MISC Berhad (MISC) Earnings Call Transcript & Summary

Good evening, everyone, and welcome to MISC Berhad's Second Quarter Financial Year 2026 Analyst Briefing. I'm Faizan from Investor Relations, and I'll be facilitating this evening's session. Joining us today from MIC are [indiscernible] Dati Zahid Osman, President and Group CEO; Raja Azlan Shah Raja Azwa, Chief Strategy and Sustainability Officer; and Afendy Bin Ali, Chief Financial Officer; and [indiscernible] Head Strategy and Investor Relations. Before we get underway, please take note of the disclaimer included in the presentation deck, particularly in relation to forward-looking statements and the risks and uncertainties that may cause actual outcomes to be [indiscernible] The agenda this evening, we will begin with opening remarks from Zahid followed by the group's financial performance and market outlook before opening the floor to questions. So without further ado, Zahid, over to you.

[Foreign Language] and good evening, everyone. Thank you for making the time to join us this evening for our quarter 2 results. In this session, we will take you to the overview of our second quarter performance, some of the key development across our businesses. And thereafter, I mean, we are certainly open to question that you have on our performance. Well, we have an exceptional quarter as a group in the quarter in quarter 2 this year despite the challenging and uncertain market environment, I think as a group, we delivered a very strong operational and financial performance. Revenue increased by 90% year-on-year Profit after tax more than doubled compared to -- compared with the corresponding quarter last year. And in terms of cash flow, we our performance in this space has strengthened further, and it's about 60% year-on-year increase. The earnings uplift majority are mainly driven by the petroleum segment, which benefited from the elevated tanker rates during the quarter. this certainly has enabled us to capture the high rates with in charter to support the lifting activities. At the same time, offshore and our heavy engineering businesses recorded higher revenue supported by good project progress, while gas secured new long-term charter and also took delivery of new vessels during the quarter. Our strong operating performance also translated into a very robust cash generation during the quarter. [indiscernible] enable MIC to capture market upside when conditions are friable, we are providing the required resilient across the different market cycles. In support of the good continued cash generation for the quarter. The Board has declared a second interim dividend of PLN 0.8 sens per share. Even though we are showing a very strong first half performance this year, I do want to highlight that it is important for us to be cognizant that our business environment is influenced by changing our supply demand dynamics and geopolitical development. As such, we remain measured in our outlook for the second half of the year recognizing that the strong contribution from petroleum in the second quarter we model it for the current level. Next slide, please. Beyond our financial performance, I think it's worthwhile to share with you, we continue to make tangible progress across the 3 strategic pillars of our delivering progress strategy strengthening the group long-term earnings visibilities and resilience under the resilient core pillar. So under our resilient call, gas secured a long-term charter contract with Petronas gas for a new build floating storage and regasification unit, or the FSRU. This adds to our contracted growth pipeline to further strengthen MIC participation across the LNG value chain. We also received 2 new LNG carriers for a long-term charter to see reverse during the quarter and in heavy engineering, we signed a memorandum of understanding with nor power system to jointly pursue and develop new building projects. The partnership brings together our MHB yard and construction capabilities with an engineering and technology expertise to pursue future opportunities in this area. Under our second strategic pillars, profitable new business, new energy business, we secured the second liquefied carbon outside carrier with Northern Life joint venture together with our partner, Kline. We will continue to build future medicapabilities with our partner while maintaining the capital discipline and long-term earnings visibility when we pursue opportunity under the new energy space. Under decarbonization, we continue progressing field renewal and operational efficiency initiatives across our shipping portfolio. For the first half of 2026, I am pleased to share that our GHG emission intensity was 2% lower year-on-year. The improvement is the result of the changes in our fleet composition following the disposal and layout of our vein turbine LNG carriers. So going forward, we will continue to focus on pretermination and improving operational efficiency in line with our sustainable strategy to ensure that we can meet our decarbonization target that we have stated earlier. On safety and operational excellence, I am pleased to share that our petroleum business AED received the June there been safety awards for 46 of our tanker. This recognition reflects the continued commitment of our people to maintain safe and reliable operations across our fleet. So in closing, we are having an exceptional quarter as a group. It's also is fairly strong first half of the year. It demonstrates the agility and resilience of the group and our ability to perform and to deliver our promise to market uncertainties and increasingly unpredictable geopolitical environment. So looking ahead in second half of the year, we will continue to pursue selective new energy opportunities, strengthening our resilient core business and deploy capital selectively into strategic opportunities that will enhance the group's portfolio and capabilities, driving long-term growth and shareholder value creation. I do want to stop here and allow Raja Azlan and Afendy to take you through in detail our financial performance and market environment in created detail. Over to you, Afendy.

