Q4 2023 International Seaways Inc Earnings Call
Good morning, all and welcome to the international Seaways fourth quarter and full year 2020 free results call. All lines have been placed on mute during the presentation portion of the coal we have an opportunity for a question and answer.
Operator: Good morning all, and welcome to the International Seaways four quarter and four year 2020 All lines have been placed. Please subscribe to my channel. I'll see you next time.
If you'd like to ask a question. Please press star followed by walk on your telephone keypad.
Now I'd like to hand, this conference call Eyeball to all high Vol International Seaways General Counsel. Please go ahead.
Operator: Food Light Class, I would now like... Thank you, Candace. Good morning, everyone, and welcome to International Seaway's earnings call for the fourth quarter and full year 2023. Before we begin, I would like to start off by advising everyone on the call today of the following. 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.
Thank you Kevin.
Everyone and welcome to International Seaways earnings call for the fourth quarter full year 2023, before we begin I would like to start off by advising everyone on the call today are the following.
During this call management may make forward looking statements regarding the company by the industry in which it operates.
Those statements may address without limitation the following topics.
Operator: Outlook for the Crude and Product Tanker Market 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 Ongoing and Threatened Conflicts Around the Globe, the company's strategy, and our business prospects. Expectations regarding revenues and expenses, including vessel, charter hire, and G&A expenses, estimated bookings, TCE rates, and or capital expenditures during 2024 or in any other period, projected scheduled dry dock and off-iron days. Purchases and Sales of Vessels, Construction of New-Build Vessels, and Other Investment, The Company's Consideration of Strategic Alternatives, anticipated at 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.
Outlets for the crude and product tanker markets.
Changes in trading patterns.
Cast of World and regional economic activity and have been around for it.
The production of oil and other petroleum products.
The effects of ongoing threatened conflicts around the globe.
The company's strategy or business prospects XP.
Expectations regarding revenues and expenses, including vessel charter hire and G&A expenses.
Estimated bookings TCE rates and or capital expenditures during 2024 or in any other grid.
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 future developments and other factors that management believes are appropriate to consider in the circumstances.
Operator: 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 statement. 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 for 2023 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 Zabrocky. Thank you very much, Jaeyoung. Good morning, everyone.
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 <unk> actual results to differ from expectations include those described in our annual report on Form 10-K for 2023 and.
And in other filings that we have made or in the future may make with the U S Securities and exchange rate.
Now, let me turn the call over to our President and Chief Executive Officer, Brian Lewis.
Thank you very much Jim.
Good morning, everyone. Thank you for joining international Seaways earnings call fourth quarter and for the full year of 2023.
Lois K. Zabrocky: Thank you for joining International Seaways' Earnings Call for the fourth quarter and for the full year of 2023. You can find our presentation in the investor relations section of our website. 2023 was a record year for International Seaways.
You can find our presentation on the Investor Relations section of our website.
2023 was a record year for international Seaways.
Our net income was 556 million $11 25 per share.
Lois K. Zabrocky: Our net income was $556 million, 11.25 per share. This eclipsed 2022's net income of $388 million, $7.77. Net income for the fourth quarter of 2023 was $132 million, $2.68 per share. Included in these figures are gains on vessel sales and a write-off of deferred financing. Excluding these special items, adjusted net income was $525 million for the year and $108 million for the quarter.
Is he clinched 2022 net income of 388 million.
$7 77 per share.
Net income for the fourth quarter of 2023, with a $132 million $2 68 per share.
Included in these figures are geez I'm vessel sale any write off deferred financing costs.
Excluding these special items adjusted net income was $525 million for the year and 108 billion for the quarter.
D wave closed 2023 with just over $600 million in total liquidity.
Lois K. Zabrocky: Seaways closed 2023 with just over $600 million in total liquidity, $187 million in cash and $414 million in undrawn revolvers. Jeff will highlight our balance sheet in just a few moments, but to steal a little bit of the thunder, our $547 million in net debt is well below our fleet recycling market value. In 2023, we repaid $475 million in debt, of which $300 million was incremental to our natural debt amortization schedule. With this sizable prepayment during the year, we reduced our breakeven levels to an impressive sub $14,500 per day level across the fleet; we've unencumbered 30,000. And we doubled the size of our revolving credit capacity to $414 million.
$187 million in cash and 414 million and Undrawn revolver.
