Q1 2021 International Seaways Inc Earnings Call
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Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
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Okay.
Ladies and gentlemen, thank you for standing by and welcome to the International Seaways first quarter 2021 earnings call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
If you require any further assistance please press star zero.
I would now like to hand, the conference over to your first speaker today, Mr. James Small General Counsel. Please go ahead.
Thank you.
Good morning, everyone and welcome to International Seaways earnings release Conference call for the first quarter of 2021.
Before we begin I would like to start off by advising everyone with us on the call today of the phone.
During this call management may make forward looking statements regarding the company or the industry of which it operates.
Those statements may address without limitation the following topics.
Outlooks for the crude and product tanker markets.
And the oil trading patterns.
Forecasts of world of the regional economic activity for the demand for and production of oil and other petroleum products.
The effects of the ongoing coronavirus pandemic.
The company's strategy.
The timing and likelihood of the completion of our announced the merger with Diamond S shipping.
Any plans to issue dividends.
And the anticipated synergies or other benefits from the proposed transaction from the party's respect of prospects.
Purchases and sales of vessels construction of Newbuild vessels and the other investments.
Anticipated financing transactions.
Expectations regarding revenue, so the expenses, including vessel charter hire and G&A expenses.
Estimated bookings and TCE rates in the first quarter of second quarter of 2021 or in other periods.
Estimate of capital expenditures of 2021 or other periods.
Projected scheduled dry dock and off hire days.
The company's consideration of strategic alternatives the.
Company's ability to achieve its financing and other objectives.
Other economic political and regulatory developments around the world.
Any such forward looking statements take into account various assumptions made by management based on the number of factors, including management's experience and perception of historical trends current conditions.
And the future developments and the other factors that management believes are appropriate to consider in the circumstances.
Forward looking statements are subject to risks uncertainties and assumptions many of which are beyond the company's control that could cause actual results to differ material materially from those implied or expressed by the statements.
Factors risks and uncertainties that could cause of international Seaways actual results to differ from expectations include those described.
In its quarterly report on form 10-Q for the first quarter of 2021.
Our 2020 annual report on form 10-K.
Our recently filed registration statement on form S. Four.
And in other filings that we have made for the future of May make with the U S Securities and exchange provision.
With that out of the way I would like to turn the call over to our President and Chief Executive Officer, the slowest the bracket Lois.
Thank you very much James.
Good morning, everyone.
Thank you for joining international Seaways earnings call to discuss our first quarter 2021 result.
The first quarter with transformational for international Seaways.
We took important steps.
The significant value for our shareholders.
This includes.
Our highly accretive merger agreement.
That will create an industry bellwether.
With enhanced scale and capability.
We are again capitalizing on an attractive opportunity to further renew our fleet.
Kind of cyclical low point for the benefit of shareholders.
If you would turn to slide four.
We review the compelling value, creating transaction and.
And our first quarter financial results.
Starting with the first of all right.
Our all stock merger agreement with Diamond App.
Bringing together two leading U S based diversified tanker owners.
For the long term customer relationships deep.
Deep cultures.
Of achieving stringent safety.
Operational standard and strong governance.
With this we expect to deliver a number of compelling strategic and financial benefits to our shareholders and to stakeholders of both companies.
The combination of international Seaways and Diamond.
Doubles, our net asset value and tripled the size of our fleet to 100.
We are creating the second largest U S listed tanker company by the accounts.
And the third largest by deadweight.
We expect to solidify our power alley in the large crude sector focus on vs and suezmax it.
And to create of power alley in the EMR product.
Among other notable benefit.
We expect the merger to be highly accretive to both earnings and cash flow per share with.
With the estimated annual cost of synergy.
$23 million in revenue synergy of $9 million.
We will increase our equity market capitalization and our liquidity.
Which we anticipate will provide an opportunity for a re rating of our equity valuation.
We preserve our significant financial strength.
It maintains one of our lowest the lowest net leverage ratios and global shipping.
As part of this attractive transaction.
We have continued to ensure the return of capital to our shareholders.
This is highlighted by the 31 5 million special dividend to be paid to shareholders immediately prior to completing the merger.
