Q3 2022 International Seaways Inc Earnings Call
Yeah.
[music].
Ladies and gentlemen, good morning. Thank you for your patience and thank you for attending today's international E ways third quarter 2022 earnings call.
My name is amber and I will be your moderator for today's call.
<unk> could be muted during the presentation portion of the call with an opportunity for questions and answers at the end if he would like to ask a question. Please press star one on your telephone keypad at anytime. It is now my pleasure to hand, the conference over to our host James small General Counsel with International Seaways. James. Please proceed.
Thank you Amy.
Morning, everyone and welcome to International Seaways earnings call for the third quarter of 2022.
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 in which it operates these statements may address without limitation the following topics.
Outlooks for the crude and product tanker markets and changes in 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 conflict between Russia and Ukraine.
The company's strategy.
Anticipated cost savings and synergies and benefits from our merger with Diamond S.
The effects of the ongoing coronavirus pandemic our business prospects.
Expectations regarding revenues and expenses, including vessel charter hire and G&A expenses.
Estimated bookings TCE rates and or capital expenditures in the fourth quarter of 2022 in 2023 or in any other period.
Projected scheduled dry dock and off hire days.
Purchases and sales of vessels construction of Newbuild vessels and other investments.
The company's consideration of strategic alternatives anticipated.
We anticipated and recent financing transactions and any plans to issue dividends.
The company's relationships with its stakeholders.
The company's ability to achieve its financing and other objectives and other economic political and regulatory developments globally.
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 in the circumstances.
Forward looking statements are subject to risks uncertainties and assumptions many of which are beyond the company's control, which 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 in our quarterly reports on Form 10-Q for the first second and third quarter of 2022.
In our 2021 annual report on Form 10-K, and in other filings that we have made or in the future may make with the U S Securities and Exchange Commission.
Now, let me turn the call over to our President and Chief Executive Officer, Ms. Lois the bracket loss.
Thank you very much James good morning, everyone.
Thank you for joining Seaways earnings call to discuss our third quarter results.
During the third quarter, we generated our highest ever quarterly income.
This marks our second consecutive record quarter.
Crude tanker earnings rose to follow suit with the product carriers from the second quarter.
With oil demand, increasing more than 1 million barrels per day in the quarter.
Bind with the prioritization of energy security tanker demand and utilization are high.
International Seaways is capturing the strong rates.
Our commitment to growing the company, maintaining a healthy balance sheet and.
And returning cash to shareholders is serving key ways well.
We have built our overall liquidity and.
Now with strong cash flow generation, we are returning more to shareholders.
We have announced a special dividend of $1 per share. In addition to our regular quarterly dividend of <unk> 12 per share.
On slide four we summarize our third quarter highlights and recent developments.
In the third quarter, we generated net income of $113 $4 million or $2 28 per share.
<unk> earned adjusted EBITDA of $157 1 million as our diversified fleet operated at profitable levels across all asset classes.
As you can see in the chart on the lower left of the slide our year to date adjusted EBITDA in 2022 of $295 million.
Has eclipsed all prior full year EBITDA and Seaway.
We are taking advantage of the strong markets.
The strongest in the last 10 years.
On our fourth quarter bookings to date, we expect to generate even stronger earnings in the fourth quarter.
We maintain.
Our strong balance sheet supporting our diversified capital structure and our financial flexibility.
Both of which are hallmarks of <unk> success.
We ended the quarter with total liquidity at over $475 million, including $255 million of cash and $220 million in <unk>.
All of our capacity.
Using today's values.
Our net loan to value is the very low 29%.
We repurchased approximately 687000 shares.
During the third quarter were $20 million.
At an average price of $29 well below our current price.
We also paid our regular quarterly dividend of <unk> 12 per share.
Which we doubled earlier this year.
This marks our 11th consecutive quarter of regular dividend.
We have declared regular dividend for this quarter and as a result of our strong cash flow generation as mentioned a moment ago. We're pleased to have declared a special dividend of $1 per share. This represents the second consecutive year, where we paid a special dividend of $1 or more per share.
Sure.
Overall Seaways will return.
About $90 million in cash to shareholders in 2020.
