the driest month that they’ve had since they have been keeping records in the Panama Canal. And so the expectation is for those 24 current transit slots to continue to reduce down to a low of 18% starting February 1. So what we’re seeing is a couple of different factors. One is like the cost for a charter to ship a vessel through the Panama Canal is starting to rise quite a bit as the impact of this is being digested by the marketplace. And then second, the expectation for how long you wait to go through the canal either in ballast or laden is, frankly, a bit of a question mark and can be quite expensive to get through.
And so what you’re looking at is ballast alternatives to get back to the next load port. So just some rough numbers. If you do like a Quintero, Chile and you ballast to Houston going through the Panama Canal with no delay, that’s 14 days direct. And if you send that same boat down through the Magellan straight, it’s 30 days. So you’ve got an incremental 16 days to get back into the Gulf or if you send that boat to load in the Med, that’d be 26 days or if you ballast it transpacific, it would be 33 days. So there’s obviously a lot of different factors here. There’s an economic factor where the Chile, Peru, Ecuador, West Coast Central America and West Coast Mexico rely heavily on imports in order to stay supplied. So whether these imports come from Asia, whether they continue to come from the U.S. Gulf, those types of things and how flat price plays into it will play out over the coming days, weeks and months.
