Q2 2021 International Seaways Inc Earnings Call
[music].
Good morning, and welcome to the International Seaways second quarter 2021 earnings Conference call.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by Christian and Starkey followed by <unk>.
After todays presentation, there will be and opportunity to ask questions to ask a question you May Press Star then 1 on your telephone keypad to withdraw your question. Please press Star then 2.
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.
Good morning, everyone and welcome to International Seaways earnings release Conference call for the second quarter of 2021.
Before we begin I would like to start off by advising everyone with us on the call today are the following.
During this call management may make forward looking statements regarding the company or the industry and which it operate.
Those statements may address without limitation the following topics.
Outlooks for the crude and product tanker markets change.
Changes in oil trading patterns.
Forecasts of World and regional economic activity and of the demand for and production of oil and other petroleum products.
The effects of the ongoing coronavirus pandemic.
The company's strategy.
Anticipated cost savings and other synergies and benefits from our merger with Diamond and sugar.
And he plans to issue dividends.
Our prospects.
Purchases and sales of vessels construction of Newbuild vessels and other investments.
Anticipated financing transactions.
Expectations regarding revenues and expenses, including vessel charter hire and G&A expenses.
Estimated bookings and TCE rates and the second quarter of 2021 or other periods.
Estimated capital expenditures in 'twenty, and 'twenty, 1 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 and.
And other economic political and regulatory developments around the world.
Any such forward looking statements take into account various assumptions made by management based on a number of factors, including management's experience and perception of historical trends current conditions expected and future developments and other factors that management believes are appropriate to consider and 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 materially from those implied or expressed by the statements.
Factors risks and uncertainties that could cause international seaways actual results to differ from expectations.
Include those described and quarterly reports on form 10-Q for the first and second quarter of 2021.
Our 2020 annual report on form 10-K and.
And and other filings that we have made or in the future may make with the U S Securities and exchange Krishna.
But all of that out of the way I would like to turn the call over to our President and Chief Executive Officer with lowest Brian Lewis.
Thank you very much James.
Everyone.
Thank you for joining international Seaways earnings call to discuss our second quarter 2020.1.
During the second quarter we.
We maintained an unrelenting focus on.
To strengthen our industry position and see.
To enhance our ability to create long term debt for our stakeholders.
On slide 4.
We review, our transformational and accretive merger.
We detail our fleet optimization.
And recap.
Our return of capital to our shareholders.
Starting with the first bullet.
We're excited to have completed our merger with time and last month.
And merger and solidified.
Yeah. This is an industry dealt with it.
And with enhanced scale and capability.
And as well as significant financial strength.
Combining the 2 leading U S based diversified tanker owners.
With long term customer relationships.
And a share deep culture of itchy.
Cheating stringent.
Safety and operational standards.
We're now poised to deliver compelling strategic and financial benefits to our shareholders and to our stakeholders at the tanker market moves into its recovery stage.
And merger doubled our net asset value.
And triple the size of our fleet to 100 ships.
We have created the largest U S listed diversified tanker company.
Among other benefits, we expect the merger to be accretive to both earnings and cash flow per share.
We estimate we will realize annual cost savings.
Of $23 million and revenue synergies.
Yes.
Importantly.
We expect these synergies to be fully realized in 2022.
We have increased our equity market capitalization and our trading liquidity.
Which we anticipate will provide opportunities for a re rating of our equity valuation going forward.
We have preserved our financial strength and.
And we maintain 1 of the lowest net leverage ratio and the tanker shipping.
The next bill that our second quarter net loss was $14.3 million 50.
And 51 cents per share excluding.
Excluding vessel impairment charges.
Importantly, please note.
As of the end of the quarter.
We had a total liquidity of $174 million.
This includes a $134 million of cash.
This cash is serving us well.
Throughout the challenging rate environment.
And as of today, we have approximately $200 million and total liquidity.
Fleet optimization.
We have been actively selling older ships at attractive prices.
These prices reflect the resilient secondhand market.
We expect.
Net proceeds of $75 million after repayment of $50 million and debt.
We have preserved our combined.
$34 million.
Forward dry dock and ballast water expenses.
[laughter].
These costs would have been incurred in 2021 remaining 2021 and 2022.
The additional liquidity.
Protects our balance sheet.
And this provides.
Capital allocation flexibility going forward.
Further detail on these sales.
Is found in the appendix.
Now moving to the final bullet.
Since the beginning of 2020.
We have returned over $70 million to our shareholders.