We reaffirm our commitment to paying a quarterly dividend.
And opportunities Opportunistically executing on our $50 million share repurchase program following the close.
On the second bullet.
We highlight our dual fuel VLCC project.
We have contracted to build three dual fuel LNG VLCC from top tier Korean shipyard D. SME for delivery in early 2023.
We are executing our balanced and accretive capital allocation strategy.
Adding the state of the art vessel on seven year time charters to shell provide the strong stable cash flow with.
With the base rate and profit sharing that allows us to capture upsides.
Importantly, these tankers are well suited to adhere the future environmental regulation throughout their life.
There are 40% more fuel efficient than a 10 year old VLCC.
And 20% more efficient than of modern eco vlccs.
In line with our ESG principles.
These are highly efficient ship.
It will surpass today's I'm of energy energy efficiency design index.
And they will substantially outperform the 2025 E D I target.
This builds on our signing of the first sustainability linked refinancing in the industry.
Which was completed at the beginning of last year.
We're proud to continue to be at the forefront of sustainability initiative and the maritime sector.
We believe the addition of these vessels.
At attractive prices.
Presents a compelling opportunity to once again renew our fleet at the bottom of the cycle.
New building VLCC prices have risen by close to 10% subsequent to our contract date.
This purchase is consistent with our track record of Opportunistically deploying capital for growth since becoming an independent public company more than four years ago.
On the final bullet of the slide our.
Our first quarter net loss was $13 million for 48 cents per share.
And a weekend rate environment.
Where oil inventory destocking adversely impact the tanker demand.
We generated an adjusted EBITDA of $11 million.
It's important to note.
The as of the end of the quarter, we had ample total liquidity of $212 million.
Including $172 million in cash.
On slide five.
We discussed our disciplined and accretive capital allocation track record.
This chart highlights our success investing over $900 million to renew our fleet at the low points in the tanker cycle.
As the chart on the slide shows the.
<unk> nine ships acquired at the bottom of the cycle, which includes six vlccs acquired the 218 for $434 million.
Two suezmax the same one VLCC acquired in 2017 for a combined $169 million.
Have materially appreciated in value since the acquisition on the age adjusted basis.
Most importantly, these nine ships contributed accumulative $225 million in operating income through the end of the first quarter.
Further illustrating our ability to definitely identify attractive fleet renewal opportunities you can see that we ordered our shell project new buildings at a cyclical low point as well.
As I just mentioned new building prices are on the rise.
If you'll turn to slide six.
We provide an update on the oil supply and demand.
OPEC has announced increased production and Saudi Arabia will roll back its voluntary cut.
This will amount to an additional 600000 barrels per day and day 700 in June and 800000 barrels per day in July.
Based on its April forecast, the IEA estimates of 2021 oil demand will be up by $5 7 million barrels per day.
This is actually an increase from the last report of 300000 barrels per day.
The EIA is 2021 demand forecast is even more robust they expect demand to average 97 7 million barrels per day this year.
Consistent with this recovery in demand the.
AIA expect global oil inventories will fall by 1.8 million barrels per day in the first half 2021.
We believe the discontinued stock drawdown.
Is what was needed to set the stage for a tanker market recovery.
And when combined with the OPEC plus production increases.
A surge in demand for oil as the world begins to open up and vaccinations are administered globally.
This all signals of improvement in the tanker market.
Our positive view of the long term outlook for crude and product tanker demand is one of the major reasons that we're so excited for our merger with Diamond.
On slide seven.
We examined development and the clean product market.
During two of the code there due to the COVID-19 slowdown in global demand.
During the first half of 2020 refinery outages globally approached almost 12 million barrels per day.
Recovered somewhat in the second half of the year.
Record cold temperatures in the United States in the first quarter.
Led to a similar increase in refinery outages.
These outages have since decreased.
Refineries are running close to five year highs.
The U S Gulf refinery utilization rate.
Only yesterday popped over 90%.
This is the very strong indicators.
This allows for increased diesel oil exports from the U S Gulf.
And we're also seeing increases in gasoline demand in the United States, where we're very close to 9 million barrels per day.
We've been seeing.
Over a million barrels a day of gasoline imports into the east coast.
