Q1 2023 International Seaways Inc Earnings Call
Good morning, and thank you for standing by I would like to welcome you to international Seaways first quarter 'twenty to 'twenty three earnings conference call.
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After the Speakers' remarks, we will conduct a question and answer session.
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Operator, I systems any point, it's the Stasi likey. Thank you I will now.
I'll turn the conference is it your highest James small general counsel. So please go ahead James.
Thank you Brito.
Good morning, everyone and welcome to International Seaways earnings call for the first quarter of 2023.
Before we begin I would like to start off by advising everyone with us on the call today.
During this call management may make forward looking statements regarding the company or the industry in which it operates.
Those statements may address without limitation the following topics.
It looks for the crude and product tanker markets and changes in trading patterns.
Forecasts of World and regional economic activity.
<unk> for and production of oil and other petroleum products.
The effects of the ongoing conflict between Russia and Ukraine.
The company's strategy.
The effects of the ongoing coronavirus pandemic, our business prospects XP.
Expectations regarding revenues and expenses, including vessel charter hire and G&A expenses.
Estimated bookings TCE rates <unk> capital expenditures during 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 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.
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 annual report on Form 10-K, our quarterly reports on Form 10-Q.
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 to Brian .
Thanks, very much James Good morning, everyone. Thank you for joining international Seaways earnings call for the first quarter of 2023.
Following slide four of the presentation.
Found on our Investor Relations section of our website net.
Net income for the first quarter was $173 million.
Or $3 47 per diluted share.
Bringing our cumulative earnings.
Over the last three quarters to over $500 million.
Adjusted EBITDA.
Which removes the gain on the sale of an MLR.
With $209 million.
Based on our strong results in the first quarter.
And strong spot fixtures, thus far in the second quarter, we have declared a combined dividend of $1 62 per share.
Following the dividend payment in June .
Key ways in year to date dividends are nearly as high as the previous three years combined.
As found in the chart on the upper right hand corner of the slide.
And surpasses $360 million in cumulative return to shareholders since the start of 2020.
And finally represents over $5 per share return to shareholders over trailing 12 months.
Our success today is clearly demonstrated in our balanced capital allocation approach.
Two of the three VLCC.
<unk>.
Have been delivered with.
With the third new building and final delivery expected later in the second quarter.
We ordered these ships in 2021 at a contract price of $96 million per ship.
<unk> vessels value has these ships were nearly $150 million each.
These ships will be on time charter for the next seven years to an oil major with a fixed rate component plus a profit share.
We are financed at a 64% loans to current value.
At a fixed interest rate of 425 basis points.
We also exercised the purchase option on two vessel under sale leaseback arrangement for a net price of $41 million combined representing a discount to current value of about 45%.
One vessel delivered in March and the other in April .
Additionally, we sold an MLR during the quarter and that resulted in a $10 million gain on sale evidence Inc or.
Our successful investment at low points in the cycle.
The balance sheet remains strong with total liquidity ending the quarter at $519 million.
This is after our $98 million in dividends and $97 million of repayment toward our term loan.
Yeah.
With the repayment on.
On the term loan we.
We amended the facility.
To increase our revolving credit to nearly $260 million and.
And released 22 vessels from the collateral package.
Today, we have 27 unencumbered vessels, representing 35% of our total fleet.
Lastly, we fixed four ships on two to three year time charters during the quarter.
Creasing, our contracted revenue to about $337 million, excluding any profit share component on the newbuild.
These additional time charters.
Increase our fixed coverage to over 10% of the fleet and reduce our cash breakeven levels.
On slide five.
Russian oil exports remain in focus.
Trade flows to Europe are displaced due to the ongoing sanctions.
And creating higher ton mile demand, while soaking up tonnage.
On the left hand side of the slide it is clear that Russian crude is primarily heading to Asia, particularly India and China.
The chart shows that crude seaborne exports have remained relatively stable in constant at four and a half to 5 million barrels per day.
While the composition of the destination on the right axis has narrowed significantly to essentially Turkey in Europe and increased significantly to Asia.
Product exports from Russia, and a similar graph on the right hand side of the page are not as clear in terms of displacement.
Since the sanctions began only in February .
Turkish imports in the Mediterranean are all that remain for Europe .
Our volumes to Asia and Africa have increased.
While this story continues to develop including the concept of double handling via STS transfer.
International Seaways and its commercial managers remains constant on our self sanctioning of lifting Russian oil.