This includes 10 point and $1 million of regular dividends.
$30 million and share repurchases.
And $31.5 million and.
And a special dividend that we paid just prior to the merger closing.
Let's move to slide 5.
And we talk about our transformational strategic combination with Diamond S.
We joined together to U S based tanker companies with strong and complementary position and the crude and product tanker sectors.
We solidified our power alley, and large crude sector focused on V and Suezmax says well, we created a new power alley of strength and the product sector.
We have a sizable and diversified fleet of crude and product tankers.
We're positioned to benefit from the positive long term industry fundamentals ahead of us as.
As well as near term development.
As global oil demand recovers.
Inventory Destocking complete.
And OPEC plus.
Execute higher production levels.
As we focus on continuing to seamlessly integrate the merged company.
We welcome the newest members of our Seaways team and.
And we look forward to working together to create lasting value.
For all of Seaways customers and our shareholders.
To illustrate the combined entities.
Earnings power ability the combined company of 100 vessels.
And 2020.
And would have earned time charter equivalent revenue.
Greater than $800 million.
With an EBITDA of $420 million.
Please turn to slide 6.
We're smoothly progressing.
And on building, our 3 dual fuel LNG VLCC.
Yeah.
Is on target for delivery in early 2023.
Each day to be our vessels.
We will adhere to future environmental regulation.
Throughout their lives.
Being 20% more efficient than a modern eco VLCC and 40% more efficient than a 10 year old VLCC.
These vessels will be in line with international Seaways ESG principles.
These vessels will be highly efficient.
And we will surpass today's on email energy efficiency design index.
And substantially outperformed the 2025 E D I targets.
Building on our signing of the first sustainability linked refinancing in the industry and early 2020.
We're very proud to be implementing sustainability initiative in our fleet in the maritime sector.
The $96 million price achieved for these 3 vessels.
And since materially appreciate it.
Reflecting the strength and steel plate prices and the rapidly filling yard.
And with LNG.
And container vessels.
That's what values estimates that our ships have appreciated by $15 million per ship.
With these vlccs.
Secure on 7 year time charters to shell.
And providing strong stable cash flow with a base rate that is protecting our downside and profit sharing and is allowing us to capture the upside.
We expect to earn rates significantly exceeding the benchmark route.
Yeah.
Slide 7.
This chart illustrates.
Our commitment to working with the tanker cycle.
Since becoming an independent <unk>.
Publicly traded company more than 4 years ago.
Seaways have invested over $900 million to renew our fleet at the low point and the tanker cycle.
And acquiring diamond S for $361 million and stock is no different.
Including.
At the bottom of the current tanker cycle.
As the chart on the slide shows the 9 ships that we acquired.
Have materially appreciated and valued and sensor acquisition on and age adjusted basis.
And have contributed accumulative of $111 million and operating income during 2020 alone.
Our shell new buildings.
This project and the transformative merger with Diamond.
Are they illustrate our ability to have definitely identify attractive opportunity.
And moving at the right time and the cycle.
Michelle new buildings.
Appreciation of $45 million or 89 per share of Ians W. Stock represents this.
Let's turn to slide 8.
Yeah.
We provide and update on oil supply and demand.
In spite of.
The Delta variant.
Colby Keith increases throughout the world.
OPEC plus.
He is acting on their agreement to increase supply by 2 million barrels per day over the period from August to December.
This will add to the market 400000 barrels per day.
Monthly.
This increase is on top of the $2.1 million barrels per day.
The increase implemented from May through July.
Right now in the World.
$4.4 billion vaccination shot.
Had been administered globally.
We're currently at a pace and the world of administering over $42 million Covid shots per day.
This has.
Enabled a stronger economic growth.
And oil demand jumped by $3.2 million barrels per day in June.
The IEA projected July demand to be up by $5.4 million barrels per day year over year.
And they forecast 2022 demand to increase by 3 million barrels per day.
And the chart on the right hand of this slide.
Assistant with a recovery and oil demand oil inventories have declined.
By 700 million barrels.
Over the last year and.
And they are now at 2019 levels pre COVID-19 levels.
These stocks drawdowns were needed to set the stage for a tanker market recovery.
And we are encouraged.
By the magnitude.
Of the drawdown.
Combined with the OPEC plus production increases and a surge and demand for oil as global economic recovery.
And reopening and begin air travel rebounding and vaccination being administered globally, we're optimistic.
That all this signals a strengthening.
And our rate environment going forward.
Slide 9.