All of these recent moves bodes very well for the M R sector.
And when you see that the spot market is starting to increase.
Turning to slide eight we take a look at ship the bi.
We've mentioned previously and it continues to be the case the overall tanker order book remains at historic lows.
This is reflected in the 31 VLCC orders in 2019.
Same amount in 2020.
And 27 for it to date this year.
We believe that uncertainty regarding the market.
As well as de Carbonization regulation.
And higher steel input cost.
And increasing new building prices are temporary in the orders.
On the bottom half of the slide.
We take a look at the potential for recycling.
There's a number of candidates based on the aging global fleet.
You can see in the chart on the right hand side of the slide nearly 20% of the existing VLCC fleet is now at least 17 of half years old and 8% or 20 or older Rep.
Representing the majority of the VLCC order book.
Another 90 will reach 20 years old in 2021.
As each set of reach.
These deadlines.
The expenses increased and ballast water treatment installations loon.
This greater capital investment is required to keep them trading.
Based on these combined dynamic the potential for recycling has been building.
Only for Vlccs were recycled in 2019 and 2020.
We expect the T recycling increase, particularly given the current low spot rate environment.
And the increase in recycling prices.
I would now like to turn it over to Jeff to give the financial review Jeff.
Thanks, Louis and good morning, everyone.
Let's move directly to reviewing the first quarter results in more detail.
Before turning to the slides on the quick quickly summarize our consolidated results in the first quarter, we had or the adjusted EBITDA of $10 $7 million.
Net loss for the first quarter was $13 4 million for 48 cents per diluted share compared to net income of $33 million for $1 13 per diluted share for the first quarter of 2020.
Now please turn to slide 10.
I'll first discuss the results of our business segments, beginning with the crude tanker segments.
Time charter equivalent or TCE for the crude tankers segment were $36 million for the quarter compared to $89 million in the first quarter of last year the.
The decrease primarily resulted from.
For the impact of lower average monthly rates in the VLCC, Suezmax aframax and Panamax sectors.
Turning to the product carriers segment, TCE revenues were $9 million for the quarter compared to 31 day, even in the first quarter of last year.
This is due to lower period over period average daily by the rates earned by the other two other I'm wondering of our fleets.
Our product revenues were impacted by a decrease of <unk> revenue days as a result of increased off hire for scheduled dry docks and the decrease in MRI revenue days due to the re delivery of for time priority of ours to their owners between March 2020 of July 2020.
Overall as reflected in the chart top left consolidated TCE revenues for the first quarter of 2021 were $45 million.
Two 120 million for the first quarter 2020 the.
The Greece. The decrease was principally driven by substantially lower average daily rates or the cross the fleet for this quarter.
Per the last year's first quarter.
Looking at the chart at the top right of the page.
Adjusted EBITDA was $11 million for the quarter compared to adjusted EBITDA of 74 million in the first quarter of 2020.
Again, the decrease was principally driven by lower average daily rates.
On the bottom half of the page we look at our results over the last 12 months kind of year over year basis.
Consolidated TCE revenues and adjusted EBITDA for the last 12 months ended March 31, 2021 for $327 million and $157 million respectively.
The $356 million and $192 million for the prior year of LTM period.
Now turning to slide 11, we provide the first quarter review.
In the second quarter of 2021 earnings update.
Yeah.
For a look at results for Q2, thus far.
With 63% of our Q2 spot days for Vlccs.
The done at an average of approximately $50200 per day.
75 per cent of our available Suezmax spot days at an average of 16000 per day 37 per cent of our available LR twos spot days.
In an average of $11100 per day.
49% of our available Panamax spot days at an average of approximately $21000 per day.
On the MRO side.
The 65 per cent of the of the second quarter accounted for.
The spot days or approximately $12600 a day.
When we look at it on a blended basis of time charters and spot and as the concrete example of the benefits of our Opportunistically executed time charters done last year. If you look at the number on the top right hand side of the page you'll see as of the combined spot and time charter rates for Vlccs 19.
<unk> $19800 for Q2 with 67% of days accounted for.
Now I'd like to turn to slide 12.