Thank you, [Foreign Language] and a very good evening, ladies and gentlemen. Let me begin with a walk-through of MISC's group financial performance for the second quarter of 2026. Overall, the group delivered an exceptional performance during the quarter, as mentioned by that is ahead with substantial growth in revenue, operating profit and profit after tax and cash generation. The earnings uplift was anchored by the Petroleum segment, which has benefited from the elevated [indiscernible] and strong operating performance. At the same time, our cash flows were further complemented by advanced customers' receipts and higher project cash collection in the offshore segment. While the quarter demonstrates the earnings of earnings capability of our diversified portfolio, it is important to distinguish that the strong performance was driven by exceptionally favorable banker market conditions. Resulting in earnings that were significantly above our normal operating levels. Although these results demonstrate the group's ability to capture upside opportunities while benefiting from the stability of our contracted businesses. The elevated tanker market environment is not expected to persist indefinitely and may moderate as we move into the second half of 2026. Accordingly, the quarter 2 set of results should be viewed in the context of the group's underlying business fundamentals and sustainable earnings profile rather than as the new baseline for future performance. The group revenue for quarter 2 2026 increased to USD 1.2 billion, representing growth of 90% year-on-year and 65% quarter-on-quarter. The significant increase was primarily driven by stronger petroleum freight rates and higher earning days. Revenue was also supported by higher construction revenue recognition from offshore and JV engineering projects. The Petroleum segment was the largest contributor to the increase, reflecting a stronger rate across the tanker portfolio together with higher vessel utility. The increase in offshore revenue was mainly attributable to construction progress on Clean as well as FSO Kutubu pipeline system, which is to be located in Papua New Guinea. While the heavy engineering benefited from the ongoing projects advancing into higher phases of construction. The group operating profit increased to USD 295 million compared with USD 176 million in quarter and USD 193 million in quarter 1, 2026. The improvement was principally attributable to stronger petroleum margins in line with the exceptional tanker market and higher India achieved during the quarter. This was partially moderated by lower contribution from the Gas & Offshore segment. In gas operating profit was impacted by softer revenue and higher depreciation following the reassessment of the useful life for selected steam cabin vessels. Resulting in an acceleration of depreciation expense during the quarter. In offshore operating profit continued to be affected by the operational shutdown of FPSO SP1 While ongoing construction projects have yet to attain the minimum required progress threshold for meaningful profit recognition. Profit after tax closed at USD 283 million, delivering more than twofold increase from USD 110 million in quarter 2 of 2025 and grew by 55% from USD 189 million in 2026. The improvement was primarily attributable to the higher operating profit generated by Petroleum for the supported by lower impairment losses and gains from vessel disposals during the quarter. Moving to cash flow. The group generated cash flow from operation of USD 589 million in quarter 2 2026. This represents an increase of 60% against quarter 22025 and a 3% against quarter 1 2026. The strong cash generation reflected higher collections from Petroleum segment, in line with its robust operating performance during the quarter, complemented by advanced charter hire for [indiscernible] based project collections from offshore project. Overall, the quarter to cash flow from operations reflected solid underlying operational cash generation and timing of certain project-related receipts, including advanced charter hire received during the quarter. While this reset strengthened the group's cash flow performance, some of these items are one-off and timing related in nature, hence, should not be recorded as securing in the future. Next slide. The group maintained a stable and resilient balance sheet as at June 2026 supported by a stronger equity position and healthy liquidity total assets stood at approximately USD 13.4 billion, broadly stable compared with December 2025. Gross clearing improved to 0.6x from 0.37x in December 2025, supported by the increase in shareholders' equity, primarily driven by higher retail earnings arising from the group's improved financial performance. Net gearing further strengthened further to 0.6x compared to 0.2x at the end of 2025, 25%, primarily reflecting the group's stronger cash position. The group's debt proposition remained predominantly fixed rate with approximately 90% fixed and 10% floating debt at June 2026. The shift in composition reflects the higher proportion of floating facilities, while the overall debt profile remains prudently managed. Overall, our gearing remains prudent, providing sufficient financial capacity to fund the group secured growth pipeline while maintaining a disciplined capital allocation. On the cash and debt balances, the group ended in the first half of 2026 with a healthy cash position and broadly stable debt cash benefits stood at approximately USD 1.8 billion as at June 2026 compared with USD 1.5 billion as of December 5. The increase was anchored by higher net cash generated from operations during the first half of the year, partially offset by capital expenditure payments. Total debt remained broadly stable at approximately USD 3.2 billion compared with the position at the end of December 2025. The group's robust liquidity position provides the financial flexibility to support ongoing capital commitment including fleet rejuvenation and the execution of secured growth projects. At the same time, we remain disciplined in managing our cash and debt profile, optimizing funding sources to enhance capital efficiency. This positions the group well to pursue its growth agenda while preserving a strong balance sheet, good and gearing adequately liquidity headroom. Next. So let me now walk you through the performance of each of our core business segments, starting with gas. Yes, recorded revenue of USD 104 million in