On the ship supply side.
The overall tanker order book remains at historic low levels.
This is reflected in the 31 VLCC ordered in 2019, the same number and 2020 and 27.
Year to date ordered and 2021.
Uncertainty and the market.
Decarbonization regulations.
Higher new building costs.
All have suppressed and.
And tempered new building ordering on tankers.
Looking at recycling potential.
There are numerous candidates based on the aging global fleet.
And we take a look on the B.
On the right hand side of the slide 17% of the existing deeply.
Is at least 17 and a half years old.
8% is at least 20 years old.
So this aging and 25% of the VLCC fleet.
And then compares to an order book.
At 9.5%.
On the VLCC sector.
And these ship age and reached the ballast water treatment deadlines.
Our substantial capital investments required to keep them trading.
Based on these dynamics the potential for recycling has been building.
Particularly given low spot rate environment and.
And record steel prices.
I'm going to now turn it over to Jeff <unk>, our CFO, who will give us the financial review.
Yes.
Thanks, Louis and good morning, everyone.
Let's move directly to review and the second quarter results in more detail.
Before turning to the slides, let me just quickly summarize our consolidated results and second quarter, we had EBITDA of $10 million.
The net loss for the quarter was $18.8 million or <unk> 67 per diluted share compared to net income of $64.4 million or $2.24 per diluted share and second quarter of 2020.
Now if I could ask you to turn to slide 11.
I'll first discuss the results of our business segments, beginning with the crude tanker segment.
And you see either time charter equivalents for the crude tankers segment were $31 million for the quarter compared to $106 million and the second quarter of last year. The decrease primarily resulted from the impact of lower average blended rates and each of the VLCC suezmax aframax and panamax sectors.
Turning to the product carriers segment, TCE revenues were $14 million per quarter compared to $29 million and the second quarter of last year.
This was also due to lower period over period average daily and blended rates earned by our <unk> wanted to Emaar fleets.
Overall as reflected in the chart top left consolidated TCE revenues for.
And SW from second quarter, 2021 were $45 million compared to $135 million and the second quarter 2020 the.
The decrease was principally driven by substantially lower average daily rates earned across the fleet from this quarter compared to last year's second quarter.
Looking at the chart on the top right and the page adjusted EBITDA was $10 million per quarter compared to adjusted EBITDA of $96 million from second quarter, 2020, again, driven by lower average daily rates.
On the bottom half of the page we look at our results from last 12 months on a year over year basis consolidated TCE revenues and adjusted EBITDA for the last 12 months ended June 32020.
$237 million and.
2021, and say, what $237 million and $70 million, respectively, compared to $438 million and 267 and $9 per the prior year LTM period.
Now turning to slide 12.
I'd like to highlight our track record and returning capital to shareholders since the beginning of 2020.
We have returned over $70 million of shareholders and the form of special and quarterly dividend as well as share buybacks.
And as you can see from the Pie chart, we paid over $10 million and regular quarterly dividends.
Purchased nearly 5% of our outstanding shares were $30 million and pay day $31.5 million dollar.
$1.12 per share special dividend to share and that's W. Shareholders immediately prior to closing the merger.
Based on our pre merger and market cap. This represents an approximate 8% return in 2020 and.
Further, 8% and 2021 year to date.
Creating enduring shareholder value remains a priority for us and we are committed to continuing to pay a quarterly dividend and on.
Opportunistically utilizing a $50 million share repurchase program authorization to unlock further value post merger.
Now turning to slide 13.
We provide our second quarter review and third quarter earnings update.
And I look at results and Q3, thus far we booked 61% of our available Q3 spot days for Vlccs.
And on an average of approximately $10800 today per day.
Day 45 per cent of our available Suezmax spot days and an average of $6500 per day.
50% of available Aframax LR, 2 spot days and an average of 11006 hundred per day, and 51% of our Panamax spot days and at approximately $10100 per day.
On the product side, we booked 50, 242% of our third quarter spot days at approximately 9000 and $600 per day and.
And 26 per cent of our handy sized spot days at $4000 per day.
Now if we could turn to slide 14.
Yeah.
The cash cost TCE breakeven from 12 months ended June 32020 are illustrated on this slide.
International Seaways overall growth.
Keith and rate was $20700 per day over the last 12 months.
These amounts are the all in daily rates, our owned vessels, our owned vessels must earn to cover vessel operating costs dry docking costs cash G&A expense and debt service costs, which means scheduled principal amortization as well as interest expense.
