Q1 2020 Earnings Call

Got due to covid-19 In Spite of the challenges that we have faced. This includes vessel siren inspections, which are challenging to arrange with major oil customers other inspections, which are becoming increasingly difficult to transport a spare parts, which takes longer and dry-docking and scrubber installations, which cannot be completed as quickly due to short staff in the yard.

The company strategy purchases and sales of vessels and other Investments anticipated financing transactions.

expectations regarding revenues and expenses including vessel and G&A expenses

estimated bookings and tce rates for the second quarter of 2020 or other periods estimated Capital expenditures in 2020 or other periods.

projected scheduled drydock and off higher days

As we continue to operate in a covid-19 environment our priority remains ensuring the safety of our onshore and professionals and providing safe reliable service to suck energy customers.

The company's consideration of strategic alternatives.

The company's ability to achieve its financing and other objectives and other economic political and Regulatory developments around the world.

Dead dead dead.

Any such forward-looking statements take into account various assumptions made by management based on a number of factors including management experience and perception of historical Trends current conditions expect the computer divorce and other factors that management believes are appropriate to consider in the circumstances.

If you'll turn to slide five, we review our first quarter 2020 highlights and our recent accomplishment.

He weighs disciplined and balanced approach to allocating Capital combined with our success capitalizing on the current robust tanker market and this is served as well on the first quarter month.

Forward-looking statements are subject to risks uncertainties and assumptions many of which are beyond the company's controls which could cause actual results to differ materially from those implied or expressed by those statements wage factors risks and uncertainties that could cause International actual results to differ from expectations include those described in our annual report on form 10-K 2019 in our quarterly report on a thank you for the quarter ended March 31st, 2020. And in other filings that we have made or in the future may make with the US Securities and Exchange Commission.

We continue to focus on creating lasting value for our shareholders.

We highlight our success executing approving Capital allocation strategy during the first quarter.

Good morning, and welcome to the international see ways first quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal leakage specialist by pressing the star key followed by zero. After today's presentation. There will be an opportunity to ask questions to ask a question. You may press * then one on your telephone keypad to withdraw your question, please press * then two. Please note this event is being recorded. I would now like to turn the conference over to James small general counsel, please. Go ahead. Thank you. Good morning everyone and welcome to International earnings release conference call the first quarter of 2020 before we begin. I would like to start off by advising everyone on the call with us today.

We execute it on four distinct front. Number one. We successfully refinanced 380 million dollars of higher-cost debt off. When you combine the seating from this refinancing with the savings. We achieve from the prepayment of $110 of debt that we retired in the fourth quarter.

With that out of the way, I would like to turn the call over to our president and chief executive officer this Louis Louis.

We have reduced annual interest expense by $25 million dollars and we have transformed our capital structure.

Thank you very much. Jean. Good morning, everyone. Thank you for joining International earnings call to discuss our first quarter 2020 results before we get into a quarterly results. Please turn to slide for where we'd like to talk about the coronavirus Amid and unprecedented Health crisis. We want to provide an update on the steps that we have taken to ensure the safety of all of our employees both onshore and see professionals.

Number two at a time when we had maintained when the lowest leverage profiles in the public shipping sector our balance sheet strength and our strong cash positions enabled us to shift priority and begin to return Capital to shareholders during the quarter. We initiated a six cents per share quarterly cash dividend Thursday. We repurchased ten million dollars of our shares.

based on our stock valuation relative to Arnav

Regarding our crew we had implemented strict measures on all of our ships keep our seafarers states and healthy.

We believe this represents an attractive opportunity for C ways to further unlock value.

This includes daily temperature check personal protective equipment such as goggles gloves masks and we minimize the number of people that are boarding a ship.

Our priority is to optimize how we allocate our Capital throughout the cycle in addition to our regular quarterly dividend. We will continue to consider all of our options to unlock value package holders as we did during the first quarter.

Well Global travel restrictions are making crew changes difficult. We want to thank our seafarers for their dedication and their commitment to adhering to the highest level of Professional Standards. We continue to support industry efforts to designate seafarers as key workers.

Number three, we repaid the outstanding balance on our revolver which now provides forty million of additional liquidity, which is important that this can be used opportunistically to take advantage of a creative opportunities in the future and it's important when we are operating in periods of high volatility.

This would enable.

For seafarers to more freely travel to and from the ship and to their homes and their families.

I'm sure with our employees all working remotely since March sixteen advance planning has enabled our business to continue to run smoothly with 24-hour Samsung support and remote connectivity. We continue to have all of our commercials our technical operations finance and administrative support.

number four

Consistent with our focus on strengthening our earnings power and further modernizing our Fleet. We took delivery of an lr1 to see ways Guayaquil life ahead of the market recovery.