quarter 2 2026, representing a modest improvement against the preceding quarter, although remaining lower against quarter 2 '25. The quarter-on-quarter improvement was mainly supported by the delivery of [indiscernible] where revenue was lower against corresponding quarter due to the absence of construction revenue from an FSU conversion project following its project completion in quarter 2. Lower earning days following vessel disposals and layup and lower charter rates. Year-on-year decline in [indiscernible] fleet rejuvenation transition as we progressively phase out aging steam turbine vessels in favor of modern and more efficient fleet anchored by long-term charters, while resulting in lower earning days arising from contract expiries, vessel disposals and layup. Not expanding this, this segment maintained 100% term to spot ratio underscoring sustained earnings stability and the resilience of its long-term contracted income base while the ongoing street rejuvenation program continues to progressively reposition the portfolio towards new work and more efficient vessel, which is expected to strengthen the efficiency and the long-term earnings resilience of the portfolio in the future. Operating profit stood at USD 35 million, lower against both the corresponding and preceding quarters. The decline was primarily attributable to higher depreciation following the reassessment of the useful life of selected steam turbine vessels, resulting in an acceleration of depreciation expense during the quarter, as I mentioned earlier. Profit after tax of USD 17 million was lower quarter-on-quarter, in line with the lower operating profit and absence of vessels disposal gains in the current quarter. Against the corresponding quarter, PAT was marginally higher, mainly due to lower impairment losses, negating the softer operating performance in quarter 2 2026. For the Petroleum segment, return segment delivered an exceptional quarter 22026 performance and remained the group's largest earnings contributor. Revenue increased to USD 562 million from USD 299 million in quarter 22025 $382 million in quarter 1, 2026, driven by higher tanker rates and earning days. The growth was further supported by the accelerated recognition of deferred income arising from a contractual arrangement which provided a one-off uplift during the quarter. Operating profit increased to USD 215 million, representing a more than 2 fold improvement year-on-year and an almost twofold increase from the preceding quarter. The increase was broadly in line with the strong growth in revenue and reflects improved earnings margins. However, the benefit from the one-off revenue uplift was partially offset by the corresponding acceleration of depreciation expense arising from the same contractual arrangement. PAT increased to USD 232 million compared with USD 55 million in quarter 22025 and USD 129 million in the preceding quarter. The improvement was primarily driven by stronger operating performance, while the year-on-year increase also benefited by a gain on the disposal of vessels during the quarter. Approximately 70% of patent remain on transactor during quarter 2 2026, regarding a stable contract earnings base, while the remaining market exposure enabled the segment to capture favorable spot market opportunities. As highlighted earlier, the strong quarter 2026 performance would be viewed in the context of the exceptionally favorable bancomarket environment and certain nonrecurring items that contributed during the quarter. Accordingly, the results are not indicative of a sustainable quarterly earnings run rate. Our offshore revenue increased significantly to USD 262 million compared with USD 106 million in quarter 2 2025 and USD 107 million in quarter 1 2026, driven by the advancement of [indiscernible] and FSO projects. The operating profit stood at USD 45 million compared with USD 53 million in quarter 22025 and USD 49 million in 2026. The year-on-year decline primarily reflected the lower contribution from FPSO following its continuous operational shutdown. While the quarter-on-quarter movement was impacted by higher project-related predevelopment costs incurred to support future growth opportunities. Classically, Profit after tax was lower by USD 7 million compared to USD 30 million in quarter 2, 2025 and 19 million in quarter 1 2026. Overall, the offshore segment continues to be anchored by a portfolio of long-term contracted offshore assets complemented by the ongoing education of its secured projects, providing a balanced mix of operating profit, operating and project-related activities across the business. Finally, for our Marine and Heavy recorded revenue of USD 247 million, more than twofold against both the corresponding and preceding quarters. The increase was supported by higher project activities and incremental construction progress across several ongoing projects. Operating profit improved to USD 17 million compared with $3 million in 5 million in quarter 1 2026. The improvement was driven by higher contributions from key ongoing projects and penalization of post-sale projects. PAT correspondingly increased to USD 15 million compared to USD 2 million in quarter 2 2025 and USD 4 million in 2026 million. Overall, the stronger performance reflects steady execution and progression of projects across the segment's order book translating into higher construction activities and improved earnings contribution during the quarter. To conclude, Quarter 2 2026 was an exceptional quarter for MIC, underscoring the strength of our diversified portfolio and our ability to capture opportunities across different market cycles. While we remain mindful that certain favorable conditions may not persist at the same level going forward, our focus remains unchanged on disciplined execution, prudent capital management and sustainable long-term value creation. At the same time, we continue to benefit from the stability provided by our portfolio of long-term contracted assets and projects, which forms the foundation of the group's resilience across gearing market conditions and market environment together with our healthy financial position and disciplined approach to growth. This provides us with the flexibility to navigate evolving market conditions while continuing to deliver value to our stakeholders. With that, I conclude my briefing of the group's financial performance for the quarter. Thank you for your attention. I will now hand the floor to Raja Azlan.