On this slide is also shown breakeven excluding principal amortization and this case, the cash breakeven and trailing 12 months was $15200 per day.
Now and far right hand side on the Bar chart shows the estimated all in daily breakeven rates for larger and there's W. Fleet inclusive of Diamond S vessels, which I will refer to as the combined fleet.
Over the next 12 months the cash breakeven for the combined fleet is $17700 per day that you can see and the box on the right hand side.
At this time I'd like to provide some cost guidance from the combined company for your modeling purposes.
And 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 Vlccs $8800 per day per Suezmax, 7000, and $600 per day, Aframax 8200, Panamax 7900 and grandma's.
7200 per day, and finally per handy size, 7000, and $400 per day and.
And each case, excluding any impacts attributable to COVID-19.
For details on projected Drydock, capex and off hire days by quarter again on a combined company basis, you can refer to slide 20, and the appendix for an update.
Continuing with cost guidance from the combined company from there.
<unk> 2021, and we expect cash interest expense will be about $11 million per quarter.
For the remainder of the year, we expect cash G&A to be in the region of $11 million per quarter as well. This reflects previous guidance for both I and the SW and Diamond S. Now combined.
And that's a factor for transitioning and approximately 25% of expected G&A synergies from the merger.
And as previously stated full cost synergies are expected to be achieved in 2022.
And finally, we expect about $6 million and quarterly equity income and $31 million.
And for quarterly depreciation and amortization.
Now if we could turn to slide 15, our.
Our cash bridge moving.
And from left to right.
And actually Seaways, B and the second quarter with total cash and liquidity of $212 million during the quarter. Our adjusted EBITDA was $10 million equity income from <unk> decreased by 5 million and and the cash distributions from the episode Jv's World pods and $1 million.
And we expanded $13 million on dry docking and Capex and.
And $14 million on the first installment as part of our agreement to build 3 dual fuel LNG vlccs.
We received $4 million and deposits on 2 vessel sales that are to be delivered to buyers and the third quarter of 2021.
And cash and interest scheduled principal payments and cash interest and scheduled Pennsylvania's on our debt were $21 million.
Finally, taking into account and the $2 million quarterly dividends and a positive impact on working capital and other charges of $2 million. The net result, with it and we ended the quarter and with approximately $134 million and cash and $40 million of Undrawn revolver.
And total liquidity of $174 million.
As of today and as long as mentioned total liquidity stands at approximately $200 million.
Now turning to slide 16.
I'd like to briefly talk about our balance sheet.
As of June 30th.
International Seaways pre merger had $1.5 billion and assets compared to $445 million of long term debt.
And this should have $400 million $40 million of robbing credit debt remained undrawn as of that date and still remains undrawn and you.
You can see on the right hand side on the slide our net debt to total cap at that day was 28 per cent.
Our net loan value to our conventional fleet was 37 per cent.
Now if we move to slide 17, we provide.
Pro forma combined company debt as of June 30th accounting from the merger.
The total debt balance was approximately $1.2 billion and as long as mentioned post merger and we continue to maintain low net leverage ratios with net debt to capital of 33% and net loan to asset value of 45 per cent.
The debt facilities listed on this slide reflect their highly competitive cost of capital, including a weighted average interest cost of 272% and our.
Quarterly amortization schedule and as well and note the 56% note that 56% of the debt at this point is fixed or hedged.
And in addition, I would point out the vast majority of the debt matures and maturity dates are no earlier than 2024.
And finally I'd like to highlight and we continue to have very strong relationships and league group of diverse global thanks very much appreciate the ongoing support of this group, which now includes 12 major shipping banks.
Lois that concludes my remarks, I'd like to turn the call back to you for your.
Closing comments.
Thank you so much Chad.
On slide 18.
I want to conclude our call by detailing the strategic vision of the new.
International Seaways.
We're focused on capitalizing on our position as a tanker sector leader.
Executing on our disciplined and balanced capital allocation strategy and.
And taking further steps to maximize shareholder value.
With enhanced scale and capability.
Combined with our best in class ESG track record and focus.
We're ideally suited to continue achieving the highest operational standards.
And to meet the evolving needs of leading energy company and customers.
Based on our diversified fleet.
And crude and products power Alley.
We are poised to benefit from positive long term industry fundamentals.
We will benefit.
As global oil demand recovers.
And inventory Destocking completes.
And as OPEC plus production increases as per their plan.
Yeah.
Based upon the accretive nature of our merger, we expect cost and revenue synergies of 30 million $32 million to be fully realized in 2022.