Increasing the total return to shareholders to $185 million since the start of 2020.
We continue to build upon our track record of returning value to shareholders as part of our balanced capital allocation strategy.
At this point in the cycle.
With our large sleep.
Healthy rate and our strong balance sheet.
We intend to continue.
Delivering returns to shareholders.
Turning to slide five we.
We examine one of the most prominent topics and tanker demand today.
The sanctioning of seaborne Russian barrels of crude and product in the EU.
This will create a structural shift in trade routes.
With cargoes exported from Russia.
On the left hand graph, we pull data from Kepler on Russian crude exports to Europe .
About two and a half to 3 million barrels per day of Russian crude were exported to Europe prior to the invasion of Ukraine.
Today around the $1 billion.
Seaborne barrels continue to flow into the EU.
As of December 5th Russian seaborne crude will be displaced from the EU.
Europe .
Has been pulling incremental barrel in from the AG West Africa and the Americas.
These voyages add about 20, plus days of late compared to importing for Russia.
We would also note here that Europe is increasing their overall crude imports as part of the switch from natural gas to oil.
We need the world will switch in the fourth quarter to six to 700000 barrels per day of additional oil consumption due to the switching from natural gas.
Overall, we expect there will be further displacement of Russian crude.
Backed out of the U S sanctions take effect.
While the majority of Russian crude has moved toward Asia. It's too early to see if all of these displaced barrels will have E but.
But the overall trade is moving to more inefficient pattern and soaking up a lot of tonnage, particularly in the middle class of crude vessels, Aframax and Suezmax, which have been quite strong in the second third and continued into the fourth quarter, thus supporting higher tanker demand.
On the right hand side of the page product exports from Russia.
Still moving into Europe , which we do not expect to continue.
Once the EU sanctions on products takes effect on February <unk> of 2023.
This could present further upside to the product tanker market.
We believe the tonnage to move these barrels is largely in place with the Russian fleet, yes.
Yet we still see about 40 to 60, MLR vessels will likely rotate from commercial markets to new Russian trade routes that are likely to take product exports to Turkey Africa and Latin America.
In particular these are early days and we will see the trade movement as they evolve overall.
Overall this should have a similar impact on the product market as it has in crude longer haul trade absorbing more tonnage and pushing earnings higher.
Okay.
Turning to slide six.
We have highlighted some of the major drivers of tanker demand.
Oil demand has averaged about 99 million barrels per day through the first three quarters of 2022.
This is about 2 million barrels per day higher year on year.
In the fourth quarter, we expect oil demand to close the year above 101 million barrels per day.
Driving the 2022 average to be just under 100 million barrels per day.
The outlook for 2023.
It is for an additional 2 million barrels per day of oil demand increase.
To average around 102 million barrels per day for the year.
Of course as high inflation persists recessionary concerns could adjust these estimates going forward.
While the announced production cuts of OPEC.
OPEC plus I've put a focus on oil supply research suggests OPEC plus has a history of underperforming on the production targets.
We believe with Saudi <unk>.
E Kuwait and Iraq, leading the production cuts.
This could result in close to 1 million barrels per day.
A reduction this reduction will be offset by the increased oil production largely from the Americas, which is expected to increase by around one 5 million barrels per day.
Overall, we see a balanced market of supply and demand in the near term.
This also means that inventory levels, which are already at the lowest level in 10 years are not likely to be replenished and therefore further market disruptions could create more demand for tankers.
The strategic Petroleum reserve has been covering shortfalls across the globe for the last several quarters.
But soon these releases will be.
And eventually we will need to replace the barrels and the FTR.
Which should further create tanker demand.
In the lower left hand side of the slide you can see just how far OECD FBR has recall has declined during 2022.
The United States strategic Petroleum reserve has not been below 400 million barrels per day 400 million barrels in total since 1984.
If there is a decision to replace the nearly 200 million barrels that had been drawn down since the beginning of this year. We expect much of this will import it as much of the drawing inventories are medium sour blend not produced in the United States.
This would provide further support for tanker demand.
On the bottom right chart seasonal global refinery turnarounds.
Help seaborne trade.
Refinery planned outages typically happen in March and April and from September to early November as you can see in the chart global CDU outages in September .