Thank you, Afendy, for walking us through the financial performance. Let me now turn to the operating environment and the key market developments across our segments. On the near-term market conditions remain uneven and continue to be influenced by geopolitical developments, underlying long-term fundamentals across our core businesses remain supportive. Let me begin with the global energy market despite disruptions to cargo movements through the streets of homes during the quarter, global LNG trade remained resilient. The market demonstrated its ability to adapt supported by supply diversification and improving production across key producing regions. New liquefaction and volumes from North America together with higher plant utilization rates and the gradual ramp-up of projects in the United States Canada and Africa helped badly offset supply shortfalls from the Middle East. While near-term supply growth may remain constrained by ongoing geopolitical uncertainties and project execution risks. The long-term model remains attractive. Global liquefaction capacity is projected to expand at an estimated 10% CAGR through to 2021, driven by substantial capacity additions across major LNG producing regions. On the demand side, Europe and Asia continued to be the primary growth engine for LNG consumption. Demand remains spotted by energy security considerations and the role of LNG in supporting energy transition objectives across many markets. Looking ahead, as supply and demand conditions expected to improve from 2027 onwards. Energy trade volumes are expected to remain stronger momentum. The increase in available supply should help rebalance the market with LNG prices likely to moderate during the 2020 to 2029 period, supporting broader market growth and trade activity. With those positive supply and demand fundamentals in mind, let me turn to developments in the LNG carrier market, and the fleet that will support this growth. Fleet [indiscernible] and expansion continue to drive growth in LNGC market. The industry has moved on simply replacing [indiscernible] Dubai vessels and is now increasingly focused on replacing less efficient tonnage with modern fuel-efficient LNG carriers. This trend is being driven by tightening environmental regulations evolving customer requirements and the need for greater operational efficiency. Against this backdrop, the energy carrier market order book remains elevated. As of the second quarter 2026, the order book-to-fleet ratio stood at 39%. The composition of the order book reflects the industry shift towards more [indiscernible] tonnage with around 80% of the vessels currently on order, which are equipped with modern propulsion technologies. Demonstrating the industry's clear preference for more efficient and environmentally compliant reserves. Energia speculative ordering activity remains limited with most new build vessels tied to specific energy projects and supported by underlying commercial demand. Vessel deliveries are expected to remain elevated through [indiscernible] with the global agency fee projected to grow at a CAGR of [indiscernible]. However, growth in capacity is being partly offset by accelerated retirement of older steam turbine vessels which are becoming increasingly less competitive from both commercial and environmental perspectives. Turning to the recent geopolitical developments, while restructures in the streets of homes may create some delivery scheduling challenges, we do not expect any material impact on the long-term development of the LNG care fleet. More specifically for MIC, we have not seen any material impact on project execution or vessel delivery schedules across our portfolio. All LNG carrier new buildings scheduled for delivery in 2026 remain on track. And we continue to engage closely with the shipyards, the charterers and other key stakeholders to monitor developments proactively and mitigate an imaging risk. Moving on to LNG charter rates. The long-term LNG supply growth outlook continues to support a healthy outlook for long-term chartering, particularly for modern vessels. As for spot charters Continued high vessel deliveries, coupled with uncertainties in the Straits of Hormuz are expected to keep spot charter rates volatile in the near term. Geopolitical tensions continue to affect the supply/demand fundamentals of LNG shipping rates. The Strait fully reopens LNG exports could gradually recover. Looking ahead, modern LNGC