This ship will trade in our panamax International joint venture that has consistently outperformed the competitors in the marketplace.

We also sold two older aframax during the quarter one of which delivered in the first quarter and the other which is expected to deliver to the buyers and the third quarter further improve the age profile of our Fleet.

moving to the next bullet

the rate environment has continued to strengthen in the second quarter and with our sizeable Fleet of crude and product carriers and significant exposure not only to the vlcc market, but off to the mid-size sectors aframax is panamax is in Mr. We have captured this Market string.

seven million barrels per day beginning in May

with limited Global demand oil prices dropped precipitously in April as a result oil storage facilities on land are filling fast leaving the job market to bridge that Gap as part of the solution.

Tanker owners are currently benefiting greatly from the storage of oil and historically low oil prices.

First delays and congestion charge port where there is inadequate storage space to accept cargos has created a shift Supply shortage at load. It supports the elevated rate environment second. We're in the midst of a strong oil contango, which makes it possible to Port Raiders to store oil creating democracy for tankers to serve as floating storage. This has the effect of further reducing Shift Supply a scene in the chart on the right-hand side of the slide. This push is raised higher.

According to Reuters. There are currently about $160 million barrels being stored on ships as of mid-april.

On slide seven. We provide an update on Shift Supply.

The overall tanker order book remains historically low only 6 vs have been ordered here today and 2020.

And 31 were ordered in the full year of 2019.

Uncertainty regarding the current market as well as decarbonisation and suitable propulsion systems to meet decarbonisation goals and targets has tempered ordering Shift Supply also, needs to be limited by longer installation time for scrubbers as well as delayed Chinese new building deliveries as yard struggle with labor shortages.

Moving to the lower half the slide. We note that the global vlcc Fleet continues to age as evidence the chart at the bottom, right?

822 bltc nearly two hundred ships are over fifteen years old. This is the age at which vessels become significantly more expensive to operate both have special surveys every 2 and 1/2 years.

Additionally and ships now reached ballast water treatment deadlines even greater capital expenditure is required.

Based on these Dynamics and The Limited scrapping activity last year and into twenty-twenty due to the market recovery. The potential for scrapping has been building while there have been no pistol scrapped a 2020

if it's moderate scrapping is likely to increase based on the Aging Fleet.

Finally, I want to provide an update on our ten vlcc scrubber program to date we have completed the installation on five of our modern vlccs.

The two ships that are presently in the yard undergoing conversion one will sale this weekend and the second will complete her scrubber installation month-end May early June.

Of the three remaining vlccs in the program. We have decided to ship those installations into twenty Twenty-One to alleviate installation challenges related to the covid-19 demek. This better aligns the installations with the vessels natural Dry Dock date and also allows us to take advantage of the present strong market conditions.

I'll turn the call over to Jeff to provide additional details on the fourth quarter results.

Thanks Lois and good morning. Everyone that's moved directly to reviewing the first quarter results in more detail. But before turning to the deck, let me quickly summarize. Our Consolidated results came in the first quarter of 74.2 million and its lowest mentioned. This was our highest quarter. Net income for the quarter was 33 million or $1.12 per diluted share compared to a net income of 10.9 million or $0.37 per diluted share in the first quarter of 2019.

excluding the impact

They 2.8 million dollar gain on sale vessels 12.5 Megan of write-offs of the financing costs and a 1 million dollar loss from the extinguishment of debt. That income was 43.7 million or $1.49 per diluted share now, please turn to slide 9.

I'll first discuss the results of our business segments beginning with the crude tanker segment TCS for the crew tanker segment worth $89 for the quarter compared to $73 in the first quarter of last year.

This increase primarily resolved upon the impact of higher average Blended rates in the vlcc to as Max after Max and panamax sectors.

Turning now to the product carrier segment tce revenues. There were $31 for the quarter compared to $21 in the first quarter of last year this increased primarily resolved in for the impact of higher average daily Blended rates by the LR LR2 and Mr. Fleets.

Trying to revenues overall as reflected in the chart top-left Consolidated revenues for the first quarter of 2020 for $120 compared to $94 in the first quarter of 2019. This increase was principally driven by substantially higher average daily rates earned across the crude and product segments this quarter compared to last year's first month looking at the chart on the top right of the page adjusted. Ebitda was $74 for the quarter compared to $47 in the same period last year again. This increase was pretty much given by higher daily rates.