Complementing our sizeable operating platform.
We have maintained our balance sheet strength following the close of the merger.
Positioning seaways to capitalize on attractive opportunities for our shareholders.
And the deferral rate environment.
As part of our strategic focus.
And we'll continue to be.
Main true to preserving our financial strength.
Which has served us well at this point and a cycle and.
And to execute and accretive and balanced capital allocation strategy.
We will prioritize returning capital to shareholders and.
As highlighted by our recent merger related at $31.5 million dividend.
Representing $1.12 per share.
On a regular quarterly dividends as well as our outstanding $50 million share repurchase authorization.
Reiterate.
We've returned over $70 million to shareholders in the form of special and quarterly dividend.
And share buybacks since the beginning of 2020.
Finally.
Creating enduring shareholder value remains of utmost importance to see what.
Based on our industry leadership increased upside to the crude and product tanker market recovery.
Over both the near and longer term as well as a larger market capitalization.
We believe we have the potential to have our equity reread it.
And to close.
The NAV GAAP.
Thank you very much and we will now open it to questions.
Yeah.
Thank you we will now begin the question and answer session to ask a question you May Press Star then 1 on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
Withdraw your question. Please press Star then 2.
At this time, we will pause momentarily to assemble our roster.
And the first question will come from Omar <unk> with Clarksons. Please go ahead.
Thank you Hi, Hi, Lewis Hi, John Good morning, and.
<unk> unofficial at closing the Diamond S deal last day last month.
Thank you very much.
Yeah.
A question, obviously, you mentioned getting to the 100 and vessel Mark which is obviously gives you critical mass and and significant footprint.
You are selling some older ships, and which is something you telegraph and so it's not a surprise, but I do wanted to ask maybe just about the Panamaxes and particular you sold 4 of those.
And the way a big chunk of your fleet.
Capacity and that segment I know those vessels are and involved in the South America niche trades and so just wondering kind of about those are those to be replaced or is that trade changing and the future.
No no definitely Omar those baffled Unfortunately will turn on 'twenty and.
Early 2022.
And it's not part of our strategy to operate.
Tankers passed the 20 year Mark.
And.
What we have done is sold some of those for a green recycling are consistent with the Hong Kong Convention.
And.
We're taking advantage of what our really strong recycling prices right now.
And then indeed are trading and Panamax International is really a critical niche component, where we earn a premium and trade and we will be supplementing and Panamax International in fact, we have just recently chartered in adult all.
For you know a couple of years. So we will we will look in that Panamax pool to.
And you know sort of bulk backed up our presence there and the sale of the Panamax is simply strategic because all of those boxes. We're gonna turned 20 years old and then tactical because we wanted to take advantage of where the very strong recycling prices are today.
Yeah.
Got it thanks, Louis is pretty clear and.
And that's a good point, we have seen scrap prices increased significantly this year and.
And just sort of on the maybe the question regarding overall youre looking at potentially other noncore assets to sell.
Any color you can give on what you would deem as noncore.
And any specifics you can share.
Well you know Oh are we always say that you know we have a constant a calculation going on the baffles on and all of our fleet on their discounted cash flow.
Worse versus where they are our prices are in the market and so you know we will continue to look to prune and it's just a part of our ongoing strategy the vessels that are older and.
And where we can take advantage of our capital preservation.
Okay got it.
And lowest maybe just 1 final follow up I wanted to ask just about the top chef Super Greif and itself.
There's going to be bringing on $125 million and netting over close to about $75 million debt repayment and.
Obviously nice to get that cash cushion.
But generally speaking the 125 seems a little low relative to at least what I had assessed and vessel that is there anything you can share there on that or am I, just being too aggressive on the valuation.
And you know what what I would say is that we're happy with the prices that we've achieved Omar and you know.
You go through the fleet list and sort of detail it out.
Some of these vessels are older.
Heritage Seaways ships that do not have mortgages on them such as the Tanami and.
Some of these panamaxes as I mentioned are being sold for recycle. So you may have had a different second hand value on those yet.
And.
But as I said those prices are you know the secondhand on recycled prices are very strong and.
The secondhand values have held up really even know the spot market has not so.
We feel that we're quite happy with the prices that we're achieving across the fleet and in particular I think the the factoid that we shared where you know we'll be saving on Drydocks and Dallas water. So some of the vessels that we're saving our imminently dry dock do.
And do not have a ballast water treatment systems on board, so, we're stating that our expense and net off hire as well as those capital outlay and some of those prices reflect that.