Are the lowest they have been in a while we expect the planned and unplanned outages are likely to increase in early Q4, which draws on inventories and creates the need for imports on tankers.
As a result of this combination of factors, we expect tanker demand to remain strong, especially in the near term as the Russian trade is a major market disruption for the oil trade.
On slide seven the main drivers on tanker supply remain positive for tanker earnings.
The overall tanker order book continues to be low is presently below 5% and continues to record its lowest level ever relative to the size of the fleet.
Net fleet growth is just one 5%.
Year over year.
The average age of the global tanker fleet has increased to over 12 years on average. This is the highest it has been in about 20 years.
This all means complete we'll continue to get older and more vessels over the age of 'twenty will be removed from the commercial trading fleet sang.
Sanctioned oil tree is likely to take in the older tonnage and barrels from Iran, and Venezuela may face some competition with Russian oil.
The dark fleet stands at around 240 vessels.
Of which we have seen only about 10% switched thus far into the Russian trade.
Should there be the removal of sanctions.
On any or all of these countries. We expect this would lead to higher recycling volumes.
One of the facts that most supports the positive tanker supply dynamic is the limitation tanker company path and replacing or adding to the fleet.
In the lower left hand chart, you can see that Newbuild contracting is the lowest by far in 20 plus years.
And as seen in the lower right the lower right hand chart.
New orders are likely to have delivery dates three years from now in late 'twenty five or into 'twenty six.
The yards have build capacity with orders for other shipping sectors.
New building prices are conventionally you vessels.
Our high and with pending environmental regulations, it's difficult to rationale to rationalize building a ship that will not deliver until the middle of the decade with uncertainty about economic useful life.
Overall tanker fundamentals remain positive over the short and medium term barring any major economic upheaval.
<unk> is well positioned to capture the strong rate environment with our diversified fleet of 78 tanker vessels in both crude and product.
With our healthy balance sheet and our liquidity.
We expect to continue our balanced capital allocation strategy.
Invest in the fleet opportunistic.
Reduce our debt level and return cash to shareholders.
I'll now turn the call over to our CFO , Jeff <unk> to provide the Q3 financials review Jeff.
Thanks, Louis and good morning, everyone.
Let's go straight to reviewing our second quarter results in greater detail.
As always before turning to the slides, let me provide a quick summary of our financial results for the quarter and the second quarter, we generated a record adjusted EBITDA of $157 1 million.
Net income for the third quarter was $113 4 million or $2 28.
Per diluted share compared to a net loss.
$7 4 million or $1 44 per diluted share in the third quarter of last year.
Now if you turn to slide nine.
I'll first discuss the results of our business segments, beginning with the crude tanker segment.
<unk> revenues for the crude tankers segment were over $75 million for the quarter compared to 35 million in the third quarter of last year and up sequentially from $59 million last quarter.
Crude tanker revenues remained strong in the Aframax and Suezmax.
And the increase in the quarter was largely due therefore higher earnings for the Vlccs.
Also embedded in the crude segment is our lighter business, which had $8 million of revenue.
Along with $2 million of vessel expenses $2 million of charter high expenses in the quarter.
They can EBITDA contribution of about $4 million from Bahrain Q2.
Turning to the product carrier segment.
<unk> revenues were $159 million for the quarter compared to $38 million in the third quarter 2021.
Sequentially up from $126 million last quarter.
These increases were primarily due to substantially higher spot rates for the <unk>.
Looking at the right side of the page.
Adjusted EBITDA for Q3 was $157 million compared with eight <unk>.
Adjusted and adjusted EBITDA in the third quarter last year and up sequentially from $112 million last quarter.
These significant increases clearly demonstrate our significant operating leverage to the strengthening tanker market is driven by product tankers and increasingly by the group segment.
Okay.
Now turning to slide 10.
We provided third quarter review in fourth quarter 2002.
We finished the third quarter with spot earnings that averaged $24400 a day for Vlccs and 34200 per day for Suezmax 38300 per day Aframax 41000 per day on the DLR one fleet at $36000 per day MLR spot earnings.