Turning to slide six.
We have updated our standard set of bullets on tanker demand drivers.
With a subtle green arrows next to the bullet representing.
Good for tankers, the black dash represents neutral impact on tankers and a red arrow, meaning the topic is not presently positive for tanker demand.
I won't read each of these bullets individually, but we'll pull some highlights for you.
While the consensus of oil demand growth for 2023 is around 2 million barrels per day.
Most believe that the growth in oil demand is weighted to the second half of the year.
In the chart on the lower left of the slide the average of the EIA the IEA.
And OPEC forecast for oil supply and demand.
<unk> a slight oversupply in the first half of 2023 that has been more than offset in the second half of the year.
We saw inventories grow in the first quarter, some of which seasonal but we remain cautious on near term view of global recession.
With these considerations it seems logical that OPEC plus announced cuts to their production target.
However, we are a bit skeptical on compliance as these targets as evidenced in the lower right hand chart.
Our very close to actual recent OPEC plus production level in the past few months.
We believe.
Has been impacted particularly on the VLCC earnings.
And we continue to monitor oil supply and oil demand as the year progresses.
On slide seven.
The tanker supply side remains a compelling story to our fundamental.
The supply side remains constrained with an aging fleet and barriers to ordering new ships.
We are still quite busy over the next two years with other shipping sectors.
This is keeping new building prices high and eliminating economic decisions on ordering.
We expect new environmental regulations to continue to evolve.
And just further pause a wave of new building orders.
In the chart on the lower left of the page contracting has been somewhat limited this year and there is a significant downward trend over the last few years for tanker vessels that are taking longer to bill with 2026, a reasonable estimate for.
So the early delivery on certain new building contracts today.
Yeah.
The oil tanker fleet.
<unk> is now above 12 years old with more than one third of the fleet above 15.
As you can see in the lower right hand chart expected new tonnage over the next few years as well under the candidates that could be removed from the commercial trading and we may see negative fleet growth in the near future.
The supply outlook for tankers in the near term is incredibly positive.
Combined with higher oil demand and disrupted trade flows the overall outlook for tankers remained strong, particularly in the medium term.
There may be near term recession, which could affect tanker rates.
Or we may return to our regular seasonality in the summer months in either case, we remain positive on tankers and we believe that Seaways is very well positioned to capture strong market with our low operating leverage and our diversified fleet of 76 tankers in both crude and product sectors.
With our healthy balance sheet and our liquidity, we expect to continue building.
Upon our track record.
And on our balanced capital allocation strategy investing in the fleet opportunistically, reducing debt and returning cash to shareholders.
I'm going to now turn it over to Jeff our CFO to provide our financial review Jeff.
Thanks, Louis and good morning, everyone.
Turning to slide nine.
Net income for the first quarter was $173 million or $3 47 per share.
Adjusted net income, which essentially remove the gain from the sale of a vessel.
With $163 million <unk>.
Representing the third consecutive quarter of earnings over a $100 million and over $550 million and net income for the latest 12 month period.
Similarly on the upper right chart adjusted EBITDA for the first quarter of 2023 was $209 million.
Bringing trailing 12 months EBITDA over 739.
In the appendix, we provide a reconciliation from reported earnings to adjusted earnings.
While our expense guidance for the first quarter fell within our range of expectations I, just like to point out a few items of note with our income statement.
First other income for the quarter was over $4 million.
And that consists largely of interest income on our significant cash balances that we're holding.
On the revenue side, our lighter business had a very strong first quarter with $11 million in revenue.
Given the $2 million vessel expenses $3 million charter hire and G&A.
G&A overall, the lottery business contributed about $5 million in EBITDA for the quarter.
Also on a revenue side, our LR, one pool Panamax international.
<unk> to outperform the general market with earnings in excess of about $5000 a day above the broader market indices.
As you can see in our TCE revenues at the bottom of the page <unk> spot earnings for the quarter were nearly $71000 per day.
Yeah.
Turning next to slide 10 for our cash bridge.
You can see we began the year with liquidity of $541 million, which was composed of $324 million in cash and $217 million and an undrawn revolving credit capacity.
Following along the chart from left to right on the cash bridge, we added $209 million and adjusted EBITDA for the first quarter, plus 37 million in debt service composed of scheduled debt repayments and cash interest expense.
Les our drydock and maintenance capital expenditures of 23 million.
And then a quarter and a working capital bump of about $40 million.