The cash cost TCE breakeven for the 12 months ended March 31, 2021 are illustrated on this slide.
The international Seaways overall breakeven rate was $21000 per day over the last 12 months the.
These rates are the all in daily rates, our owned vessels must earn to cover that as the operating costs dry docking costs cash G&A expense of debt service costs, which means scheduled principal amortization as well as interest expense.
After taking into consideration distributions from our <unk> JV and the fixed time charter revenue.
The overall breakeven rate for the last 12 months dropped to $17500 of debt.
We are also now on this slide shown breakeven excluding principal amortization for <unk>.
In this case, the overall fleetwide breakeven fell to $50000 of debt.
On the far right hand side of the page the Bar chart shows the all of the daily breakeven cost for the next 12 months.
Taking into consideration contracted revenue from the SSO in or try and cutters. The overall breakeven rate of $18900 per day.
At this time I'd like to get caught the guidance for the year for your modeling purposes.
Please note. This is not taking into account expected cost synergies following the anticipated closing the merger.
For the remainder of 2021, we expect regular daily Opex, which includes all running costs insurance management fees and other similar related expenses for our various classes to be as follows.
For <unk> $8900 per day for Suezmax $8000 per day for Aframax $8200 per day for Panamax 7900.
And for the <unk> $7600 per day in each case, excluding any impact attributable to COVID-19.
Further we expect write off the dock and Capex expenses to be $24 million 9 million and $38 for millions this year.
For details on that you can look at that and.
Off hire days you can refer to slide 16 in the appendix for an update.
Continuing with the cost guidance, we expect 2021 cash interest expense will be about $24 8 million.
This compares to an actual cash interest expense of $30 8 million in 2020.
For the year, we expect cash G&A to be in the region of $25 9 million and.
And finally, we expect about $20 8 million in equity income from J vs $65 7 million for depreciation and amortization.
The about $900 below last year.
Now if I could ask you to turn to slide 13, we look at our cash bridge.
Moving from left to right. We began the first quarter with total cash and liquidity of $256 million.
During the quarter adjusted EBITDA was $10 7 million equity income from J vs. The decrease of 5 million.
And the cash distributions from J vs like three of them again.
We expanded $12 million on dry docking and Capex cash.
Cash interest and <unk>.
Scheduled principal payments on our debt was $21 million.
Finally, taking into account the $2 million quarterly dividend and the negative impact of working capital and certain other charges of $14 million. The net result was the we ended the quarter with approximately $172 million of cash and of $40 million Undrawn revolver, yielding total liquidity of $212 million.
Now please turn to slide 14.
Just like the briefly touch on our balance sheet.
As of March 31st we had a one $1.6 billion of assets compared to $450 million of long term debt.
In addition, we had the $40 million revolving credit facility debt remained undrawn as of March 31.
As you can see on the right hand side, our net debt to total capital stands at 26 per cent.
Our net loan to value stands at about 33%.
Our last 12 months of adjusted EBITDA with the strong $57 million and therefore, our net debt.
<unk> EBITDA for the last 12 months with two to three times.
That concludes my remarks, low like they turn the call back over to you.
Thank you very much Jeff.
As I summarize our first quarter.
Right. The to say this has been a truly instrumental and transformational quarter for international Seaways.
We signed.
Mercury agreement.
With Diamond.
And we contracted to build three dual fuel LNG VLCC.
Our all stock combination of a diamond as well double international Seaways net asset value.
The triple the size of our fleet.
It will create an industry bellwether.
That will rank as the second largest U S tanker owner by ship count.
We anticipate significant accretion to our earnings and our cash flow per share.
We have of forecast it at.
Annual cost savings of the synergy of $23 million and revenue synergies of $9 million.
We expect to maintain one of the lowest net leverage ratios in.
In the global shipping market and enhance our trading liquidity.
The larger market capitalization.
We continued to demonstrate our commitment to returning capital of investors.
As highlighted by our attention to pay of dollar 10 special dividend to international Seaways shareholders immediately prior to the completion of the merger.
In addition, we remain committed to paying a quarterly dividend and opportunistically drawing on our $50 million share repurchase program authorization to increase for the further value post merger.