On the bottom half of the page we look at the results. Sequentially, you know that is quarter-to-quarter Consolidated revenues and adjusted ebitda for the first quarter of up in the fourth quarter increasing by $2,000 in each case.

Turning now to slide 10. We provide a q1 rate review and to to look forward. I will now discuss our bookings for as far which are significant a higher relative the first quarter based on a strong rate apartment.

First we booked 71% of available spot days for a vlccs an average of approximately $91,000 per day for a modern vessel and $88,000 per day. Overall. 58% of available is next 5 days in an average of approximately $63,000 per day 53% of available a permanent spot days and an average of approximately $40,600 per day and 51% of available panamax ones five days in an average of approximately $34,000 per day on the MRC side. We booked 42% of our first quarter spot days and an average of approximately $20,000 per day.

Now if you would turn to slide 11.

Talking about our break even the cash cost tce breakevens for the 12 months ended March 31st, 2020 are Illustrated on this slide International sea waves overall Break Even rate was $50,000 per day for the 12 months ended March Thirty One Two thousand twenty these rates as always are the all-in daily rates are owned vessels must learn to cover vessel operating cost of dry-docking coughing cashing an extent and debt service costs, which means scheduled principal ever Sation as well as interest expense of note taking into consideration distributions from RFS o j v the overall break even read company drops to $8,800 for that.

now we've include

On the far right side of the bar chart the wall and daily Break Even rates for the forward 12 months ending. March Thirty One Two thousand twenty one. We expect our overall break even read to be $21,500 per day taking into consideration the contributions from our efforts and our for time Charters the overall Break Even rate will drop to $16,000 per day off at this time. I'd I'd also like to reaffirm cost guidance for the year for your modeling purposes for the remainder of 2020. We expect regular daily Optics, which includes all running coughing Assurance management fees and other similar and related expenses for our various classes to be as follows for VIP seats eight thousand four hundred per day to as Max 7704 Max $8,100 per day. Panamax. 7900. And Mrs. $7,500 per day for details on projected drydock capex costs and birth.

Paradise by quarter, please refer to slide 19 in the appendix for an update there.

Continuing with cost guidance for your modeling 2020 interest expenses expected to be $39, which importantly is $35 of cash interest expense the balance of $4 off of three million dollars and amortization of unamortized discounts and deferred fees and one way in the dollars which relates to a market market change an interest rate Collard to it's modification a designation as a cash flow hedge. Both of those are non-cash items additionally our debt calls for $20 and scheduled quarterly principal payments beginning of Q2 month for 2020. We expect to be in region of $20 and it's a $28 would be non-cash items, which is relatively in line with last year. I finally we expect $500 in equity income about and about 19 million dollars for depreciation and amortization for court.

Now if we could turn to slide 12 for a cash bridge moving from left to right we began the quarter with the total cash and the clarity of $200 off during the quarter. We generated $74 of adjusted ebitda. This amount includes $5 in equity income from the JVS, which is non-cash. So be there for conduct it to reach a cash figure out an ad back to cash distributions for the JVS which were $300 in the first quarter from the episode JV.

Ruby long week spend a $20 on dry docking and capex you received fourteen million dollars in proceeds from sale vessels and we extended Seventeen million dollars toward the purchase of an adult desel to see wage Guayaquil cash interest and principal payment on our debt with $18 and finally taking into account the $40 of net to averaging comprising twenty million dollars from the refinancing and a $29 repayment of r q 1 revolver drop along with twelve million dollars cash returned to shareholders. The net result is that we took the quarter with approximately $110 of cash and $40 a month on revolvers giving us total liquidity of $150.

I'm moving to slide 13 like to just briefly talk about our balance sheet as of March 31st. We had one point seven billion dollars of assets compared to 543 million dollars of long-term debt an additional $40 revolving credit facility. It remains undrawn at the March Thirty One, as you can see on the right-hand side of the slide. Our total debt-to-capital said the 33% off our net loan-to-value of our conventional Fleet alone stands at just over 40%

Now turning to slide 14 like to highlight the sustainability linked pricing mechanism included in the loan facility, which we close in January. We're very pleased about this situation is the first-of-its-kind for a publicly-listed tank router and has been certified by an independent leading firm in G and corporate governance research ensuring that it needs sustainability least link to loan principle adjusting. The pricing will be linked to the carbon efficiency of the international Fleet as it relates to reductions and CO2 emissions year-over-year such that it aligns with the international Maritime organization a 50% industry reduction targeted greenhouse gas emissions by 2050 the traffic and Emissions reductions follow the trajectory outlined in the presiding principal the global framework used financial institution to assess the climate alignment of their shipping after polio.