Let me therefore achieved our definition of free cash flow.
$169 million for the first.
The remaining bars and the cash ratio all the levers, we pull that our capital allocation strategy for the quarter.
For instance, we sold one 2008 built MLR for proceeds of $10 million.
And we opted to repay more of the term loan rather than reduce capacity under revolving credit facility.
We exercise the purchase options on two Aframax is that had been on sale leaseback.
$24 million of that amount was paid in March for the vessels at $18 million that put in escrow as of the end of March.
Final payment on the second vessel, which was made in April .
We repaid $97 million on our term loan portion of our main senior secured facility.
Which will reduce our scheduled amortization by about $3 million per quarter, let's save over $600 a day on a forward cash breakeven levels.
Finally, we paid $98 million in combined dividends, which was the $2 per share that we announced on our last earnings call.
The $4 million of other is mostly composed of deferred financing costs for taxes paid in stock.
Altogether. These components that led us to an ending liquidity of over $519 million with $261 million of cash at the end of the quarter and short term cash and short term investments at the end of the quarter and $257 million in undrawn revolving capacity.
As previously mentioned the revolving capacity was increased during the quarter in connection with the amendment of the credit facility.
Okay.
Now moving to slide 11.
We continue to have a very strong financial position as shown by the balance sheet on the left hand side of the page.
Cash remains strong at $261 million restricted cash of $18 million as I've said represents the amount of escrow related to the aframax vessel purchase with a corresponding lease liability with the completion of the sale in April after the quarter those will be eliminated.
Vessels on the books stands at approximately $1 9 billion.
Versus the current market values, which are well over $3 billion.
With about $950 million and gross debt that equates to a net loan to value just about 21%.
On the right hand side of the page we wanted to show further strength of our operating leverage which resulted in significant cash flow generation over the last few quarters, even after returning substantial cash to shareholders and paying down debt.
As we mentioned in our press release. This morning, we expect to continue on this trajectory of balanced capital allocation approach.
Two new buildings of the three of our three dual fuel VLCC program will deliver in the second quarter.
We also intend to use some of our cash to repay existing debt.
Currently we're exploring options at which facilities the portfolio, we intend to repay either in their entirety or a portion.
But overall, we expect the total repayment maybe around $75 million.
We've also announced our combined dividend of $1 62 per share which consists of a regular dividend of <unk> 12 per share and a $1 50 per share supplemental dividend.
These payments we made in the second quarter as we continued to build our track record of executing our capital allocation strategy.
The last part I'll cover slide 12 shows our forward looking guidance on book to date time charter equivalents aligned with our cash breakeven levels.
With Tc fixtures for the second quarter of 2023, and as always I'll remind you that actual tcs that we will report on our next earnings call, we'll probably be different than this.
But as of now we have a blended average spot TCE of nearly $48000 a day fleet wide for the quarter.
On the right hand side, you can see our cash breakeven, which we displayed for the forward looking 12 months reflective of the delivery of the last vessel on our Newbuild program.
Related payments on principal and interest.
As well as the new fixed revenues before any profit share on our increased long term time charters.
Altogether, we have reduced our breakeven by $600 a day for the first quarter of last year.
But if you consider the approximately 250 basis point increase in bank rates over the same period.
Reduction to our breakeven is actually closer to $1500 a day.
When you compare these breakeven rates to our fixtures for the quarter to date certainly.
Looks like it certainly looks like second quarter, it could be another strong quarter for international Seaways.
On the bottom left hand side of the chart for those Modelers out there we'd give you some updated guidance for expense such as in Q2 and the remainder of 2023.
We also included in the appendix of this presentation, our quarterly expected off hire of Capex scheduled twice right I won't read.
Each item line by line, but encourage you to use these for modeling purposes.
That concludes my remarks, I'd now like to turn the call back to Lois for her closing comments. Thank you very much Jeff.
On slide 13, we.
We provide a comprehensive E.
<unk> investment highlights.
I encourage you to read and review in its entirety, but we just summarize briefly for you here.
At International Seaways, you will find that we execute on our commitment to all people.
And we have a recent track record.
We strive to buy assets at low points in the cycle.
Our track record and our balance sheet.
Show that we have invested about $2 billion in assets that are now worth well over $3 billion today.
We said that we have a balanced capital allocation approach last quarter, we generated over $200 million in earnings and we distributed nearly half to shareholders and the other half to reduce debt.