Complementing this highly accretive merger, we're excited to partner with shell market, leading counterparty on our agreement to build three LNG dual fuel of VLCC for.
For delivery in early 2023.
In addition to the seven year time charters, providing strong stable cash flows and added upside.
Highly efficient debt both offer significant environmental benefits and further reflect our commitment to ESG in the maritime sector.
This is the latest example of Seaways capitalizing on an opportunity to renew our fleet at a cyclical low point.
This is consistent with our disciplined and accretive capital allocation track record.
Going forward.
Based on the two important transactions, we entered into in the first quarter. We are in a strong position to take advantage of positive of long term team for fundamentals.
And further create enduring value well into the future.
This concludes our prepared remarks, and we'd like to open it up for questions operator.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
Yeah.
Your first question comes from the line of Randy <unk> from Jefferies. Your line is open.
Thanks, operator of how the lowest Geoff and David How's it going.
Very good good morning, Randy Good morning wanted all of my two questions for me I guess first you know theres been some chatter on maybe your average fleet age being a little older than peers that said you know it doesn't seem to be of material negative as you have now I guess much less obsolescence risk right. When it comes time of 2030, So how do you feel.
About your fleet possible fleet renewal in terms of maybe some sales candidates and additional modern acquisitions.
[laughter].
Okay, Randy so.
Kind of taking that and starting to address it first with fleet age.
Since the international Seaways, the team independent for and a half years ago.
Derek for Luna.
And his team has sold over 21 of their vessels and they've done extremely well. So you know we continue to modernize the fleet and as we look forward.
Right now if you were to look at depth of value.
The independent service on ship valuations, you'll see that secondhand values are ticking north.
Really daily so as we look forward to 2021 we believe that the conclusion of the merger with Diamond.
The ships are going to start.
Earning higher TCE and also be at a higher valuation and.
All the time at every ship to you know whether or not we.
Selectively sell any vessel. So we'll just continue the same disciplined approach that we've had all along.
And when we look at buying more modern ships.
Would say that at the moment I think international Seaways.
Will you know for.
Yes.
Concluding our merger.
Building, our new buildings and.
That's going to put us in really good shape.
Well, if I could just add one comment Randy I think we're really happy with what I would call the portfolio of the aegis, we have in our fleet.
It's a really nice mix of the shiny buildings other modern vessels sort of eight to 10 year vessels.
<unk> 14 year old age vessels it's.
It really is the fleet, we wanted to put together at this point of the cycle.
Okay makes sense.
And then I guess lastly, following up on the upcoming merger with the of Society. What are your updated thoughts on the episode venture I know, we've asked about it for but at these levels or are you more likely to sell your 50% ownership by your own asked 50 per cent ownership or just kind of keep your current 50 per cent as is.
So you know regarding the asset. So we've been you know we continue to work very closely with our joint venture partner.
And it's a very positive.
Discussion with them and we are you know we look at.
Opportunities to monetize the episode and we're continuing to do that we're not in any particular rush and you know we believe that debt there is significant value potentially to be unlocked on those episodes.
Sure all right well that's it for me thanks, so much.
Randy.
Thanks.
Your next question comes from the line of Omar <unk> from Clarksons Plateau. Your line is open.
Hi, Thank you I have Lois Hi, Jeff.
Omar.
Hi, there I sort of just a general question about.
And this is maybe a bit bigger picture, but it's sort of like the the use of pool in the future, especially as it's really a big part of how you deploy your ships and soon to be the 100 chips you'll have.
Following the proposed merger with Diamond S. Now, we're getting to a place where ships you know ships are becoming much more differentiated and more so I think <unk> said in the past you've got eco vs. Non eco scrubber and non scrubber and now dual fuel as youre investing versus traditional bunkers.
How do you see that just affecting pool and how they operate going forward in particular for tankers international and any thoughts on that.
You know Omar that's that's a great point tankers international has been around for over 20 years and the international Seaways owns half year NAV on task and I think for pools in the future to the successful. They are actually we'll have to look a lot the way that P. I does.
<unk> is a pool that is really in.
The lower cost overhead type pool.
Yeah.