We are truly pleased to work with a backing group to support their not support their goals and ours. If we meet the targets of future years will receive a modest discount or will pay a modest increase if we don't offer that include my financial remarks right now like to turn the call back to Lois for her closing Google. Thank you very much Jeff.

If you could please turn to slide 16, we just want to reiterate some of the highlights from the first quarter.

We continue to make progress effectively allocating Capital to unlock shareholder value and successfully take advantage of the current robust tanker Market.

We transformed a capital markets completing the refinancing of 380 million of high-cost debt in January. This reduced annual interest expense by $25 billion dollars in the customer or the lowest leverage profiles in the public Companies shipping sector as a result of our balance sheet strength and substantial cash positions. We continue to execute our disciplined and balance Cafe the allocation strategy which included initiating a regular quarterly cash dividend of $0.06 per share and opportunistically repurchasing shares in the first quarter.

We purchased an LR one to see wage Guayaquil strengthening our earnings power and we sold one older a Crewmax during the quarter and schedule the sale of another order a Crewmax to take place during the a second quarter or third quarter further improving the age profile of our Fleet as the rate environment has continued to strengthen in the second quarter with our sizes accrued and product tankers and significant exposure. We captured the market strength and are well-positioned to generate substantial earnings moving forward in addition strong second-quarter bookings to date we capitalized on elevator rates by entering into a number of Highly possible time Charters ranging from 7 to 36 months where we anticipate continued service will conditions for tankers. It's important that together with our joint venture income these time charges reduced the fleet where I break even on our spot Revenue days to $16,000 per day over the next Thursday.

We believe our first quarter results highlighted by our highest quarterly earnings per share is a public company demonstrates E-Waste wrong process in a robust rate environment. We enter 2550 with a substantial cash position and ended the quarter with over $150 in total liquidity, including hundred and $10 of cash. We have always managed our business for the long-term and I recently executed time Charters that highly attractive or a combined with our sizeable Fleet and are significant exposure to these suicide after panamax and M insured Seaway is positioned to generate substantial cash flow throughout the cycle and create lasting shareholder value.

Thank you very much, and we can open it up to questions.

We will now begin the question-and-answer session.

To ask a question. You may press * then 1 on your touchtone phone.

If you were using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two.

At this time, we will pause momentarily to assemble our roster.

The first question comes from Randy Givens of Jeffries, please. Go ahead.

Howdy lowest Jeff David. How's it going? How are you already doing well doing well. Yeah, you know congrats again on the record quarter. It's pretty clear that the second month will be another record. So keep it going now your balance sheet obviously already very strong in this environment. You're producing a lot of free cash. So what are your preferred choices of this cash going forward now just so you know, I'm I'm out of my chair giving you a standing ovation for the share repurchases. So should we expect that to continue now that you know, the shares are still at a birthday discount on the levels?

Jeff that your favorite topic come on Jeff. I like talking about better than Capital allocation. It's all good. So thank you for that wage. I think as we look forward to start by looking back. I mean nothing tells the story better than to one, you know, because we got the refinances done is gave us flexibility and we had a straw balance sheets in the clarity in q1. We were able to do all four ways that you really can do Capital allocation of cash off and do them concurrently the same court, you know, we bought a vessel as well as two older vessels. We delivered substantially as we talked about and we returned cash to shareholders two ways. We can get this fixed dividend which will keep quarter-to-quarter regular and we bought back ten million dollars a share. Thank you very much. So I think we feel good about being able to do all those I don't think it's yep.

Anything like sequential egg, we can do them all together. So we don't have any immediate plans to buy another ship. I think our deleveraging is

Eating along quite well under the news new schedule what we aligned so, you know with the clarity and the bouncy we have, you know, we feel comfortable continuing to continuing, you know often I'd certainly say that the, you know, share price certainly still looks attractive for we purchased.

Okay, I'll I'll accept that as a yes. And then the second question. Thank you for all the details on your time charters on Slide Five like the transparency there so I can you give us a sense of the liquidity of that market, you know, for example, why lock in for Charters instead of maybe eight or instead of just staying full spot. So how do you balance that? And then what are your current kind of six month or or seven months or one year time Charter rates that you're seeing? Okay, good question Randy. So you really see the customers responding very quickly to wear contango is at at any one point in time and it it takes a little bit more patience and effort to execute a three-year deal in this investment than it does 7 month or or a year deal. So, you know, we we simply have been layering in portfolio approach across the ship and we still think that dead.