Jeff will highlight our balance sheet in just a few moments, but stealing a little bit of his thunder.
Our 547 million in net debt as.
He is well below our fleet recycle market value.
In 2023, we repaid 475 million in debt of which $300 million with incremental to our natural debt amortization schedule.
With this sizable prepayment during the year, we reduced our breakeven level to an impressive sub $14500 per day level across the fleet.
We unencumbered 30 vessel and we doubled the size of our revolving credit capacity to $414 million.
Today, we announced that we signed an MLA to purchase six eco mod vessels for $232 million.
Lois K. Zabrocky: Today we announce that we signed an MOA to purchase six ECO-MR vessels for $232 million. We expect to fund this through shares of Common Stock for 15% of the price, and the remainder will be financed from our available liquidity. We anticipate closing this series of transactions prior to the end of the second quarter. These MRs are high-quality vessels that reduce the age of our overall MR fleet by one year.
We expect to fund this through shares of common stock for 15% of the pride and the remainder will be financed from our available liquidity.
We anticipate closing this series of transactions prior to the end of the second quarter.
These <unk> are high quality vessel that reduced the age of our overall them our fleet by one year.
Lois K. Zabrocky: During 2023, we sold three MRs for $39 million in net proceeds after debt repayment. The sails of the older ship crystallized value generated since our merger with Diamond S in 2021 at the bottom of the tanker mark. These shifts return nearly 80% all-in from the purchase price due to both their strong earnings and the strong price realized in their sales. Finally, we added two vessels to our charter out portfolio, which now has over $354 million in contracted revenue with an average term of nearly three years. On the lower right hand side.
During 2023, we sold three Mr's 39 million in net proceeds after debt repayment.
The sale of the older ship crystallized value generated since our merger with Diamond in 2021 at the bottom of the tanker market.
These shifts returned nearly 80% all in from purchase price due to both their strong earnings.
And the strong price realized in their sales.
Finally, we added two vessels to our charter portfolio.
Which now has over $354 million in contracted revenue with an average term of nearly three years.
On the lower right hand slide.
Lois K. Zabrocky: You can see in the chart, where we continue to share our strong earnings by returning a substantial portion to shareholders. During 2023, we paid $308 million in dividends, plus $14 million in share repurchase. Combined, we've returned over $320 million to shareholders, a 16% return on our average market cap over the year. Today, we build upon the Seaways record, declaring a combined dividend of $1.32 per share to be paid at the end of this quarter. This is 60% of adjusted net income, and Seaways is committed to our balanced capital allocation strategy. We pulled all the levers to secure our future and to provide value to shareholders in 2023. We continue to upgrade the fleet, investing in our profitable LR1 joint venture. We're renewing the MR, and we have time charted out selected vessels with strong customers to secure revenue beyond today. Our balance sheet has dropped, with a net loan-to-value of 17%.
You can see the chart.
Where we continue to share our strong earnings.
Returning a substantial portion to shareholders.
During 2023, we paid $308 million dividends plus $14 million of repurchases.
Nine we returned over $320 million to shareholders.
A 16% return on our average market cap over the year.
Today, we build upon the Seaways records.
Declaring a combined dividend.
Of $1 32 per share.
To be paid at the end of this quarter.
This is 60% of adjusted net income.
At <unk>, we're committed to our balanced capital allocation strategy.
We pulled all the levers to secure our future and to provide value to shareholders in 2023.
We continue to high grade the fleet.
Vesting in our profitable LR, one joint venture.
We're renewing the fleet and.
And we have time chartered out selected vessels with strong customers to secure revenues beyond today.
Our balance sheet is strong.
With net loan to value of 17%.
Lois K. Zabrocky: We have liquidity, over $600 million, and break even so low that you would expect it for a company with only smaller vessels, not for a tanker company where half the fleet is large crews. We continue to share success with the shareholders, with double-digit yield on our share value. Turning to slide five, we've updated our bullets on tanker-demand drivers, with green up arrows next to the bullets representing positive developments for tanker-demand drivers, black dashes for neutral impact, and red down arrows indicating tanker negative. Pulling out some highlights.
We have liquidity over $600 million and breakeven. So low you would expect them. We're a company with only smaller vessel not for a tanker company where half the fleet is large crude.
We continued to share success with the shareholders.
With double digit yield on our share value.