Has to be it has to be of very close relationship between the owners and the pool, because as we need to capture more data on the performance we have to enhance.
How the ships are performing for the company's technical and commercial needs to be closer than ever. So I think ti is actually extremely well positioned and theres a high level of collaboration between the.
The Martin the owners in the pool and the commercial and the technical teams and Youre going to have to see that in your order for pools to thrive in the future.
Yes.
Yes that makes sense, Lois and I think it's now how do you think the you know the potential per se of carbon tax that the play into this you know we've got the he was discussing at the.
The us as the increasingly coming on board with that idea and you know I guess it sort of seems that you'll have the pool, making decisions on the maximize maximizing rates in the earnings potential.
And then the owner might be seeing in outside of carbon tax Bill I guess.
And this is the discussion on carbon tax starts to really gain steam here is theres more clarity.
Do you see that as being like a brisk within pools.
Alright, that's it just sort of come down to what you just said, which is closer collaboration between the pool owner operators and the owner.
Well and you know what Omar I think.
In our industry, there's a lot of innovation and you know the pools are populated by really sharp commercial people.
And we're starting to see a carbon monitoring desks in within the pool of themselves and you know because all of us.
Owners realize that we need to you'll be paying close attention.
Attention and be part of the solution here moving forward so.
I think that you're hitting on what would be the biggest growth area in in trading probably in the future, which is gonna be carbon tax and how critical it is for all of us as owners to be.
The part of that conversation as this develops.
Yeah, no definitely the very interesting to see how things develop on that front.
<unk>.
And just maybe one follow up just maybe to Randy's question about the the episodes.
This ongoing discussion of it feels like every quarter it comes out of it.
Is there.
Is there a way maybe that the JV is waning when it comes to monetizing it.
Is it is it outright selling the shifts or do you think securitizing them with the securitized in the cash flow with some sort of debt facility.
And any way you're leaning so far.
Well you know, it's funny Omar because it does seem like a long time, but we actually just concluded. These are two JV for an additional 10 years for 2032 in the fourth quarter.
So.
It's a fairly recent achievement and and I would say that we are still evaluating all the different opportunities and we're going to work together with our partners to make sure that we maximize our outcome on the episodes so like I said.
We've got two really strong teams working on that and you know, we'll look at whatever it's going to bring us the absolute best value.
Okay, that's clear enough thanks, Lois depreciate it.
Thank you.
Yeah.
Your next question comes from the line of Magnus fear from H C.
Right. Your line is open.
Yeah, Good morning, Lewis from Jeff.
Right.
Couple of questions here first I'm going to slide 11, thanks for.
Got it.
A spokesman for the equipment.
Uh huh.
And it looks like you're able to capitalize on the spread between the low sulfur and high sulfur.
Can you talk a little bit I mean, this is the first quarter I've seen that breakout can you talk a little bit about the challenges over the last year you know with the since you know the <unk> 'twenty 'twenty came into the regulation and what you expect going forward there as far as.
If there are any challenges that you can address.
You know Magnus I would say that.
One challenge is debt.
True to form a shipping ever does exactly what you would think and you know the original differentials that we had expected to be between the low sulfur fuel oil on the conventional fuel where more narrow however, presently and it has been you know maybe now for about four of five months, maybe maybe that's what we're seeing.
But we've been at about $100 per ton. So as you can see.
The differential is something like five to $6000 per day between the scrubber fit at vs and the non scrubber fitted the so.
That that critical outperformance is just when we need it most of it.
At the moment in the cycle and then Bill maybe I would ask you our head of operations for Allegiant.
You know from from a fuel perspective, I mean, the fuel has been available the heavy sulfur and the.
And the low sulfur fuel has been available have have we seen quality issues or have we been able to overcome the largely to date.
Hello, Matt I guess.
Thank you Louis the on the heavy fuel side for the ships with the clean exhaust gas cleaning systems, we've been very fortunate we've not had any issues.
Getting fuel or any quality issues, there, it's actually been quite stable and end of quite.
Right, Okay on the very low sulfur side of the IMO 2020 of fuels.
We've seen a lot more variation in the nature of the fuels, which is something.