And then we bought two ships at discounted prices.
This quarter is much of the same.
$70 million of earnings with $80 million to shareholders and another $75 million towards debt reduction.
And our balance sheet remains very healthy with significant liquidity historically low net loan to asset values and 35% of the fleet unencumbered.
We have strategically positioned the company today.
Sustained robust tanker market with our low cash breakeven levels and flexible operating model.
We are set to take advantage of the compelling tanker fundamentals on the horizon.
The growing distances between oil supply and consumption, creating high demand for seaborne transportation across a globally aging fleet.
Has barriers towards replacement.
Much less.
Expected well, we anticipate to come in demand.
On this we are mindful of the environmental regulations ahead and remain focused on being a leader in ESG. We have backed this up with sustainability clauses in our cost of borrowing we strive to continue to evolve these principles and to provide a meaningful platform for all stakeholders.
Thank you very much and with that operator, we would like to open up the lines for questions.
Yeah.
Yeah.
Okay.
Okay.
Great.
Yeah.
Hello, operator, operator, we can't hear you.
Now we think we can.
I apologize please press star one to ask a question.
I can confirm the first question on the line is from Greg Lewis with BP.
Yes, Thank you and good morning, everybody and thanks for taking my questions.
Yeah.
Hi, Greg I do want to talk about Hey, guys. Yeah, I do want to talk about the cash balance, but lowest before it can I can we clarify you mentioned that with the new builds on the back of the strong contracts.
You mentioned, the 60 plus percent on the LTV was.
Was that on the purchase price, which was in the $90 million or was that on the.
Current market price of the $1 50 ish.
That is on the current market price.
Okay.
So I mean, we're pretty much.
Based on what we bought it we worry okay. Great. So then as I think about cash and Lois and Jeff you've seen more cycles than me cycles can be challenging as we know.
As we think about and realizing we're not in a market like that but you never know.
As we think about the cash balance and appreciate you're realizing that interest rates are higher so youre actually making some good income on that money now.
What it is.
Like should we be thinking about kind of like.
More of a sustained cash balance around these levels realizing that as I look ahead into the back half of this year and when we and unexpected rate recovery.
Without any real forward capex going forward.
It seems like that cash balance should really just continue to melt higher is that kind of a fair way to think about it.
Well Greg.
I think that presently we are still in really strong market.
And yet we have very structural.
Fundamentals for a strong market in the future.
The spot.
Spot market has reacted.
Two the sentiment with OPEC cutting and yet we still believe that theres going to be strong demand in the second half.
I'm going to let Jeff expound on it.
But president you have presently.
We think that the way that our balance sheet is set up.
And the way that we've been focused on unencumbered and shifts in paying down debt as well as returning to shareholders.
Yeah.
Sweet spot hopefully of where we are.
We're really striking a very good balance.
And.
Our prepared for.
Whenever the market breaks to really.
Very well through that.
Yes, like you said, Greg it's been through a couple of cycles.
Actually remember when it was sort of normal.
Getting interest rates on your cash right with golf forgot about that for the last 10 years. So I don't think it fundamentally changes our view, which is we want to have a good cushion between cash undrawn revolver, and frankly unencumbered vessels, which are itself a great cushion.
Whenever that next downturn might be and how long or short it might be and it's just nice to be paid more net cash, which you want to have.
Cash as a portion of the liquidity that we want to keep.
I think returns as well as just Tom I was trying to share with paying down debt that all stays the same.
It's the right thing to do at this point in the cycle. So we'll continue with it. So I think it's kind of back to the future back to a fairly normal time, where.
Interest rates on your debt at a little higher but that's why we've hedged out a significant portion of our have fixed portion of our debt and interest on your cash is commensurate little higher just as where it is.
Okay, Yes.
I mean, you kind of build this it looks like a through cycle company with the cash gives you flexibility. So just kind of wanted to kind of hear your thoughts on that and then I was hoping Luis you called out that the offer the benefit of all our Jeff maybe it was about the benefit in the wider in and we're continuing to see those yes weekly SPR releases.
Some degree could you I guess theres a two part question. There is how much of the SPR releases is helping the lighter in and then beyond the lighter and once again, we will have executed the lighter and that that those volumes then go on ships farther afield.
Any way to kind of quantify what that SPR release is actually built into the market over over the last couple of months.
That's interesting I mean, we certainly know last week, four 7 million barrels a day export it out of the U S. Gulf. So we know that.