Turning to slide five.
We've updated our bullets on tanker demand drivers with Green apparel next two bullets, representing positive developments for tankers black dashes for neutral impact and read down arrows, indicating tanker negative.
Pulling some highlights.
The forecast for oil demand in 2024 remains robust.
Lois K. Zabrocky: The forecast for oil demand in 2024 remains robust, with demand growth estimated to be about 1.5 million barrels per day in 2024, representing a percent and a half growth year over year. This is an above average demand growth forecast. Particularly for seaborne transportation demand, oil demand growth is largely concentrated in Asia, where countries are structurally short of oil with incremental new supply coming from the west.
With demand growth estimated to be about one 5 million barrels per day in 2024, representing a percentage and a half growth year over year.
This is an above average demand growth forecast.
Particularly for seaborne transportation demand oil demand growth is largely concentrated in Asia, where countries are structurally short oil with incremental new supply coming from the west.
Lois K. Zabrocky: Quite a long haul trade for Non-OPEC production growth of around a million barrels per day is mostly coming from the Americas in 2024, a supported tanker trend. In the chart at the bottom of the page, we highlight oil supply and oil demand projected trends for the next few years. Europe and Asia are structurally short and therefore focused on imports from the Americas, the Middle East, and Russia.
Quite a long haul traded for tankers.
Non OPEC production growth of around 1 million barrels per day is mostly coming from the Americas in 2024 are supported tanker trends.
In the chart at the bottom of the page, we highlight oil supply and oil demand projected trends for the next few years.
Europe, and Asia structurally short and therefore focused on imports from the Americas Middle East and Russia.
Lois K. Zabrocky: With sanctions on Russian oil, further ton-mile support underlies demand and is very supportive for the tanker market going forward. However, much of this hinges upon the global macro environment, with recent data, and Leaning Toward a Softer Land. It is constructive that commercial inventories are low. Any trade disruptions within the market increase the call for seaborne transportation, slide 6. The supply side continues to be a compelling part of the Strong Tanker Market Story. On the lower left-hand chart, we break down the order book by each vessel class relative to the operating, and more specifically, potential candidates in the next few years that would be, at the very least, removed from broad commercial trading at around 20 years of age since the order book is largely fixed through 2026. We are showing vessels that will be 20 years old by this inflection point. They are 18 years old today.
With sanctions on Russian oil further ton mile support underlying demand and is very supportive for the tanker market going forward.
Much of this hinges upon the global macro environment.
With recent data.
Suggesting.
And leaning towards a softer landing.
It is constructed that commercial inventories are low.
Any trade disruptions within the market increases the call for seaborne transportation.
Slide six.
The supply side continues to be a compelling part.
Of the strong tanker market story.
On the lower left hand chart, we break down the order book.
By each vessel class relative to the operating speeds and more specifically potential candidates in the next few years that would be at the very least remove for broad commercial trading at around 20 years of age.
Since the order book is largely fixed through 2026.
We are showing vessels that will be 20 years old by this inflection point.
They are 18 years old today.
Lois K. Zabrocky: Aligning the dark bars on the graph, you can see that the vessels on order do not even meet the need to replace the existing fleet on the water. On the lower right-hand chart, we show expected deliveries in the near term. In most categories, they are significantly lower than they have been over the last 30 years.
In aligning the dark bars on the graph you can see that the vessels on order to not even meet the need to replace the existing fleet on the water.
On the lower right hand chart.
We show expected deliveries in the near term.
In most categories. They are largely lower than they have been over the last 30 years.
Lois K. Zabrocky: The number of ships reaching over 20 years of age as a percentage of the total fleet continues to rise exponentially. Essentially, when the cycle turns, the fleet size will rationally... become specialized.
The number of ships, reaching over 20 years of age at the percentage of the total fleet continues to rise exponentially.
Essentially when the cycle the fleet size will rationalize rationalized.
Lois K. Zabrocky: As tanker owners face pending environmental regulations, shipyards are full of other shipping sectors, and prices remain very robust. We expect a great run for tankers over the next few weeks. As mentioned, regional imbalances of oil should continue to increase the need for tankers, as growth in oil production is coming from the west and the oil demand is driven by non-OECD countries in the. At Seaways, we will continue capturing the strength of the tanker market.
Laying the foundation for the future health of the tanker industry.