That was anticipated by the market and we certainly anticipate of it but again with some good planning we've been able to manage through those issues. So no lowest I think generally we've come through okay.
Thank you Bill.
And can I just got the magnets before you move on just for because of this is for help for everybody and planning purposes, the discoverer of days and Inc.
Two two.
That's just going to be 27 days for the non scrubber days of Q2 just debt.
27, so wanted to get that out there for 24 I apologize that's the correct number.
Okay. Thanks.
For that color.
I mean do you I'm I'm, the where the spread now you know all of little over $100 do you guys take the view on that or is there maybe some thoughts of locking in that spread.
You know, we constantly monitor it I wouldn't say debt.
We're looking to lock it in at the moment only because you know as you've seen in 2021 oil prices havent been rallying.
<unk> significantly and the spread tends to widen as you see the prices move up.
So at the moment I think we'll let it ride, but we do monitor it.
Alright good.
Lastly, I was looking through the slide deck here I can't find anything on the liners business here I guess in the last couple of years, but.
Maybe you can touch a little bit on what's going on there I mean, what's going on there during the last year I mean, the as far as activity level. It seems like the U S. Crude exports are still pretty robust and I guess, we've addressed a lot of the pipeline capacity issues.
So are we.
We closed 2020.
Our sales.
Our EBITDA was over $4 million for lighter Inc.
However, we have seen lighter than the COVID-19 affected as you've seen.
You know the U S. Our demand numbers were down I mean, this week just yesterday, we see that the United States exported over 4 million barrels per day of crew.
And you know in the in.
In the last week now that's the first time, we've seen that in in a very long time.
In the United States, you know, we're looking at GDP, maybe six 5% in 2021 are the high level of vaccination.
Penetration and <unk>.
Gasoline.
You see just as I mentioned, almost 9 million barrels a day, it's up 2 million barrels a day from last year, but still down one from 2019. So when you look at lighter is picking up and it is getting busier.
Certainly COVID-19 affected just like the rest of the world, where when you saw for you where.
Imports and lower exports in and out of the United States. It was COVID-19 affect it as well.
Okay, great. Thank you.
Thank you.
Your next question comes from the line of Greg Lewis from P. T. J. Your line is open.
Hi, Thank you and good morning, again afternoon everybody.
I guess I just wanted to follow up on Magnus This question bit of welcome back.
Around the lighter and it seems like it's funny alpine fly it seemed like forever ago, we had heard of lot of that out.
Whether it's an oil company or a alternative investor thinking about Dolby in VLCC export terminals.
Any kind of update there in terms of the as we think about that that's for sure.
Paul on the lighter end business have those projects move forward.
Or are they all have all kind of been kind of pushed to the right like everything else.
A lot of those projects have been pushed to the right Greg.
You know, we we do see.
Where the Suezmax it can now load average.
Also go out and fill up of V but.
A lot of those projects have been pushed to the side. It's interesting we do a lot of lighting in Panama very busy busy in the in the Bahamas.
The West Coast was affected by COVID-19 and imports, which is now starting to pick up and of course of the U S. Gulf is the biggest hub for lighter Inc.
And there are.
No.
That you know to deepen and widen but each one of the specific and you know I have to follow up with the Greg to kind of get into the.
The specifics of different projects for a lot of them.
No there were really two many of that were on the the words and then this COVID-19 a lot of those have gotten delayed.
Okay, Okay, Great and then and then I wanted to follow up from.
What Omar was discussing but but from a different angle.
You know clearly the transaction with the Doctor.
The Diamond has it hasn't closed yet, but I mean, you are going to be taking on.
A large pool of am ours.
Realizing that those were already manage.
Uh huh.
How are we how is the next couple of you thinking about the.
The management and the opportunities for those vessels just given the you know some of those damn ours are.
Or a little bit older.
Might be facing issues is there any thought about you know.
The company kind of partnering with one older emaar owner or.
How are we thinking about that I guess this is probably my question.
Yeah, well in and.
Sure.
Many of you are aware of it.
Diamond S M of ours are.
Commercially managed by the Orient and apparel and also.
The other contingent of ship the commercially managed by capital.
And I think on both fronts.
The you know you've seen them be able to increase.
There are.