Okay that makes sense. Thank you for that.
I appreciate the color overall and I'll turn it over thank you.
And so much Omar.
And the next question will be from Randy Givens with Jefferies. Please go ahead.
Oh, the lowest Jeff what's gone on.
And he how are you Randy we're good.
And congrats congrats on the merger consolidation and certainly are a hot topic and the industry. So glad to see I S. W actually making something happen here and so I guess looking at the benefits of the merger.
You mentioned, the $23 million and cost synergies will be in 2020.2.
And just curious if those cost savings ramp over time or kind of the timing of it and where exactly it should be.
For the cost savings to flow through the income statement.
So Randy you know.
Some of these costs.
<unk> are fairly quickly to be realized for example, the cost of being a publicly traded company.
Immediately fall away for example.
And to seed it boards are having to insurance.
D&O policy, having 2 external auditor.
And having to.
Rent flow.
Facilities, so those types of structural cost and and that's where you look for those will will fall away more quickly on and.
On additional cost you know we have a very.
Structured integration plan and you know we will be realizing additional savings over time and from the revenue perspective, the baffles that we all have taken over and we are.
Shifting the vessels from.
Capital too.
To.
Managed and.
Commercial pool.
On the product carriers, such as and Orient and C. P. T a which is our ultra gas pool and on the Suezmax its dependency on and so those revenue synergies, we believe will start to accrue a immediately.
Okay.
Perfect Okay.
And then looking at kind of industry wide you operate clearly both crude and product tankers and there's been a debate on 2 kind of on the strength of both in terms of outlook. So I guess, which sub sector do you expect to improve first and which is likely to outperform the other let's call. It in 2020.2.
So really you know and as we speak I would.
Simply look at where the market is today and the MLR sector in particular in the far east cash.
And strengthened over the last week, and then that is flowing through even L. R's and LR twos and now into the Western Basin and you know by strengthening you know.
Everything is relative.
Still talking low double digit a time charter equivalent returns. However, you can see the product carrier.
Fundamental being more closely balanced at the moment than on the crude side.
But we expect the crude side you know China's adjusting right now from what we observed.
I'm really have a COVID-19 a zero tolerance policy, so they're locking down.
And with this delta variance so that's affecting things, but we you know China has been out in the lead and recovery of demand post COVID-19 or.
And we're not through it yet but.
And more very resilient. So we do expect the crude side too also.
Strength in in 2022.
Sure.
Good deal and that's it from me. Thanks, so much thank you Randy thanks.
Thanks Randy.
And the next question will be from Ben Nolan with Stifel. Please go ahead.
Alright, thank you.
Lois Jeff.
I've got a couple of I want to start with something that you were talking about it and in there well.
Long and short of it is that you're selling older assets that free up liquidity E asset values have appreciated.
<unk> done share I think you did $30 million and share repurchases last year.
And how do you think about closing the values and proactively closing the value GAAP using are using share repurchases or do you kind of need do just bed down the hatches and wait for Thanksgiving and Nevada first.
So how are you then and and I'll I'll take my first stab and then I'll give it to Jeff.
So you know I do think that it is imperative that we watch very closely the developments in the spot market recovery than the rates that have been experience.
Due to lower demand have been have been and continue to be.
You know below cash breakeven levels. So that is priority number 1 and then beyond that you know clearly we do still have a $50 million repurchase program and I'll turn it over to Jeff to kind of talk about balancing things.
Yeah, you know it's a.
Amazing, but it's really only been 6 quarters since we.
<unk> began to 2.
Current cash to shareholders and meaningful way with the.
And the redo of our balance sheet, where we put in more flexible debt debt allowed for that and instituted the fixed debt.
Dividend.
And our quarterly dividend that we mentioned on the call and so I think the answer to your question is we did though what we're gonna do both what we're gonna do and how that's going to help re rate the stock is just.
Keep doing it and it is just quarter over quarter, we had to be patient.
And and continue to execute with numbers like you know last year, 8%. Total however, you want to call. It returned to shareholders and shareholder yield something like that those are those high single digit numbers. If you look at that and other industries.
I think those are good benchmarks right, so where we're at 8% so far this year and we got some more time to go so yeah like whoa, instead, and rebalancing of course, and I too, it's a crummy market to say the least but.
You know how can we do some more of that just continue to do it quarter by quarter.
And I think that over time, you know that net capital allocation track record you know it.
It is what earns a better and better valuation and.