We do not expect immediate rise in new quarters, either as tanker owner space pending environmental regulations shipyards are full of other shipping sectors and prices remain very robust.
We expect a great run for tankers over the next few years.
As mentioned regional imbalances of oil should continue to increase the need for tankers as growth in oil production is coming from the west.
And the oil demand is driven.
By non OECD.
A key way, we will continue capturing the strength of the tanker markets.
Jeffrey D. Pribor: We will utilize every possible lever to build upon our track record of returning to shareholders, maintaining a healthy balance sheet, and growing the value of seaways. I'll now turn it over to Jeff Pribor, our CFO, to provide the financial review.
We will utilize every possible effort to build upon our track record of returning to shareholders, maintaining a healthy balance sheet and growing the value of seaway.
I'll now turn it over to Jeff <unk>, our CFO to provide the financial review Jeff.
Jeffrey D. Pribor: Thanks, Lewis, and good morning, everyone. On slide eight, net income for the fourth quarter was $132 million, or $2.68 per diluted share. This includes gains on vessel sales and the write-off of deferred financing. When you exclude the impact of these special items, adjusted net income was $100,000.
Yes.
Thanks, Louis and good morning, everyone.
Okay.
On slide eight.
Net income for the fourth quarter was $132 million or $2 68 per diluted share.
This includes gains on vessel sales and the write off of deferred financing costs when.
When you exclude the impact of these special items adjusted net income was 100 and anything on the.
Jeffrey D. Pribor: In the upper-right chart, adjusted EBITDA for the fourth quarter of 2023 was $159 million, which also excludes these same special items. In the appendix, we've provided a reconciliation from reported earnings to adjustments. While our expense guidance for the third quarter and fourth quarter fell mostly in line with the range of expectations, I'd like to point out a few items of note that were unexpected. Vessel expenses were higher than expected, with the largest variance due to some opportune storage, repairs, and maintenance costs, as well as increased spend for crew changes during dry docks and training on the new dual-fuel fuel system. G&A expenses were in line with guidance. On the revenue side, our literary business had another strong quarter, earning about $11 million in revenue. With $2 million in investment expenses, $3 million in charter hire, and $1 million in G&A, the winery's business contributed about $4 million in EBITDA in the fourth quarter, and a record of nearly $20 million, or the U.S. Turning now to the Arkesh Bridge on slide 9.
The upper right chart adjusted EBITDA for the fourth quarter of 2023 was $159 million.
Also excludes these same special items.
In the appendix we've provided a reconciliation from reported earnings to adjusted earnings.
While our expense guidance for the third quarter fourth quarter felt mostly in line with the range of expectations I'd like to point out a few items of note with Oregon State.
Vessel expenses were higher than expected with the largest variance due to some opportunity story repairs and maintenance costs as well as increased spend for crude changes during drydocks and training of the new dual fuel vlccs.
G&A expenses were in line with guidance.
On the revenue side, our lottery business had another strong quarter.
About $11 million in revenue.
With $2 million investment in vessel expenses $3 million in charter hire $1 million of Q&A.
During business contributed about $4 million EBITDA in the fourth quarter and a record of nearly $20 billion for the year.
Turning now to our cash bridge on slide nine.
We began the quarter with a total liquidity of $581 million.
Jeffrey D. Pribor: We began the quarter with a total liquidity of $581 million, consisting of $214 million in cash and $360 million on draw and revolving debt capacity. Follow along the chart from left to right on the cash bridge. We first add up $159 million in adjustment to the DOFLA for the fourth quarter, less $44 million in debt. [inaudible] Then, less our dry dock and capital expenditures of about $9 million a quarter and a draw on working capital due to timing of about $14 million. We therefore achieved our definition of free cash flow of about $91 million for the fourth quarter.
Composed of $214 million in cash.
360 billion undrawn revolving debt capacity.
Following along the chart from left to right on the cash bridge.
We first add up $159 million and adjusted EBITDA for the first and fourth quarters less $44 billion of debt service composed of scheduled debt repayments and cash.
That lesser Drydock and capital expenditures of about $5 million per quarter.
And a draw on working capital due to timing of about 14 sites.
We therefore achieved our definition of free cash flow of about $1 million.
For the fourth quarter.
When you combine our free cash flow for the year, we generated over $500 million during 2023 year over $10 a share representing a 20% free cash flow yield on today's share price.