charter is to remain supported throughout 2026 driven by strong demand for fuel efficient and environmental-friendly vessels. Against this backdrop, we remain focused on rejuvenating our fleet with modern fuel efficient vessels secured with long-term charters, reinforcing the quality, resilience and visibility of earnings. By 2030, our gas segment is expected to deliver an additional 19 new vessels, which will lift the proportion of modern and efficient vessels in our fleet to approximately 75% from currently at 50%. This fleet transformation positions us well to meet evolving customer requirements, enhance operating efficiency and strengthen our competitiveness in an increasingly modernized LNG shipping market. Things like this, moving on to petroleum shipping in second quarter of 2026, the crude tanker order book expanded further, driven by robust new orders and ship owners looking to replace reaching tonnage and modernize fleets ahead of tighter environmental regulations. This lifted the order book to fee ratio to 29.5%, up from 18% in 2025. [indiscernible] have started accelerating with 49 vessels delivered in the first half of 2026. Whether 43 vessels are scheduled for delivery in the second half of 2026. Deliveries are expected to accelerate and peak in 2028, 2029 as the bulk of the stress backs and the DLCC orders placed over the past 2 to 3 years enter the fleet. Demolition activity remained low in the first half with industry vessel scrap. Scrapping is expected to accelerate in 2000s stricter regulations and efficiency standards we can incentives to retain all ourselves. Crude [indiscernible] remains highly sensitive to geopolitical developments and volatility is likely to persist given the ongoing uncertainty in the Middle East. Average rates across all crude tanker segments eased in the second quarter of this year from the peak seat in the first quarter but remain at elevated levels. Looking ahead, the crude tanker market is expected to remain broadly positive for the remainder of the year, although rates are expected to remain volatile and may moderate from the exceptional levels seen earlier in the year. The market should continue to benefit from sustained [indiscernible] demand, driven by shifting global oil trade flows and the rebuilding of inventories following drawdown the end of the year. In particular, longer-haul exports from the Americas should continue to offset lower middle eastern volume, putting tail demand and tanker rates. At MISC, we continue to strengthen the competitiveness of our fleet through ongoing rejuvenation, we currently have 10 a few new builds in the pipeline with delivery schedule between 2027 to 2030. These investments will improve the efficiency and resilience while positioning us to capture opportunities arising from changing trade flows in the industry's transition towards lower carbon operations. Moving to the offshore sector. The outlook for the offshore industry continues to be positive. Supported by increasing investments in offshore energy developments to meet long-term global energy demand. Reflecting this positive outlook, offshore CapEx is projected to increase steadily over the coming years, reaching approximately $200 billion by 2030. As operators commit to new developments, the market is also evolving with a growing preference for midsized projects that offer greater capital efficiency. This is driving increased interest in FPSO conversions and redeployment opportunities. Against this backdrop, the floating production system market, particularly in the FSO segment is expected to remain robust. The estimated total capital expenditure for our PSO units between '26 to 2030 is around 77 billion. Industry forecasts indicate that 11 FPSO projects are expected to be awarded in 2026 as of the first half, there were 6 FPSO contracts, which were awarded, matching the total number of warts recorded across both pan 2025. This provides a strong indication that the investment cycle is gaining traction. Over the 2026 to 2030 period FPSO awards are projected to average 9 projects annually. This provides strong visibility to future project opportunities. MISC will continue to pursue opportunities to meet our risk return requirements while leveraging strategic partnerships and flexible commercial structures to manage affordability, execution risk and capital deployment. With that, I end my presentation. Thank you very much, and back to you, [indiscernible].