Since our update on the Q2 Q2 earnings call regarding Q3 bookings Vlcc's gradually increase during the quarter with a strengthened rates came later in the quarter at your vessels completed the lager voyage voyages on which they were booked.
The MLR segment declined slightly from very high levels since our last update.
Strengthening again in late September into October .
Now turning to our fourth quarter first look.
Our fourth quarter bookings to date have increased considerably across the entire fleet compared to Q3.
Starting with crude.
We booked 63%.
Of our spot today.
For Vlccs at an average.
<unk> $9400 per day, 51% of available Suezmax spot days at an average of $47000.
50% of our available Aframax spot days at an average of just over 58000 barrels a day at 47% of our available LR one spot days at an average.
Stober $57000 per day.
<unk> booked 51% of our fourth quarter spot days at an average of about $41000 per day.
Nationally we caution you that these are indications of the average fixtures in our fleet that may be different one direction or another fourth quarter earnings in next quarter.
Now turning to slide 11.
The cash cost TCE breakeven for the forward 12 months are illustrated on this slide.
International Seaways overall breakeven rate is estimated to be <unk>.
$600 per day.
As always these are the all in daily rates, 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 cash interest expense.
At this point I'd also like to confirm our cost guidance for the fourth quarter FY 2023 for your modeling purposes.
We expect fourth quarter opex to be between 53 and $55 million before.
Including our lighting business, which had $2 million vessel expenses in Q3 as I mentioned earlier.
For the full year 2023, we expect Opex before library to be between $235 $245 million.
Total G&A for the fourth quarter is expected to be about $9 million to $12 million included noncash G&A, which is between one and $2 million.
But before any cost related to the shareholder.
Looking at 2023, all in G&A is expected to be between 40% and $44 million.
And as a footnote indicates at approximately eight <unk> cash.
Cash interest is expected to be between $17 million to $19 million using a base rate of 325 basis.
For 2023, we expect cash interest to be in a range of $69 million to $77 million.
Depreciation and amortization is expected to be about $30 million for the fourth quarter at $135 million for all of 2023 Capex.
Capex for the fourth quarter is expected to be between 18 and $20 million for next year, we expect capex to be in the range of 47.
For a more detailed breakdown on project projected drydock capex and off hire days by quarter, you can refer to slide 17 in the appendix.
Yes.
Now if we do go to slide.
Slide 12 for our cash bridge.
Moving from left to right on the page, we began the third quarter with total cash and liquidity of $452 million.
During the quarter, our adjusted EBITDA was 157.
Our debt service for the quarter was $25 million composed of $11 million of debt repayment.
And $14 million of cash interest expense.
We expanded $12 million on dry docking and maintenance capex.
We repaid the eight 5% baby bond for a total of $25 million.
Also our 687000 shares repurchased in Q3 used about $20 million of cash.
And we paid a regular quarterly dividend of about $6 million.
Lastly, we had a substantial negative impact on working capital or other charges for $46 million during COVID-19.
Most of this impact is due to the increase in receivables from the tools due to rapidly rising rates and also the doubling of bunker prices.
And the fact that bucket payment terms have been tapped.
As it stabilizes, we expect to recoup these with the natural ebb and flow.
Combination of all these factors resulted in our quarter end cash balance of approximately $256 million and $220 million Undrawn revolver for total liquidity of 475.
Now please turn to slide.
Yes.
I'd like to briefly talk about our balance sheet.
As of September 30th.
We had about $2 5 billion of assets.
Two 1 billion.
Long term debt.
In addition, we have a $220 million revolving credit facility that remained undrawn as I just said.
And our net loan to asset value is below 29% as of September 30.
As long as highlighted we have a very healthy balance sheet.
Asset values are well above net book value of our vessels net debt to total cap is also low in the high Thirty's and our total liquidity is $476 million.
Accordingly.
At this point in our tanker cycle with current asset values at 10 year highs and a healthy built in debt amortization schedule of approximately $180 million a year.
We are well positioned to return a substantial portion of our free cash flow to shareholders and you see that reflected in our announcement today of a $1 per share special dividend along with our normal quarterly 12 SaaS per share dividends.
Turning to slide 14, we look at our debt as of September 30th.
As you see our total debt balance of approximately $1 1 billion with $220 million in Undrawn.