Jeffrey D. Pribor: When you combine our free cash flow for the year, we generated over $500 million in 2023, or over $10 a share, representing a 20% free cash flow yield on today's share price. The remaining bars on the cash grid reflect our capital allocation program. We received about $28 million in debt proceeds that are debt retainments for two vessels sold during... We also spent $12 million in progress payments for this first two-hour one-hour. As we announced last quarter, we've repaid just about $71 million in debt, of which $50 million could be drawn again, and we paid $1.25 per share, or about $61 million.
The remaining bars on the cash bridge reflect our capital allocation for the quarter.
We received about $48 million of debt proceeds center debt repayments for two vessels sold during the quarter.
We also spent $12 million of progress payments for the first two hour one orders.
As we announced last quarter, we repaid just about $71 million of debt of which $50 million can be drawn again increased our revolving credit capacity.
And we paid $1 25 per share or about $61 million in dividends during the quarter.
Jeffrey D. Pribor: These components then led us to an ending liquidity of $601 million with $187 million in cash in short-term investments and $414,000,000 in undrawn reforming deck capacity. Now moving to slide 10.
These components that led us to an ending liquidity of $601 with.
187 million in cash and short term investments 414 million undrawn revolving debt capacity.
Now moving to slide 10.
We have a strong financial position detail by the balance sheet shown on the left hand side of the page.
Jeffrey D. Pribor: We have a strong financial position as shown on the balance sheet shown on the left hand side. Cash and liquidity remain strong at over $600 million. Vessels on the books at cost are approximately $2 billion versus current market values of over $3 billion. And with about $734 million in gross debt at the end of the year, details at the bottom right of the page, this equates to a net motive value, just as a team. Our debt today is 85% hedged or at fixed rates, which equates to an all-in weighted average interest rate of about 6% or less than 100 basis points above where we are so far.
Cash and liquidity remains strong at over $600 million.
This was on the books at cost or approximately $2 billion versus current market values of over $3 billion.
And with about 734 million of gross debt at the end of the year detailed on the bottom right of the page this equates to a net loan to value.
17%.
Our debt today is 85% hedged or fixed rates.
Which equates to an all in weighted average interest cost interest rate of about 6% or less than 100 basis points above silver.
As long as mentioned earlier, we continue to execute on our balanced capital allocation strategy.
Jeffrey D. Pribor: As mentioned earlier, we continue to execute on the balanced capital allocation strategy. We are returning $1.32 per share to shareholders in a combined dividend. This represents 60% of adjusted net income for the prior quarter for the second straight quarter.
We are returning $1 32 per share to shareholders and a combined dividend.
This represents 60% of adjusted net income for the prior quarter for the second straight quarter.
At the same time, we have positioned our balance sheet to support growth.
Jeffrey D. Pribor: At the same time, we have positioned our balance sheet to support growth. We are purchasing six MRs with our available liquidity and a portion of our share. With cash break evens below $14,500 per day and net debt below 20% in 2024, we will continue to look for opportunities to enable fleet renewal and growth, as well as. We share in our successful results by continuing to prioritize returning cash. On the last slide that I'll cover, please turn to slide 11, which shows our forward-looking guidance and book-to-date TCE, aligned with our cash breakeven. Starting with TCE fixtures for the first quarter of 2024, I'll remind you that actual TCEs, or an external use call, may not be quite the same. But as of today, we have a blended average spot TCE of about $43,500 per day, week-wide, for the quarter.
We are purchasing six mris with our available liquidity and a portion of share issuance.
With cash breakeven below $14500 per day, and net debt below 20% in 2024, we will continue to look for opportunities.
To enable fleet renewal and growth as well as.
The share and our successful results by continuing to prioritize returning cash to shareholders.
On the last slide that I'll cover please.
Please turn to slide 11.
Flex our forward looking guidance and booked at the ATC align with our cash breakeven levels.
Starting with TCE pictures for the first quarter of 2024, I'll remind you that actual TCE at our next earnings call may not be quite to say, but as of today, we have a blended average spot TCE of about $43500 per day fleet wide.
Right.
On the right hand side of slide you can see our cash breakeven, which we displayed for the next 12 months.