Those releases really bolster the exports and put more barrels on the water seaborne for the tanker side.
Tough to give you.
Quantification of how that assist on lighting I would say that their Q1 was bolstered.
By that level activity as well as by the very robust grades.
We don't look for them to be able to repeat that $5 million.
EBITDA for Q2, we would think that it would be more moderate.
In the second quarter, reflecting.
Seasonally.
A little bit lower lower volumes and lower job and then.
I think that Oh.
Half of that STR STR, it's like 11 out of like 25 26 barrels has been.
Put on the water. So we probably can look forward to seeing.
That over the next probably 30 to 60 days kind of helping volumes a little bit as well.
Can I just add one observation Greg in my opinion, a lot of people observers.
Freaked out a little bit when OPEC.
They did surprise cut like Oh, what does that mean about demand whereas.
A lot of that might've been what does that mean about inventories and inventories were probably relatively higher than they might otherwise have been because of STR releases and sales.
Mainly last year.
That's where I think it comes back and we've seen it come down in revenue in the U S. The crude is it's like 460 million barrels.
Of inventory.
A lot of what was there in Q1 as al has been coming out week over week.
Yes, Okay, alright, perfect. Thank you for taking my time I have a great day.
Thank you.
Thanks, Greg.
We now have Ben Nolan with Stifel.
Yes. Thank you good morning, Ben.
Okay.
Good to talk to you guys. Thanks for taking Greg. Thank you.
The.
I have a couple of questions.
The first relates to it's a little bit more of a macro type question.
You guys talked a whole lot about the.
Order book and fleet age I think theres been a little bit of ordering lately, though about why I think one of the interesting.
As it relates to the crude tankers had been mostly suezmax and it's been like two years since the vlccs have been ordered.
I'm curious what the dynamic is why or what about the market makes people a little bit more optimistic about a suezmax versus would be would be expressed in an order.
That's interesting I guess I would say that.
Yes.
I almost thought youre going to go to.
That have been ordered our MLR and LR twos and it of course.
You've just seen incredible strength in both of those sectors.
The Rushmore.
So that doesn't that doesn't incredibly shocked me I mean, the suezmax is are.
They are a little more flexible and you can build them in a few more yard, but we still haven't seen very much on big crude I mean, even on the Suezmax a spin then.
Pretty.
Pretty reduced I would say so overall, we're still below.
Around like a 4%.
Replacement or a full order book and in theory, you should be losing 4% to 5% of your fleet each year in normal in <unk>.
Normal times, which were not in.
And so we think thats still looks pretty structurally.
No.
Yes.
Clearly the numbers have never been really this low other than maybe a month ago or so but.
Okay. That's helpful.
Along those lines and maybe just talking about new building, obviously, a few years ago you guys.
Did the <unk>.
The vlccs with LNG.
Im curious if theres been any.
The level of reverse inquiry, whether or not you guys would be interested in doing it I think it's a different conversation, but are you starting to see your customers are getting a little bit more A&P and saying hey.
What can you guys do we know that we're going to need a ship in a few years. So let's have a conversation I mean is that happening at all.
Yes, I mean, I would certainly say that I think oil majors are.
Very forward looking very structured so.
We work to engage them and have discussions I think it's still.
Not 100% clear on exactly what type of dual fuel depending upon your vessel side you should be using in the dual fuel LNG is super <unk> that may not work for all different sectors. So theres a lot yet to be learn and innovate in this space.
One thing then.
And then we remarked on before but I think it's appropriate to say it again as we come to the completion and delivery of this the three.
Vessel program is.
A lot of intellectual property in the company and what we.
<unk> is an asset from having spent the time.
Building these vessels through to completion at sea trials, and now putting them out with our customer.
So I think that if theres going to be reverse inquiry, we expect a phone to be ringing here.
Okay.
And then just the last one for me I know you guys did it.
Yeah.
The repurchase of some of the vessels that you had leased in.
Are there any more of those in our fleet that you have purchase options on.
Yes, we will be looking at.
Uh huh.
Our debt facilities, and our sale leaseback facilities, which are all accounted for as debt.
Or opportunities to.
Reduce debt incrementally as we've talked about today.
There may be some of the low hanging fruit or the lower hanging fruit. It makes sense to even though we have a fixed the high fixed portion of fixed or hedged portion of our debt.
Pick up somewhat some of the more.
Slightly higher cost. So yes. There is you can look for that.
Okay.