The only other factor I would say is that.
We've been kind of busy with this and to say the least with with.
And preparing for the merger, which is now done and put them on an air quotes because everyone on.
Lois and the whole recipe and know the day that closing is not done I mean, it's it's legally close but there's so much work to do and it's great welcoming all of it and the new.
Seaways team members as always also said, but there's a whole lot of work been going on and continuing to go on but I think as we get to the end of the summer here and it just tell the story. So we just need to talk to investors and say Hey look you know this is now the largest.
Diversified publicly traded tanker company debt there is great and.
Got it around 100 ships and cut to over $2 billion of assets.
And.
Our growing track record 6 quarters, and going back and leave returning cash to shareholders from miracles don't happen overnight, but we'll just be patient and and keep.
Doing walking the walk and then we'll talk to talk about walking the walk so I hope that's going to do it over time then.
Yeah, so and.
A little bit sort of in that vein still I guess, the you sold <unk> and <unk>.
Ships, I guess right they're older.
It looks like the I was just doing just running down the list, but it looks like Theres 12, more that are 15 years old or older.
Is it fair to assume that you're still high grading the fleet and as that.
You know as those sales happen and the leverage falls and you're sort of yeah.
Increased do you have an increased level of flexibility that you know 1 of them and do things like share repurchases or do you have you kind of and done what you needed to do.
And then look I would say.
Continue just as you say and we will take into account and balance everything and like you know what is the pace of the recovery and you know we're not in a half to situations and these are you know are opportunistic and and.
Purposeful.
And moves that we're making and.
And we want to see.
What what you know how quickly will that market come back and then you know and we expect both our earnings to go up and those seconds out and secondhand values to go up so.
And we'll be careful and judicious, but indeed, we will continue to trend on the fleet going forward.
Okay.
And then shifting gears and for.
And for my last question here.
And I'm curious you know, we don't talk a lot about the lighter and business, it's been a nice sort of asset light.
Our cash flow generator and I'm curious it now and it sort of we're on.
And hopefully closing in on the latter part of all this COVID-19 stuff.
How do you think about that business going forward or are things fundamentally different and the Gulf coast or how and how does that fit strategically and with what you're doing and and you know what are the long term prospects there.
You know Ben I think that the lighter Inc. Kits are quite strategically with our fleet.
<unk> suite of our sites.
And it brings us very close to the customers at the high touch business, it's and service intensive and so it really allows you to deepen our relationships.
And.
Trading patterns, you know have been affected by Covid, just like everything else right. So you know fewer barrels coming and fewer barrels coming out of you know, particularly in the U S Gulf, but we have a pretty diversified base. So you know.
And we see Panama as having strength, you know where were lighter on the U S West coast and the Bahamas, and so we think that it fits well with us and in particular, we saw a strong month in June where you know you start to see these underlying volumes of oil have increased a lot.
Even though we haven't seen a bot resurgence and rates the volume of trade has increased and you know lighter and it will come along with that I don't know if you wanted to add anything Jeff.
No it's a good recap.
Alright, I appreciate it thanks guys.
Thank you thanks, Dan.
And the next question comes from Magnus <unk> with H C. Wainwright. Please go ahead.
Yeah, Good morning, Lois going Jeff.
Okay Bob.
Had a question on on the liquidity I mean, you have a strong balance sheet.
You know you've sold some assets on and you have some more assets.
With the merger it looks like the the amortization picks up from I guess, there's about 30 million plus up from the diamond side.
And you paid a dividend this quarter what are what do you guys have left and the toolbox here to address that to extend.
And the liquidity runway to deal with somebody uncertainty.
With the delayed recovery.
You know and the potential for this to run for a couple more quarters.
Do you want and jumped in there Jeff.
Sure.
Yeah and magnitude, we'd first of all we start and a really good place and if I back it up a couple of quarters.
And the fact that we.
You started the year or ended last year with the positive Covid bump you know from floating storage and all the rest.
With well over $200 million liquidity and gave us the opportunity to execute on the Diamond S merger right, so that yet and while it's a stock deal there were cash costs associated with it and that and approaching that with them.
You know a good really strong balance sheet and a lot of liquidity Super helpful and as we said now.
And there.
At $200 million and liquidity plus even after the merger completed with most of those.
Asset.
Sales and we've listed on the press release and the slide deck and then a trip still.
Still to be completed right, so really on a strong position so bade debt.
Don't need to do much else, but there's other things that debt towards the tools and the toolkit.