Jeffrey D. Pribor: On the right-hand side of the slide, you can see our cash break e-list, which we have displayed for the next 12 months. It is reflective of our daily cash costs in CapEx plus principal and interest, as well as the new fixed revenues before any profit share on our long-term chart. At this time last year, our cash break evens were $3,000 per day higher than they are today.
Collective our daily cash cost and Capex, plus principal and interest as well as the new fixed revenues before any profit share on our long term charters.
At this time last year, our cash breakeven EBIT for $3000 per day higher than they are today.
Jeffrey D. Pribor: Just to repeat that, $3,000, the amount per day that we produced in our cash break evens year over year, and we've returned over $320 million dollars to shareholders, representing a 16% yield on our average share price, while also taking considerable steps to renew the. Looking forward, if you were to compare our break evens to average spot earnings, you can see the first quarter of 2024 looks like another very strong quarter for seaways. Looking at the bottom left-hand chart, for the modelers out there, we provide some updated guidance for expenses in the first quarter and estimates for 2024. You can also include in the appendix our quarterly expected off-hire and CapEx schedules for 2023 and 2045. I don't plan to read this line by line, but I encourage you to use them for modeling purposes.
Just to repeat that $3000 per day that we produced in our cash breakeven year over year.
And we've returned over $320 million of shareholders, representing a 16% yield on our average share price 2023.
<unk> also taken considerable steps to renew the fleet.
Looking forward.
You were to compare our breakeven is average spot earnings you can see the first quarter of 2024.
Another very strong quarter receivables.
Looking at the bottom left hand chart for the Modelers out there.
This updated guidance for expenses in the first quarter.
For 2024.
It also included in the appendix, our core quarterly expected off hire and Capex schedules for 2023 and 2024.
I don't plan to read this slide by line, but encourage you to use that for modeling purposes.
That concludes my remarks, so I'd now like to turn the call back to lowest for closing comments. Thank you very much Jeff.
Lois K. Zabrocky: That concludes my remarks, so I'd now like to turn the call back to Lois for her closing comments. Thank you very much, Jeff. In 2023, Seaways Executed Our Strategy, we had significant operating leverage. Low-cash-free keep.
In 2023.
<unk> executed our strategy.
We had significant operating leverage.
Low cash breakeven.
We achieved record earnings in 2023.
Lois K. Zabrocky: We achieved record earnings in 2020, with a fleet nearly evenly split between crude and product. We continue to develop a fleet composition that enables us to build upon our operating leverage and capitalize on today's strong market. Last year, we took delivery of three dual-fuel DLCCs with long-term charters and profit sharing that are running extremely well in our. We ordered four LR1s for our niche Panamax International Joint Venture. We trimmed some older MRs that returned an 80% IRR for us in the last two years and entered an agreement to purchase six modern MRs. Our balance sheet has never been better. 2023 was transformational for International Seaways and de-leveraged. To capitalize on growth opportunities, we evenly matched our incremental de-leveraging with returns to shareholders using a substantial portion of the cash generated during the year. We built on our track record of balanced capital allocation that positions the company to maximize earnings, build a fortress balance sheet, grow through the cycle and return 16% to shareholders over the last 12 months.
With a fleet nearly evenly split between crude and product tankers.
We continue to develop our fleet composition.
That enables us to build upon our operating leverage and capitalize on today's strong market fundamentals.
Last year, we took delivery of three dual fuel VLCC with long term charters and profit sharing that are running extremely well in our fleet.
We ordered four LR ones for our niche Panamax International joint venture.
We trimmed some older Mr's that returned in 80% IRR for us in the last two years.
And entered an agreement to purchase six modern mr's.
Our balance sheet has never been better.
2023 was transformational for international Seaways and deleveraging.
And.
To capitalize on growth opportunities.
We evenly matched or incremental deleveraging.
With returns to shareholders with a substantial portion of the cash generated during the year.
We built on our track record of balanced capital allocation have positioned the company to maximize earnings build a fortress balance sheet.
Growth through the cycle and returned 16% to shareholders over the last 12 months.
Going forward, we will continue to digital bill it Vigilantly prioritize the safety of our crews and our seafarers are vessels in.
Lois K. Zabrocky: Going forward, we will continue to vigilantly prioritize the safety of our crews and our seafarers, our vessels, in very challenging geopolitical conditions. I want to conclude my remarks. I thank you very much, and we'll open it up to questions. If you'd like to ask a question, please press star on your telephone keypad, ensuring that you are unmuted locally. If you'd like to withdraw your question at any time, you can do so by pressing star followed by 2 on your telephone.