You know going forward contango has reduced but not dramatically it's it's still pretty significant according to a lot of the oil pundits. It looks like there will be still be significant in May a lot more Supply than there is demand. So we look forward to additional opportunities to take advantage of as as that materializes and you know right now I would say that the tanker market and the oil Market is adjusting to a new level and then we'll see whether or not I'm going to run up again depending upon the volatility which is very significant in oil prices today.

Okay, can you give it to kind of range maybe for current 7 month or one year time Chargers?

You're you're for probably six months Charter. You're probably around, you know, $55 sixty thousand dollars per day today, but I think you know as we walk the contain going if that increases even a little bit then you will really see additional vessels being taken.

Sir, cool, well, I'll turn it over from there. Thank you so much for the time.

Thanks, Randy. The next question comes from Ben Nolan of stifel, please go ahead.

Hey guys, should I have a couple but we'll start with we'll start with some of your cars at the moment wage larger product tankers trading it pretty healthy. From what I've seen trading it a pretty healthy premium to those in the crude Market curious where you guys are positioned in terms of how wage think about the earnings power for those vessels in the back half of of the quarter here. Yeah been great question and I hope you're well, we have one dog that's trading clean and she is on a very lucrative Voyage at present. So we we expect her to earn well, but we we put her in with the after Mac sector wage. So she is trained clean will remain so and we look for that to be a higher earnings on her and on our panamax Fleet The Vessel that's traded clean is actually the Guayaquil that we just took delivery of

And Our intention is to continue to trade her clean, you know in this prompts very strong.

Product environment where you're seeing the storage now being taken on product carriers. Okay, and and the rest of the let's say l are ones are all life is as panamax as in the dirty trade. Guess that's correct. That's correct. But I I would just highlight them that you know in q1 the spot market for our vessels was $39,000 per day per annum axis, which probably stacked up stronger than anybody that you're going to see out there and cute to today is 34,000. So I think that the panamax international joint ventures Stacks up very strongly on spot rates.

Yeah, no and that seems like it is always the case where you guys is your you know, real Niche I think but, um the also just sort of remodeling purposes. I believe there's a handful of em ours that are scheduled to or maybe have already come off Charter that you were chartering a is is that correct and and any thinking about you know, keeping the size of that position higher via, you know, either buying assets or charge more

So you're correct. We have we had seven mrs's operating. We we now have five apples were removed from service to the complexities with the third party providers. And you know, we are enjoying that market. I think the the almost $21,000 per day in the first quarter of birth for our team was quite strong and we're enjoying that sector whether or not we would buy. It just no fossils. I think we'd be careful right now with where Bethel values are so long that might not be the first thing we do, but we would add to our trading strengthen our trading platform as we see opportunities.

Okay, and then and then lastly for me and I'll turn it over you mention on the cruise installed two in process and then you shifted from 6 to 2021 a couple of things on that. How should we think about the capex Cadence with respect to those and Thursday? Are you pretty firmly committed to going ahead and and installing scrubbers on those remaining free or is it, you know more of a wait and see?

So, you know, if you go to page nineteen, then you'll see a pretty healthy breakdown of the yes, sir. No, it's okay for q1 and Q2. So we have about nine million in Q2 for the LTC sector and when you think about it, a lot of our challenges are behind us, you know, the indeed the coronavirus Heating in China, you know really and made it difficult for Laborers to get to the yards and get to work on outfitting the scrubbers so that did we did have a pretty big challenge here in q1. The guys worked through that amazingly and very diligently and turned those ships out. They're all working very well. So we we've got our eyes forward and on the remaining three, you know, we will see how everything develops our present intention name.

To install them when it is their natural Dry Dock.

And you know, then you're not picking them out of service for additional time. You just adding that job on to the regular dry docks. So that's our present intention. Let's see how the world normalizes.

Okay. All right. That's very helpful. Appreciate it. Thanks.

The next question comes from Omar Clarkson's platou Securities, please go ahead. All right. Thank you. Hi, Louis and Jeff. How are you? I'm good. Thank you. I just and I apologize maybe for for for this open-ended question about to ask but maybe just taking a step back and thinking about International see ways, you know, you guys suck really conservative on the dividend conservative on the buyback conservative on acquisition, but obviously very aggressive on repaying debts and and building free cash, which is obviously very logical at the risks the platform and gives you tons of flexibility going forward it obviously with the direction of the market as it is now you're going to be getting a whole lot more cash and you've obviously just finished your refinance. So when we think of international see ways and what it's building to how do you see things playing out from here or are you playing the long game a very patiently and what I mean is as we as we

Think about 2021 and Beyond do you see the company preparing itself for like a large scale slash into a larger company or do you feel that where you stand now that you'd like to keep it that way? I know that's a big question. But just kind of like the get yourself on that. It's an opportunity. So I I would definitely say that life. We are playing a long game. We are running this company to be prepared for the market and all environments and we think that that is a real strength, you know the team, you know, we sold the LNG for for a great 123 million dollars in Q4 immediately paid down debt the finance team immediately moved to refinance and that was locked down in a execute it in January that was done. Well before coronavirus was on the horizon, but it's just an example of the the type of movies that we want to make two. Yep.