Marketability of our or just stand pretty strong I think annoyance than posting quite strong results.
So you know we are always looking and benchmarking at the best places to trade. The ship I think that you as the market recovers you will see international Seaways take a.
A larger portion of our suite to look at time charters as the market strengthens into itself.
You know when you weren't running of hundreds of about 14, or maybe we won't have such a high percentage of spot exposure and the.
Then we will Opportunistically look at sales Oh.
As you do all the time so it is.
There's not one answer is it's a part of.
And the approach that involved for making sure you know why do you have the ship the absolutely, earning the best they can and then the best hands. They can be and then you look at Opportunistically pruning the fleet moving forward.
Okay, great to hear thank you very much.
The America.
Your next question comes from the line of Liam Burke from B Riley Your line is open.
Thank you good morning, Louis Good morning, Jeff.
Good morning.
Lois if we look at your VLCC partnership with shell and the charters associated with it and potential upside with those of charter agreements.
Does that translate to your return on capital profile, when you're doing your return on capital discipline.
Jeff why don't you jump in there.
Yeah, Yeah, Hi, Liana, it's fit.
Hey, Joe Hey.
Very very nicely we've discussed this before the.
The combination.
<unk> of the.
The low purchase price with Lois mentioned in her remarks really at the low point of the cycle.
Combined with a very.
Well thought out.
Collaborative contract with shell that provides the base rate and the profit share.
It's going to work out well for us for both parties.
Instead of before and ill say it again with the profit share of the way. It works with you can't go into the details, but we're expecting it could be of a double digit return type of contracts. So it's gonna be it the.
Perfectly well with our capital allocate.
Allocation strategy.
And I mean, obviously post the.
The Ssi merger.
How does these types of projects fit into your overall fleet management strategy.
No that's it that's all.
Really good question and I think that.
Going forward and we will continue and welcome these types of projects.
Really great to see the oil companies and owners coming together, because that's what it's going to take the innovate and decarbonize the propel.
Propulsion moving forward. So I think that we will welcome these types of projects and we will evaluate each one on the on the merits.
You know the the projected returns Liam.
Great. Thank you Louis Thank you Jeff Thank you.
Okay.
And again, that's star one if you would like to ask a question. Your next question comes from the line of John Conrad from GE Capital. Your line is low.
Hey, Lois and team congratulations on the navigating a difficult year.
Thank you John.
My question is.
About inflation of the Federal Reserve said that inflation is transitory, but a lot of the banks are.
Wondering about inflation in the long term I wonder how your company is positioned and also the overall tanker market if inflation.
It gets out of hand and exceeds the feds expectations.
Well that's that's the that's an interesting question I think that you know.
When you're in an inflationary environment.
Environment, it's good to be in hard assets.
I think that we are certainly of ways from seeing that are flowing through.
But when you have periods of.
Strong GDP and you know to be clear you know, it's the projections if we can.
The hold the Corona virus that day, I mean again, we're looking at over 6% in the United States GDP growth over eight per cent in China.
India had been looking at 12%, which is massive and I'm sure that will be moderate it now by COVID-19, but you know when you start to see strong GDP growth.
The oil consumption growth is a.
Derivative of that in other words, you know where we're usually about you.
The oil consumption growth will grow at a little bit less than half of GDP growth. So you know for the tanker market.
We're headed here with increase of GDP growth in the world and to in the back side of the 'twenty 'twenty. One it is quite welcome and then from I.
Just the perspective regarding our debt maybe just talk about how much of our debt is hedged Jeff.
Yeah.
It's right there on page 14 of the deck of 96% of our debt is either fixed or hedged and most of that is floating rate debt that has been hedged. So we feel are pretty very well protected in that price.
Excellent.
Thank you so much guys.
Thank you.
There are no further questions at this time I will turn the call back to low <unk> CEO for closing remarks.
Well. Thank you everyone for joining us for our first quarter wrap up call in our earnings today and you know at international Seaways, we're going to be laser focused on getting our merger completed and driving the business forward. So thank you very much.
Yeah.
Ladies and gentlemen, thank you for your participation. This concludes today's conference call you may now disconnect.
Okay.
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