Thank you [indiscernible]. We will now move on -- moving to the question-and-answer session. [Operator Instructions]. Okay. Now let's get started. Our first question is from Hazmy of CLSA.

Congrats on the results. Hazmy me from CLSA. Two questions to start. The first one, just on the earnings, especially on the petroleum side. I understand that you mentioned for the second half of the year in the coming quarters, it won't be as high elevated as the peak of the second quarter. But probably, can you help us to think how should we sort of think for the second half of the year, even with the easing going to the third quarter, will it go back to the first quarter kind of level? Or will it be higher or lower? And I mean, like driving from that. Probably you can share some colors on the breakdown in terms of the tanker rates on average during the second quarter and what you are seeing right now? And then sort of if you can share in terms of the deferred income that you mentioned the one-off uplift, what was the quantum for that? So that's my first question on the petroleum segment. And probably the second question, I think I wanted to ask about the results, small wedding since with 2 questions. First, I think the second one, probably on the recent news with regards to MISC and insane, if you can provide some more colors there.

Yes. Thanks, Hazmy. So I think I'll take the first question on the partial earnings. Yes. So in my sharing earlier, I provide some context in terms of the performance of [indiscernible] as we have seen, the tanker rates in quarter 2 was exceptional. And as you can appreciate, we are already in the end of August, I have the benefit of looking at actual July numbers, right? which obviously will fall into the quarter 3 results later, right? So if you -- the -- specifically on the [indiscernible]. What we are seeing is there's a significant drop in the rates in July compared to what we have actually distillized in April and May. Generally, right? So what we are seeing is the July anchorage approximately the same or perhaps slightly above the risk that we are seeing at the [indiscernible], which is in January and probably this year. So I think that's where the context that I wanted to caution all of you that you have an expectation to see a similar result in quarter 3, benchmarking against what we have achieved in Q2 yes. So that's my response to your earnings. And the other one is on the one opening. So that is in relation to our contract on the Marine well Containment company that we have 2 vessels contracted there. So one vessel has been agreed to be terminated, and we have been compensated for that. So what. As a result of that termination, we have essentially a deferred income of about 80 million which has now been flushed into the quarter 2 results, right? But similarly, we have a depreciation -- slated depreciation in respect of that, and approximately the positive P&L impact for this one-off transaction is about $23 million positive to our petrol segment, okay?

Hazmy, on the question with regards to the volume expected performance for second half. I think when you also asked about the recent news about MIC and Jensen is there any comment. I think in -- we don't -- we generally do not comment on any market speculation. If there is anything material MIC, we will make the announcement in a timely manner. So I think it's premature for us to say anything at this stage.

Next, we have a question from Raymond from CGS. Go ahead, Raymond with your questions.

So I'm just going to ask a couple of boring questions. and it's in relation to your fleet, right? So I think that the vessel disposal proceeds and the gain on vessel disposal in the second quarter, if I could just guess it would relate to the go Vancouver and the newspapers reported that you have sold your 3 buckets and 3 [indiscernible]. But can I just double check that the disposal proceeds will be booked actually in the third quarter for the 2 LNG vessels. So -- and that's on the sales side. And on the acquisition side, I think there was a report that you had ordered 2 VLCCs from Hungary, and I can see that in your order book data, I think trade wins reported that you may order up to VLCCs. Could I just check that these 2 VLCCs, that's it? Or is it going to go up further to 6 VLCCs later on? And there was also a report that you ordered 1 shuttle tanker from Dalian ship building for 2028 delivery. Just to check who is this going to be chartered to? SP1 Yes. So these are my four -- well, these are -- this is my first question relating to your fleet. Yes, thanks. Maybe I'll just start there first, and I'll ask the second one later.

Thanks, Raymond. So my answer to your first question on the fleet disposal. Yes, I can confirm, the driven comes dispose Similarly, the 2 LNG vessels about half parts were also disposed in quarter 2. So the proceeds were captured in quarter 2.

Okay, sure. Okay. Was there any gain on 3 markets about half? Or was the gain only on the Vancouver again was only on make Okay. And can I just double check about the shuttle tanker, Who is it going to be charter to and also the VLCC orders from Hungary?

I think for the VLCC currently, we committed two vessels with [indiscernible]. And currently, the final charter is under discussion at the station.

Okay. So you're going to find a long-term charter for these 2 VLCCs, yes?