I appreciate it thank you.
Thank you.
Thank you we now have with.
Jeffrey.
Thank you hi, guys good morning.
I wanted to just follow up good morning couple of things first off good morning. Louis just first off obviously the Panamax LR one fleet continues to be a nice piece of business for you its niche.
Raul.
But it is becoming a real contributor to your revenue as you can see this past this past quarter and one before it.
70000, a day and once you guided to 79% so far in the second quarter, how should we be thinking about that segment as we move forward here.
Whether the rest of this quarter or into the second half how has that market been developing and can we expect this type of elevated rate to continue for some time.
Yes.
Yeah.
Omar I would say that.
Right now.
Across and of course, those LR ones are trading.
Crude and dirty PPP in the Americas.
Presently all.
All the crude markets have backed off somewhat.
However, we still anticipate that Panamax international will continue.
Continue to.
Post very strong rates and of course, that's our joint venture with ultra and <unk>.
And we expect that it will mirror the broader market.
And and continue to post that.
Extra extra benefit beyond the spot.
Okay. Thank you and is there I guess I'm not sure I'm pretty sure you've been asked this in the past, but I cant recall is there a sort of index or or.
That we can sort of have a sense of being able to track how that business is doing or is it really just the very kind of customer to customer.
Relationship.
I don't want to say black box, but we just don't have a really good sense of being able to see how that's performing.
You know what I would say is.
Maybe we'll follow up with Tom on offline, because we do have the indices that.
Our market indices that are benchmarks so.
If we could do that I think that might be.
That might be beneficial.
Yes, Okay, yes, sorry to get into the weeds, but just obviously remarkable there are some reflect local news.
Yes, there are routes that we use as a benchmark and et cetera.
That.
<unk> that trade.
Okay Cool Alright, and then.
Look forward to that and then just as a follow up to the discussion about the dual fuel vlccs that you've taken delivery off you've got the first to the third one is coming up shortly I wanted to ask because clearly.
Theres just a lot of.
What's the future.
Type of propulsion and whatnot, but maybe just with respect to these vlccs.
Wanted to get a sense of how so far as you've taken delivery of them. How they have been deployed in terms of is it.
It is the LNG portion of the fuel source being utilized or.
Are the shifting may be used for lifting U S cargoes, thereby having access to U S. LNG.
Cheaper price.
Color you can give on how these are currently being operationally.
The license.
Yeah.
Yes.
Trading is trading in typical VLCC trades right. So.
On the vs. Those routes I mean, you need Singapore.
U S Gulf is great.
Right. So those are sort of your bunker spot they are using the LNG system not fully for propulsion.
Their operating needs on a mix.
Presently.
And of course, we want that LNG system.
To be used so that we make sure everything is effective as we start to trade them and high.
Operational smooth for US right. So we're going to learn more as we get all three of them into steady service.
Yeah.
Yes, okay and learn as well.
Watching you guys, yes, and maybe just one simple one I just kind of thought of it as we were talking.
The LNG component of the vessel doesn't always have to have LNG in it.
Or is it able to prevent without that.
Yeah.
Yes, we don't have the one guy we don't have.
I'm sorry fully on conventional.
Or black yeah.
It's able to run, but it's able to run fully on conventional fuel right you can run on a blend.
We will likely always have some LNG in the bunker tanks that are intact.
<unk>.
Probably we need to and then.
My head of ops and sustainability is traveling and if there's anything additional to add.
Share that with you.
Thank you. Thanks, Thanks, Louis sorry, I'm, sorry to get into the Nitty gritty across all my question.
No no no it's great.
Okay.
We now have Chris Robertson of Deutsche Bank.
Hey, good morning, Louis and Jeff Thanks for taking the time and answering our questions today, just on Jeff looking at the recent pullback.
With your shares but across the tanker space can you talk about how youre thinking about the capital allocation strategy here as it relates to maybe doing some share repurchases over dividends in the coming months.
Okay.
Yes, Thanks, Chris.
Okay.
Yes, Im glad you asked that.
No.
Taking a step back as you know.
We have said we don't.
We have a formula as to how we allocate capital.
When you look at everything.
And but.
That gives us a better ability to be flexible and I think that's true with respect to whether the returns that we do our dividends or share repurchase.
We're proud of the $5 that we've returned over the last 12 months for sure but that includes some share repurchasing last year that was the right thing to do.
Think that the.
Regulatory supplemental dividends, we declared as last three quarters.