While the capacity in <unk>.
Table, we provide our mandatory debt repayments for the fourth quarter and full year 2023.
The 70 $850 million facility. So the term loan begins its amortization schedule in the fourth quarter with $30 $6 million in that quarter.
The <unk> facility, which is connected with our dual fuel LNG vlccs should increase by about $190 million from the September numbers, and we'll make regular installment payments battery shipments to lift.
One last one item of note before I turn it back over to Lois we provided in the appendix updated charter out revenues and charter hire expenses for a fixed tcs time charters in and out we've entered into a two year charter out with one of our 2000 docs covered the Suezmax is.
One year on a 2007 built edmar.
We continue to review, our chartering strategy over longer term charters.
That concludes my remarks, I'd now like to turn the call back to Lois for closing comments.
Thank you very much Jeff on.
On slide 15, we provide you with Seaways investment highlights.
I encourage you to read these fully.
However, I will summarize them briefly.
Key ways.
In our history as a public company.
Have a proven track record of building value, while maintaining the balance sheet throughout the cycle.
We are disciplined stewards of capital.
<unk> consistent returns to shareholders.
With the fleet growth and healthy financial metrics.
We have a focused and flexible operating model that has allowed for us to expand and contract at appropriate moments in the cycle under a disciplined approach.
The company today has significant operating leverage to capitalize and what we expect to be a robust tanker cycle over the next few years.
Regional imbalances of oil are expected to continue and to grow and distance from sources to consumers, creating higher seaborne ton mile demand, while the supply of vessels remains limited and likely will shrink as vessels age and eventually are removed from the commercial trading fleet.
We are staying in front of the growing ESG priority investing in the fleet to reduce our carbon footprint.
<unk> and build a corporate culture of diversity with appropriate checks and balances.
We are willing to back this message up with transparent ESG reporting and sustainability metrics.
Okay.
We have sustainability linked incentives in our debt portfolio.
We strive to continue to evolve these principal and to provide a meaningful platform for all stakeholders.
Thank you very much and with that said amber, we'd like to open up the lines for questions.
Of course, thank you we will now begin the Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad.
For any reason you would like to remove that question. Please press star followed by two again to ask a question Thats Star one.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question. We will pause here briefly ask questions are registered.
Our first question comes from the line of Chris.
Chris Robertson with Deutsche Bank, Chris Your line is now open.
Hi, Louis adjusted morning, and thanks for taking our questions.
Yes, good morning.
Welcome to the group Chris.
Yes. Thank you I just wanted to talk about leverage for a moment, Jeff how are you thinking about leverage overall youre kind of methodology here are you looking at certain leverage ratios that you're targeting are you <unk>.
Aiming for a specific total cash breakeven level eventually and can you just walk us through your philosophy around that.
Sure, Chris I think that.
Our feeling is whether its leverage levels or other capital allocation policies.
They need to be responsive to the cycle its not a one size fits all situations. So we don't have any one say loan to value target when values changed so dramatically.
Rather it's more to us instead of a.
Points in time, it's about a process. So at this time when we're in the now second quarter plus of an upcycle generating significant cash one of the things that we want to make sure happens is that we will continue to delever.
We totally.
So I believe that deleveraging and returning cash to shareholders is not mutually exclusive.
Our announcement today of our dividends, but what we're doing is not heavy for any one particular target, Chris, but just making sure that we are.
Appropriately leveraging through the cycle and for US It all starts with the.
Scheduled amortization, we have on our debt, which I mentioned earlier in my remarks, it's about $180 million a year and we think that that does the job pretty well.
Yeah.
Okay, Yeah got it I guess following up on that you mentioned the special dividend can you walk us through how that special dividend was calculated the decision to go with a special dividend rather than increasing the normal quarterly dividend.
Is that going to be supplemental to the quarterly dividend or should we think about this as more of an annual occurrence.
Yes.
First of all you should think about the special dividend.
Supplemental to the quarterly dividend our commitment to capital allocation that goes across all parts of the cycle without any other change, but that's an ever changing is our quarterly dividend, which we put in place at an amount, which we dealt double this year, but it's enough that we feel will never have to change for any parts of the cycle Thats our view on that and then.