And very challenging geopolitical.
Hi.
I want to conclude my remarks I. Thank you very much and we'll open it up to questions.
If you'd like to ask a question. Please press star on your telephone keypad, ensuring that you all are muted Luckily if you'd like to withdraw your question with any time, you can do side by pressing star one.
Mike too on your telephone keypad.
Chris: As a reminder, it's a star followed by one to ask a question. Our first question comes from the line... Hey, good morning, Lois and Jeff. Congratulations on a very strong quarter here. I just have a couple questions, one more market-oriented and then a detailed one. So just as it relates to the Red Sea disruptions going on, in your minds, is the market for tankers at peak disruption at the moment? Are there further dislocations that could occur, or have all the tankers that were going to switch and divert around the Cape of Good Hope already done so? Or is there more room here?
As a reminder, stomp on that's why I wanted to ask you a question.
Our first question comes from the line of Chris.
That's with Deutsche Bank. Your line is now open.
Please go ahead.
Hey, good morning lowest Jeff congratulations on the very strong quarter here.
I have a couple of questions. One is more market oriented and then a detailed one so just as it relates to the Red Sea disruptions going on.
In your mind is the market for tankers at peak disruption at the moment is there further dislocations that could occur or have all the tankers that were going to switch and debate around the Cape of good hope already done so or is there more room there.
Lois K. Zabrocky: Chris, this is Lois. Good morning, and I would jump in there and say that I think we are at peak disruption levels. I think that with the number and variety of attacks, you know, sort of indiscriminately on tanker assets traveling through the area that we're really seeing a large number of tankers deviate around the bottom. Okay, this next question just relates to the MRs.
Chris the slowest good morning, and I will jump in there and say that I think we are at.
Peak disruption levels I think that would.
It would be.
Number variety of attacks.
<unk> sort of indiscriminately on tanker assets traveling through the area that.
We're really seeing a large amount of tankers TD eight around the bottom.
Okay.
Next question just relates to the <unk>.
Lois K. Zabrocky: When you guys take delivery of those vessels, is there going to be any incremental CAPEX associated with, you know, energy saving upgrades or anything like that that we should think about? You know, Chris, what I would say is that these vessels are built at FPP. We already have eight in our fleet that we built, our predecessor company at SPP, their strong design, their eco vessels, we will, of course, bring them into this fleet. And then, over time, just as we do with every one of our ships in the water, look at, okay, you know, are we going to, in due course, you know, maybe when they're at their natural dry dock cycle, will we look to put on slick paint But we don't have any immediate required cap expense.
When you guys take delivery of those vessels is there going to be any incremental capex associated with <unk>.
Hum.
Energy saving upgrades or anything like that that we should think about.
Chris what I would say is that these vessels are built at SPP, we already have in our fleet.
We built a.
This is a company at SPP there strong design their eco vessels, we will of course bring them into this week and then over time just as we do with every one of our ships on the water look at Okay are we going to do.
New course, maybe when they're at their natural dry dock cycle, when we look to put on split paint and efficiency.
Efficiency factors, you know naturally we will do that but we don't have any.
Mediate required capex spend.
Chris: Okay. Okay, great. Thanks, Lois. I'll turn it over.
Okay. Okay, great. Thanks, a lot I'll turn it over.
Thank you thank.
Thank you.
Thank you.
Our next question comes from the line of Liam Burke.
Riley you line is now open. Please go ahead.
Yes. Thank you good morning lowest good morning, Jeff.
Liam Dalton Burke: Thank you. Yes, thank you. Good morning, Lois. Good morning, Jeff. Good morning.
Good morning.
Lewis.
Is there any interest in.
Lois K. Zabrocky: Um, Lois, is there any interest in or inclination to sell some of your older MRSAs? Yes, so you know, and I know you've been following us along. We've sold 18 MRs, you know, over the last two and a half years. So, you know, we thought it was, especially when you just see that continued strong fundamentals in that MR sector, time to bring some in, and we do continue to prune some of the older vessels, and this is just a natural regeneration. You know, these vessels coming in are seven years younger, you know, and it just brings in a renewal that we think is very natural and organic to the company. Okay. Okay. Okay.
Or tendency to sell some of your older Mr's.