Our shareholders very good value and see ways and we continued some of the moves, you know, our individual such as buying a ship selling a couple of here, but we never idle and we continue to improve our earnings power our Fleet profile and we want to keep moving up the leaderboard at the US.

Thanks a lot. That's I think that's a good answer. I appreciate that and and how to follow up on a comment you made I think was the best question. The you said we need to be careful at the prices are just wanted to get a sense of what you meant by that do you feel that asset prices at this point or maybe too high or does it I guess when we think about where rates are TCS, especially the ones you've entered into as it seems that they're relatively low or at least a cash flow yield is high, you know, just wanted to tell ya know. Absolutely, you know, if if you look at the ships that we bought, you know, the $650 that we spent, you know, we were able to do that really not perfectly the cyclical bottle pretty close, right? So at the values have come up somewhat not dramatically but you know as you look at where asset values are today, you know, whether

or not we would make a he

Huge Splash to buy a lot of ships at this exact moment. We might wait and and be very patient as the cycle plays out and you know, maybe in a year and half, you know, when I set prices are lower as we go through the cycle, you know take our opportunities when they come to us.

Yeah, but that's there and maybe just Switching gears gears. I just have one question on the you know, the episodes. It's been a while since we maybe you know thought about the about that long but I think there's still another couple of years of of charger left on those. You know with where oil prices are have you gotten any sort of feedback from the charger on you know, the the potential extension or risks to to extending that that that work any anything on that you can the comments on well, I would simply say Omar that you know, as you know of the episodes are offshore and those fields continue to operate and those two episodes are fully utilized on that on the field and continue to operate without the indeed do have about you know, not quite 2 and 1/2 years left on on the existing Charter those Charters go through 2022 Q3.

And so we look forward to conversations with our customer. And we you know, those those vessels are ideally suited for that field and it continues to be highly productive. So in the future, we look for life conversations and when we can share more we will okay and but they haven't necessarily have you noticed any sort of change and and how they're using those clothes ships whether they're storing less or anything along those lines.

You know, we we actually, you know had a a recent opportunity where they really took the advantage of the availability of the three million barrels, which is unique to those two episodes. So they they are really fully utilizing those vessels.

Okay. All right. Thanks Lois. Appreciate it. Thank you, Mr. Before you go. I just wanted to maybe add on to Lois's answer about the long game, you know, obviously not the same room in the back in this environment, but I wanted to say that that indeed the case and you mentioned that we're sort of aggressive on deleveraging and legal conservative. In other areas. Well, I think I just highlight what I said a little earlier on about the proud of the fact that we were able to do all these major four major the cash allocation Capital allocation choices that you wanted to continue to see that the possibility and that's one of the things I like about the net the leveraging is that it it it's just all optionality. Right? So, you know if that puts you in a good place now and still leaves you your options for the weather. It's just you know buying assets when they become more attractive or whether it's further returning cash to shareholders, you know, it it doesn't preclude as any of those future options. So that's probably why it comes up first month.

Hope that helps it does. Yeah. Thanks for that job. Appreciate it.

Ahead. Yes. Thank you. Good morning Willis. Good morning, Jeff. Good morning, ma'am Louis on on the macro you highlighted the fact that there are older be else in the global Fleet. A lot of them now are being used floating storage. Would you anticipate as as some of the longer-term benefits the supply side of the equation as these floating store or vlccs come off line. Do you expect them to be scrapped rather than come back into the fleet?

You know, it's all going to depend upon the market timing and we all watch that, you know, very carefully. So in this kind of an environment the owners would be very reluctant to suck up that high levels. But also you've seen the scrapyard be closed due to coronavirus and and a lot of challenges on that front, you know as let's say, you know storage on wines maybe in twenty Twenty-One, you know, depending upon how quickly demand is able to recover will determine what the what the rates would be and whether or not there will be opportunity for those older vessels or whether they will then go ahead and scrap and then that will create a healthier Market going forward.

Okay, and looking at the the product tanker side, are you anticipating the storage requirements for refined products to help with the birth longer-term or sustained rates in that area of the fleet of your Fleet?