The number of unencumbered vessels from.
From the NSW core facility or what was the transition facility sorry on it and say that correctly.
Debt, we paid off last year. So those are vessels that if we don't want and sell them like some of those older Panamax and are still not at the recycling dates so very valuable to us.
And always Oh look at and putting leverage on those so there's a number of tools that we have but I think we feel really good about.
And where we stand right now you know EBIT, even allowing for that.
And if it turns out to be a couple more quarters of growth.
Of this rate environment.
I hope that answers your question Magnus.
Yeah, I mean any thoughts on you know on consolidating some of that debt that may be to extend the amortization.
Core <unk> increased the revolver I mean with the increased size from the company.
I just put this I mean, yes, and I'll put this way we will look at it was really good that we did.
Need to do anything.
Around the balance sheet and our to close the transaction you know as Lois and I, both been saying a lot going on and if we and had to do a lot of balance sheet gymnastics that just would've made it that much more complicated. So we're really grateful that go.
And with the bankers that we have significant overlap with with it.
Legacy Diamond Bank group.
He was seamless.
That said, there's absolutely you know you've got a pretty robust amortization, which we gave you there and then.
Charged up about $47 million per quarter.
No near term maturities, but sure theres, probably some from low hanging fruit there in terms of the smooth.
Smoothing out that are pushing out debt.
Evaluating optimization of the balance sheet, so no no.
And see to it but yes, it will flow.
And we always look at things that can do it and to optimize the balance sheet. So we'll do that.
Great well thank you thank.
Thank you Thomas.
The next question will be from Greg Lewis with <unk>. Please go ahead.
Hey, Thank you and good morning, everybody.
Lois and I kind of wanted to dive in and talk a little bit more about and what what Omar was talking about.
I guess I guess I'll ask.
In terms of as we were selling some of the vessels and not not for them not for the retirement.
But you know just kind of hanging in there no longer fitting on profile, we picked them up and downtime and that's acquisition what was the type of appetite and the marketing and and really what I'm wondering is and.
I think a lot of us are looking at share prices for secondhand vessels going higher and.
And you know whether it's.
And your how you're talking about rates or we look and the right market you know rates on rates haven't been doing that well for for a while so just kind of kind of trying to understand we're seeing that upward as a price inflation without that rate followed through and and really in this environment or are there multiple buyers on.
Of assets I mean, as you saw that was there was there was there a lot of interest or was that on a like a 1 off where somebody was willing to kind of plant their flag it takes and tonnage.
And yes right combination.
And you know.
Individual asset sales and you know some some any group and you know that secondhand market has it's it's not extraordinarily deep you know it will be deeper when you see that the rates have recovered, but it has really held in there and that you know that is definitely a reflection of you know new building.
Still having gone up and kind of holding up you know that new piece of the market and then the recycle prices holding up the you know the other side of the market. So there there is a.
Interest from multiple buyers on each 1 of the ships that we have.
You know transact at M always on.
Okay, Great and then just I'm sure. This is a question that you'll be getting probably until you do another 1.
You successfully won those 3 dual fuel LNG VLCC with contracts I mean could you talk a little bit about the state of that market. I mean every day. It seems like somebody is talking about ESG and the migration migration towards and maybe LNG or some other type of alternative fuels.
And what is their ongoing tenders right now for dual fuel LNG contracted tonnage.
You know that.
And there are still on.
A couple of open and inquiry that you know very bespoke and specific rate. So again that is that's not and incredibly deep market. You know definitely you know the the most of that you've seen and it's really been you know aframax is and on Vlccs.
And I do believe we will continue to see inquiry for a dual fuel you know certainly you know when you look at the LPG market you know they're building vessels that burn LPG right. So you know you're seeing some product carrier new buildings b.
Methanol Bernie right. So you know this okay. This is for us.
And you know obviously, we're following everything watching everything and keeping up with all of the innovation that's going on because this is going to be.
It's something we talk about every call for the foreseeable future.
Yeah, Okay, alright, thank you very much everybody. Thank.
Thank you. Thanks, Thanks, Greg.
Ladies and gentlemen, this concludes our question and answer session and I would like to turn the conference back over the lowest zebrowski for any closing remarks.
Just really wanted to thank everyone for joining seaways on our second quarter 2021 earnings call and you know, we really look forward to a tanker market recovery and being able to close our price to our net asset value GAAP are going on in through end of 2020, 1 and into 'twenty.
<unk> 22, so thank you very much.
And thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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