Whatever we do last quarter. It was share repurchasing this quarter, we've announced at this point a special dividend, which is in large part reflective of the increase in our share price and closing the gap to NAV. He was very happy about that as a separate special dividend.
As you'll see in the press release the record date and payment date are the same but it will be two dividends to make the point that we'll always have a regular dividend and then at times like this at this point of cycle, our policy will be to pay a substantial portion of our free cash flow.
Out there is not a formula we don't go to that other than our regular dividends you want to call that a formula.
But it's a substantial portion of free cash flow, we think an appropriately paid out too.
Our shareholders with adequate liquidity with a more than adequate liquidity, we have at at this point of cycle.
Clear.
Yes, thanks for the color, Jeff and I will turn it over.
Okay.
Thank you.
Our next question comes from the line of.
Omar Nikola with Jefferies. Omar Your line is now open.
Thank you and Lois Hi, Jeff Good morning.
Hey, Nice nice strong nice strong result, obviously in a very good figures ahead it looks like.
Maybe just maybe touching on the topic you were just having with Chris.
The share price has been trending nicely all year and in fact, I think <unk>, albeit it's been the best performer.
In terms of gains in terms of the middle part of May.
Since the beginning of the third quarter, how are you thinking about valuations today.
Basically it looks like you're at the closest to NAV.
You've been since you guys took the helm, how do you view that and does that change anything in terms of how you look at allocating capital, whether it's returning capital to shareholders or investing in the business.
So omar in indeed.
We are asset values on net asset value continues to improve and increase and we think that that will continue as you see the extremely high rates that are projected that we've already earned in the fourth quarter. So youre building on strength and you know the.
If you look at vessel values the Mars.
Around 289 10 has improved.
<unk> valuation by over 50%. This year, if you look at being proved its been something like 33%.
Just overall in making the pie bigger we believe that we will continue to earn these strong cash flows and fee increase that's about <unk>. So you see that the overall tanker market, both crude and products strengthening into itself.
Yeah.
I'd just add that we're very.
Confident that we.
Have a strategy that works investing in fleet renewal at the bottom of the cycle and focus on return to shareholders and deleveraging in the parts of the cycle and we've done that over the last six years and we're grateful that it's.
Being recognized in our in our share price now.
And so I think we just continue to stay the course and follow the strategy.
Yes, great makes sense nice to see the stock price.
Perform so well.
And maybe just wanted to ask one about the fleet makeup and Jeff just mentioned acquiring assets at the bottom in returning capital.
Higher end of the cycle.
Just in terms of where you are with the fleets you have obviously critical mass in the VLCC suezmax and the <unk>.
Not so much of a presence I would say on the efforts and the LR too.
In the past you've sold the <unk> business to LNG vessels, and I think it may be the handy that you got from Diamond desk.
Basically you've been selling a lot of the noncore pieces. What do you think of where you are today with the Aframax LR two segment, you, perhaps maybe look to monetize that.
And maybe take that capital and boost your presence elsewhere or what do you think just generally on that.
Well Omar I would say you did have a really good job of recapping you know those.
Non core businesses that we did move out move out at including the handy tankers, especially due to the Russian exposure that we saw in that sector of the market.
On the middle part of the fleet as you can see with.
Earnings booked in the quarter to date.
Well up in the 50 per day.
Very strong piece of our portfolio, we were not looking to divest.
The Aframax <unk> or <unk> at this point.
Okay.
Thanks, Louis and thanks, Jess Congrats on a strong quarter.
Thanks Omar.
Thank you.
Our next question comes from Greg Lewis with BT.
Craig Your line is now open.
Thank you Lee and good morning, everybody and thank you for taking my question.
<unk>.
Realizing that you kind of walk through how youre thinking about that the.
Capital allocation I'll move on.
As I think about.
The.
The timing of the sanctions are the embargoes around crude and then following products.
It is there is there any way that that that the industry can kind of position our position their fleets around that.
And I say that specifically to you guys. Because you do have that blend of crude and products. I E are there things that are there things that are going to happen in the crude market from the embargo that we should see similar things happen in the product.
Or.
Is there any way.