With the right move.
But yes, we're not we don't.
We are cognizant of the drop in prices that the whole peer group has had.
And I would say looking forward is generating cash flow in the second quarter have a good cushion.
And.
At these kind of values. We certainly if we have an open available $40 million share repurchase program and we won't be shy to use that to look at accretive share repurchases as part of capital allocation going forward.
Okay, Yeah, that's pretty clear thanks for that Jeff.
You guys spent a little time here talking about the OPEC production cut targets versus the actuals I mean, it seems on a kind of a tangible impact the volumes haven't really been impacted thus far but I guess looking ahead and all that.
Brent price is still trading below $80 I think the IMF has come out and said that Saudi Arabia need $80 per barrel the balance.
The balance sheet. Therefore, the government is there any downside risk do you think after next meeting that either the cuts would be extended or deepened in some way or trying to get additional compliance to where we will actually see.
Volumes on the water impacted.
It's possible, but you know the IMF also said on Monday that Asia. They raise the GDP to $4 seven a four six from $4 three.
And that will equal to 70% of worldwide GDP growth. This year, so we'd love to see that because that's where we see that China is a little bit uneven Golden week Youre, starting out very strong with year on year transportation way higher than last year. So we're seeing.
Strong demand from the eastern the Saudis.
Their pricing this month, they cut a little bit for Asian destinations, but very mildly. So we're watching it very closely of course, it's possible.
But we're still it still looks like.
Asia could could pull with more strength certainly then.
The west.
As we head into the second half.
Okay, yes. Thanks for that commentary last question for me just looking at the order book to fleet ratios for both segments.
You kind of highlighted that the crude segment is faring a bit better on a relatively lower basis, and you mentioned that there's been some bordering on the product side with with <unk> and <unk> do you think at least in the near term kind of given the uncertainty in the market and the current sentiment that ordering might take a pause on the product side or do you think there is more kind of downside.
Risks to two additional orders in the coming quarters.
I think we have we.
We kind of said in our remarks, the regulations continue to evolve.
Order books continue to move forward the values are high.
The technology is a bit of a question Mark you know I don't think that we're going to I would think we would see a little bit of an abatement.
Let's see if that comes to reality.
Alright, Yeah got it. Thanks appreciate the time.
Thank you Chris.
Thank you we now have a final question on the line from Liam Burke of B Riley.
Thank you and good morning, good morning, Jeff.
Good morning, Hey, Liam.
Lewis.
CEB older EMR is begin to age and move to the 15 year and above level, but are you satisfied to keep operating them or do you consider selling them.
Or taking them out of the fleet.
You see that we are so one here in the first quarter and that.
We continue to kind of prune them, but.
31, five a day right.
It's it's a balance you know they are fully employed they are highly marketable they're well maintained so.
We're judicious in.
The way that we just kind of continue to do our fleet optimized optimization, that's just ongoing.
Great.
Jeff you've been very clear about not being formulaic in terms of capital allocation.
Yes.
Do you anticipate.
Dividend program that has the flexibility of providing the special.
Component every quarter or during the quarter next quarters.
Yeah, Liam I think that's what we've done is put in.
A program, where we have the regular dividend.
Not all that long ago that we raise it doubled it last year so.
<unk> a share per quarter to 12.
We expect that to continue and at some point.
We look at.
As someone else said in this call is as of through the cycle Company I Love that Yeah, we'll look at whether we can at some point.
Increased that regular dividend and then.
You captured it right you get more of it.
Thank you for saying, we're clear where we're trying to say is when we are in cycle point of the cycle like we are now with his significant free cash flow.
In addition to paying down debt, we're going to.
Supplement that regular dividend and that's why we use the word supplemental dividend.
So that we're sharing in that upside with <unk>.
With shareholders and so we don't have a particular formula as he said, but all things being equal if we if that continues in the coming quarters shareholders to expect that we will continue to do to pull the same levers, we'll pay down some debt and we will.
We'll share some via dividend or as I said to the last question, possibly share repurchase we'll continue to share with shareholders.
Great. Thank you Jeff Thank you.
Thank you.
Thanks Liam.
Thank you I'd now like to hand, it back to Louis for any final remarks.
I want to thank everyone for joining international Seaways today.
<unk> on the New York Stock exchange. Thank you very much and have a great weekend.
Thank you for joining I can confirm that does conclude today's call. Please have it every day and you may now disconnect your lines.
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