Yes would be the short answer and I think that you have all different all different refineries around the world and everything within country trying to calibrate and match where demand is at. So, you know, when you see refineries running too high, then you see excess product when you push refiner, he's running say too low and production still high then you see it on the crude side. So we expect it really to be across the space and there are new bill for the axles that are the lccs who is Max is that are indeed storing or will be storing products as well. So, you know, there's really a dog across the space in the tanker sector right now.

Thank you, Luis.

The next question comes from Greg Lewis of btig, please. Go ahead.

Yes, thank you and good morning everybody.

Good morning, Lois Louis. I just wanted to ask you a question and it's kind of been touched on a little bit, you know through the capital allocation kind of thoughts wage. So, you know as we look across, you know, the the the international seaways Fleet. Yeah, it's a mixed Fleet. There's some smaller vessels some younger vessels cross at the classes as as we look at each of these older vessels and and really what I'm getting at is is fleeting them alone. And you talk a little bit about asset prices, but really the older vessels in any Up Cycle, which is what we're in right now and to increase more in value on a relative basis than newer vessels. So, you know, is there any way to think about and I think some of your peers are trying to do this. Is there any way we should be thinking about renewal in terms of you know, maybe not going out and buying a block of vessels. But but in actuality maybe taking some of those autoships and Ed

The next question comes from Liam Burke a b Riley FBR, please go.

You know selling them and and that's you know, more than enough equity required on buying a new ship is kind of a problem.

From that you're running in first of all, is that a strategy? And then I guess I guess my follow-up on that is is the problem that there's just not a lot. There's just no modernist tonnage that you guys have interest. In fact, I'm just trying to understand if that's a planet. It is a plan. What's kind of holding that back? Well, you know certainly a plan is, you know, when it is true that some of these older vessels appreciate more so I'll give you a double response, you know, as you see on our app for Max's some of those old one or two belts. We're we're moving those out took this opportunity to do that then on some of our vlccs, you know being able to fix a year charger on tanabe, which is 18 years old significant life brings in so much cash flow that that you're able to capture that and that really you may be able to do that again, and then dispose of that that so after that so you're really dead.

Any of your downside risk on a vessel like that. So we you know, we look at across the Spectrum, you know, where can we capitalize on realising valve that when we proceed we're we're in part of the high. And then, you know, we will look for Value, you know, where we see it if we would not it's it's unusual where we would sell over baffles and then buy back, you know, buy a newer ship simultaneously we we try to be a little bit more opportunistic than that, but you're not off the mark in in the general approach. Okay, great. And then just as I think about, you know, the panamax poll just you know, looking at some of those ships and getting you started the renewal process their home is their limitations that would would I mean, I guess what I'm wondering is yes at the panamax pool, but it would there be ways to kind of renew that pole with other birth.

Is vessels i e maybe scaling-up than LR2 or NMR is that is that not not really the way that there's limitations around that trade that would prevent that from happening. Well, the the the key thing on the most of the panamax international Fleet all are dirty and those are trades that you know, go back and forth easily Kathleen, um, North and South America, there's a lot of Panama Canal Transit and while an aframax can Transit the Panama Canal at this time, and he often do the panamax is dead pretty flexible that use the old box. It's really ideally suited for this trade and and those are dirty shift. So you really wouldn't want to put an m r in there, which is mostly clean base trade. So, you know, it's a trade that's well established and and that we continue to persist on

And and then just following up on that and just you know, you know, like you were mentioning earlier that vessels get over fifteen years old that becomes somewhat of an issue. We're only giving the niche nature of this trade-off our vessels in this trade maybe aren't as it isn't as big a drag in the panamax trade as it might be in the broader International Market. Is that a fair statement? Well, and we made a lot of investment in June 2019 on our panamax has and line them up. We expect a 20 20 to be a very good year and those ships are are earning really well in that police wage right now.

Thank you very much. Hey Greg is Jeff. Can I just follow up on the question you started with you still there? Please bill. Yeah, I I think you would note that that we have been selling selectively older ships and mentioned to on this conference call and not to mention non-core assets like the ONG joint venture last year. We definitely see that as part of the plan as the way to renew and grow our freedom itself non-core or older assets. So that's going to continue that make sense. You know, if you look at the the name of the new facility we put in place it's part of his called the core and the other is called the transition facility, which is you know, didn't need another clue and tells you that it's shorter term lending for for veteran that transition phase to uh to to head out. Eventually. He goes are thought our strategy long-term kind of goes to Omars question too is that you want to be able to log

Fun with your renewal and a modicum of growth from a combination of operating cash flow and the disposal of vessels when they get to that the right time. So you have one with the lower leveraging prudently. You can meet that objective. But you know, it comes episodically we know cuz you don't make Acquisitions that typically every year you wait for when the assets are low. So you you got to have a lot of money for that but the idea is offering cash flow disposed of older vessels are non-core assets can support your your growth your renewal and growth, you know alone without having to go outside for cash.