Yes, that's correct. There is a mismatch with regards to when we can close the deal on the customer side and for us to signed a shipbuilding contact with the yard. You know at the moment, I mean, the yard is very hot [indiscernible] to demand and slot. So that's the mismatch. But the intention is to secure a long-term charter for these 2 new vessels.

Okay. I mean trade was reported that you order out to 6 VLCCs from Hungary. Is that coming through later on? Or are you stopping at 2?

Usually 2.

Okay. Okay, sure. How about the shuttle tanker, Who are you going to be chartering it now to?

Yes. No, I think I mean we certainly have committed to the charter tankers. But carbine, we are not able to share who the customer is going to be, but it's backed by the long-term charter when a customer do not want us to announce anything on the outside.

Okay. Okay, sure. And I just want to ask a bit about the offshore side. I think the FPSO [indiscernible] was reported by upstream that [indiscernible] is going to buy it over. So are we expecting a sale of the tender in the third quarter? And there's another FSRU project in [indiscernible]. So wanted to check whether you are going to be part of this.

I think for Chengdu, I mean, currently is under a long-term charter to Petrofac. I think is coming to the end of that charter. So I think in any speculation, what's going to happen to that vessel, I think we will announce it when the time cursing. And the second question is with regards to the FSRU project announced in Qatar. Is it an [indiscernible] it?

Yes, that's right.

Okay. I think that as far as you also see in the news on that one, it's currently being promoted by gas Malaysia. So we are not involved. Okay, sure. How about the FPSO ex caliber there was a news that you might buy something and we deployed to [indiscernible] I mean, I think the customer -- the owner has announced it, yes, I think we signed the deal, and I think it's coming to Malaysia. And the intention is to deploy that into but to offshore [indiscernible] long term Okay. So you announced the details later on is finalized, right?

We have a question from Ho Meng.

Just on the tech -- for your gas side, you -- I think previously, when you do your impairments in the previous years, there was mainly to match the team to buy vessels with the market values at the time right. And this time around, you are doing and as listed early depreciation is that different time method using now versus the previously.

Thanks I'll take that. So I think what we have been doing in the last, I would say, a couple of years, right? So we have definitely seen the significant drop in market value for our steam vessels, which has impacted the profitability of -- and obviously, I think in numerous session, we have highlighted that these vessels once they are coming out of charter chances are trying to get new contracts for them will be quite challenging given number one, they are only technology plus number two, they are on a smaller, smallest part size. So -- and I think over the last 12 months, we have also shared with you that some of these vessels, we have actually laid them up in order to manage the cost. So I think what we have done in this quarter is for the 6 vessels that currently still have a contract. But they do not have a contract up until 35 years of the life of those vessels. So it ranges between up to 90 to 23 years of life when the current quarter expires. So -- and when we look at the ending of the steam vessels, cases they would not be able to sustain the value of those vessels at the end of those contracts expired. And [indiscernible], we will probably have to impair them at some point. So what we have done is we have taken a more conservative approach is to depreciate these 6 vessels over the life of the economic life based on the contract that we have, which is up to 90 -- between 90 to 23 years.

[indiscernible] But these 6 are the ones that are going to expire in probably 1 or 2 years time rig because I remember you have a batch of steam turbine vessels that -- I mean, you have [indiscernible] previously and another bus is incoming maybe meals. So are those the best that you decided to do the accelerated depreciation? Yes.

Yes. Yes, you are right.

Okay. But that does imply that operationally that the [indiscernible] are going to be earlier than next year, that's why you need to do the sort depreciation?

No, it doesn't mean that the contract will stay as is. It's just that when we revisit I mean our what we have seen in the past for all of our steam vessels, the stage to be deployed in the spot market. So we have revisited and decided to accelerate the depreciation until the end of the contract period rather than the end of the '25.

Okay. Just [indiscernible] offshore. When you have the construction revenue, is that related to the $700 million revenue from contract with customers as per your 810 in the [indiscernible]?

Yes. Yes, yes, [indiscernible] Ho Meng.

Okay. So order 700 is the conversion projects related Okay. And then for [indiscernible], okay, so you have amortized deferred income net of by [indiscernible] I know you say that after netting of the accelerated cost depreciation, the net -- the net earnings to you is $33 million $23 million 23. And it's all included 3, sorry, all in the second quarter? Or is there more to come?

Yes. Happening quarter 2.