I'm just trying to I'm trying to wrap my head around.
How <unk> should be able to take advantage of that.
Okay. So we believe that theres about a million barrels per day.
Seaborne crude still going into the EU.
And Bulgaria has an exemption. So that's like 200000 barrels a day. So there's about 800000 barrels a day that has to find a home certainly India and China have been the biggest takers of rush.
Russian crude to date and that 800000 barrels.
It has to find a home either.
Working under the price cap or.
With vessels that are in the Grace Lee.
And.
I think Russia is going to scramble to.
December 5th the date, but now it's January .
19.
You would have to have your crude off your shift by then to.
To be compliant so.
That 800000 barrels a day, we're going to see.
Where Russia can put that and then Russia is.
The EU is starting to import more.
You know as far as vessels.
There may be some ways, but it is very tricky with the reinsurance market for a robust strong owner too.
Concerned about their reputation in the market too.
Go ahead and avoid all of these coming regulation so.
We see that's step one and then that's going to be followed by the product carriers and I think the product carrier deadline will be modified potentially based upon the success of the crude.
Deadline and these regulations, but the bottom line is that we're watching to see okay. So where does that mean that Russia is able to.
Gain more market share to put their barrels into the market and then the EU Poland from alternate markets. So that's we think it's a dislocation is inefficiency and good for the tanker market.
And then I did okay, and then I did want to follow up on that because of this February timing.
We're already in or at least if you pick up a newspaper in the northeast, which is where I I am youre already starting to hear concerns about heating oil.
It's an unseasonably cold winter.
I guess, what I would say is could you walk us through a little bit out of the heat a little bit around the heating oil market and.
<unk> really could we see the.
Okay.
And a cold winter does that typically last I mean, I imagine it lasts longer than we think and really what I mean, it just seems like the product market seems like it's been a tremendous spot here.
Heading into heading into the winter.
Yes, Thanks, a lot Greg so.
Middle of the barrel. The diesel you know this is the lowest inventories that we've had on the east coast since.
2007.
And you know.
The United States I mean, there's really it's a pretty small diesel market you know that the <unk>.
North East is really the principal.
Market, that's still here with.
Diesel gasoline gas oil.
And.
One of the things we're seeing is TV.
On the East coast.
Has restarted unit, making 100000 barrels a day. So when you see the refining margins very very strong all of a sudden the market used to respond to that and to close that gap. So we understand there is some Jones act movements, bringing diesel from the U S Gulf and East Coast.
Like I said, you can see some of that.
PBF cranking up a little bit on the east coast, which of course, we will bring in some foreign crude.
And you see the market respond, but I think the key overall as these very very strong refining margins.
Puts the signal out hate money to be made.
And the market moves into.
Take advantage of that and then.
Narrow that margin.
Okay.
Super helpful. Thank you very much good morning, Okay.
Okay.
Thank you. Our next question comes from the line of Liam Burke with B Riley Ian Your line is now open.
Thank you and good morning, Louis Good morning, Jeff.
Hey, how are you Liam.
Good thank you.
Just touching back on <unk> question on the fleet management not that you would need the cash but is there any thought of lightening up on some of the older Mr's.
With the asset values are so high here.
We have.
Notice in our press release, we have one vessel that.
Is under contract for sale at present and.
We're very judicious and looking at it because these vessels are earning very strong returns right. So very carefully we're like okay.
You know under contract for sale for one so that's just a continuation of that pruning that vessel will avoid the dry dock and ballast water treatment installation in 'twenty three.
And you should expect us to continue.
With selective sales like that.
Okay fair enough and is there any thought with spot rates, so high to move anymore of the vessels over the time charters.
Yeah.
The team looks at that and you know.
Yes.
We executed a couple of time charters.
We continue to look at it as that market builds into itself and you can get more links at a healthy rate.
Thank you.
This will now conclude the question and answer session. I will also hand, the conference back over to Lois for any additional or closing remarks.
Thank you very much everyone for joining international Seaways third quarter call. We look forward to a strong performance in the coming quarter. Thank you very much.
Yeah.
Okay.
This concludes today's international Seaways third quarter 2022 earnings call. Thank you for your participation you may now disconnect your line.