Okay, perfect. Hey, hey guys. Thank you very much.

The next question comes from Jayden's Meyer of value investors Edge, please. Go ahead.

Good morning, Lois. Good morning. Jeff congrats on the great quarter. Hey, how are you? I do it all right, it's good to see these results flowing in even if the market doesn't appreciate them. I do want to highlight. I think the strong point of the call was the two fixtures for seven months at a hundred thousand, but there's a lot of pessimism in the market but we've seen Occidental taking some long-term Charters. We've seen Hess recently announcing some Charters. You clearly took some can you talk a little bit about the bid out there for CS 6-month or 12-month Charter? Is that still existent? Is that still strong or has that fallen off a little bit with the current spot rates?

I think that the charters and the storage potential is taking a little bit of breather at the moment while the markets just itself and that you know now this week you've seen everything study out and you starting to see a lot more activity. So what you have to realize is when when vessels are all those charges were executed were with 2nd half April first half may days. So a lot of these vessels are now getting their car goes but what you're starting to see show up is these days now storing and starting to sit around the world and that's going to show up in the position list. So we don't think that you know, we think setting out between fifty sixty here that's home. And we think that there's some Runway left in that and there will be additional storage and we may start to see that in the coming couple of weeks.

Yeah, we'll have to see how that develops of course the rates came back markedly. But of course compared to historical. They're they're off the almost off the charts. They're going to slide 13. You have a good break down out of your current debt. As long as I'm looking at that on the bottom of slide 13. I see one clear facility a very small one that is a massive outlier in terms of costs and I believe it's it's coming up for a call back in June any other comments on that facility. I'll just say that that is unsecured debt. So that is reflected in the cost, but then I will turn it over to Jeff to jump in that one.

Yes. Sure. Hi Jay. Yeah, that's the last remaining piece of the patchwork. I almost called debt that we did in order to not issue Equity when renewing our our Fleet Indian two thousand and Seventeen or eighteen. So it's the baby Bond. It's so called because of the smaller amounts and $25 car and it's Louis noticed unsecured. So, uh, it actually is a relatively attractive rate for unsecured that said page is unavailable up until June so it's no choice about that. But yes when we get there that that'll be a a capital allocation choice. We will have an option if we want to to reduce that so haven't made any decision yet, but it's definitely one that will come up at the end of the end, too.

Definitely a good thing to keep watching one last question. I think we had a good discussion on the call about Capital allocation. I did notice you spent ten million on share repurchases. So good to see that going. I have your current mileage around 30 to 50 and if we you know put an S before cue to that's only q1 financials if we add in Q2 cash flow. We're probably well north of thirty five, but look, I mean as we're talking right now. I'm looking at your shares and hook it up an amazing quarter. And then your adapted to the HT did yesterday and the shares are not trading. Well, I mean there at like $20 flat so, you know, you're looking at shares that trade at 60% nav give or take off percent up or down. How do you think about that remaining authorization you have 20 million left. Is there a way to maybe increase that further or does that require some sort of like annual meeting?

Louis you hear me? Yeah, go for it to ya know we have the $20 off that was put in place in glass the last for two years from one that started so it's got a ways to go but it's not one. I know this might be true for some other companies. That's why you're asking where we have to tie it to an agent. If we were to run through that authorization we would go back to our board for a renewed authorization, but that's not you know, a once-a-year thing. It could be something that we request so I look at it as pretty routine.

Okay, excellent. Thank you Jeff for clarifying that yeah, you know I'd hate for you to be in a position where you know you get to June and rates are great and the stock for whatever reason does not seem to understand that and you run out of authorization so long, you know, I guess that's a luxury problem if you're buying shares at twenty bucks, but good luck to you. Thanks again for the good quarter. Thank you.

Once again, if you have a question, please press * then 1 on a touch-tone phone.

This concludes our question-and-answer session. I would like to turn the conference back over to Lois of Rocky CEO for any closing remarks. Thank you so much. Thank you all for joining see ways earnings call. We will continue to take advantage of every opportunity to create shareholder value, and we really hope everyone on this call and all of your family stay safe and healthy and change time. Thank you very much.

The conference has now concluded thank you for attending today's presentation. You may now disconnect.

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