Yeah. So.
I know you've been following us a long you know we sold our 18 EMR as you know over the last two and a half years. So we thought it was.
Especially when you just see that continued strong fundamentals and that MLR sector time to bring them in and we do continue to prune.
Some of the older vessels and this is just a natural regeneration these vessels coming in our <unk>.
Seven years younger you know and it just brings in.
Our renewal that we think is very natural and organic to the company.
Okay.
I'll just add as well.
Jeffrey D. Pribor: Hey Liam, as Lois mentioned in her remarks, you know, these vessels... When we're selling vessels that we acquired in the Diamond S merger, looking at the purchase price, the cash contributed, and profits while we've held them, and the sale price, it comes out to an 80% IRR. So we like the ones we have and the ones we're acquiring to continue generating good cash flow, but we like taking profits. Thanks Jeff. And do you have any interest in terms of adding to your current time charter fixtures, or are you happy with the balance of spot and time charter? Hi Liam, this is Derek Solon, the commercial officer for Seaways. Hi Derek,
Well as mentioned.
In our remarks.
These vessels.
When we're selling vessels that we acquired in the Diamond S.
Merger looking at the purchase price the cash contributed a profit while we've held up.
The sale price it comes out to an 80% IRR. So we like the ones, we have and the ones we're acquiring to continue generating.
Good cash flow, but we like to take a process like that.
Okay. Thanks, Jeff.
And.
Do you have any interest in terms of adding to your current time charter fixtures are you happy with the balance of spot and.
Time charters.
Hi, Liam this is Derek just alone our commercial officer for Seaways.
Eric Thanks for the question.
Hello, Ed.
Derek G. Solon: Thanks for the question. We will continue to look for time charter opportunities, Liam. I think for us, we continue to look for multi-year charters, right? So for the shorter-term stuff, one year or less, we'd rather stay in the spot market right now. But, you know, for the availability of coverage that's two or three years out, if we can develop rates that are attractive to us, then we'll continue to look at that.
Thanks for the question.
We've continued to add to OTC coverage through 2023.
Like lowest Jeff covered in their remarks, putting away two more ships in the fourth quarter.
We continue to look for time charter opportunities Liam I think for US we continue to look for the multi year charters for.
For the shorter term stuff, one year or less we'd rather stay in the spot market right now, but for the availability of coverage that's two or three years out if we see rates that are being developed rates that are attractive to us then.
And then we will continue to look at that.
Great. Thank you Derek Thank you Louis Thank you Jeff.
Derek G. Solon: Great. Thank you, Derek. Thank you, Lois. Thank you, Jeff. Thank you. Hey, guys.
Thank you.
Yeah.
Thank you. Our next question comes from the line of Jack Mcgarry.
Your line is now open. Please go ahead.
Hey, guys. Thanks for taking my question and congrats on a solid year.
Jaeyoung Mcgarry: Thanks for taking our question. And, you know, congrats on a solid year. Just turning to 2024, you know, market withstanding, just in terms of allocating capital. Are you looking to deleverage, you know, at the same rate as last year? Or, you know, are you more or less content with the amortization profile you have now maybe looking to build on, you know, shareholder returns or your cash position? You know, just trying to see, you know, is there any priority where you're leaning towards? Free cash flow. Thanks, Jaeyoung, and welcome. Chef
Turning to 2024, and you know market withstanding just in terms of allocating capital.
Are you looking to deleverage at the same rate to last year.
Are you more or less content with the amortization profile, you've got now maybe look to build on.
Shareholder returns or your cash position.
Is there any priority, where youre leaning towards with respect to free cash flow.
Okay.
Yeah, Thanks, Jay and welcome.
This is Jeff Yeah in 2023, we were.
Jeffrey D. Pribor: Yeah, in 2023, we were able to both de-lever to that level that we mentioned, where that 70% level of the value was well below the recycling value, while still returning a lot to shareholders, a combined 16% dividend as a share purchase on average market cap. But to your question, as we look forward to 2024. Having achieved that low level of debt, and with a lot of the debt that's left being, you know, we kind of call quality debt, like your home mortgage that's below the current interest rates that you've received.
April two.
Both delever to that level that we mentioned.
That 17% net loan to value with it well.
Well below recycle value.
While still returning.
A lot to shareholders at a combined 16% to dividends or share repurchase on average market cap.
But to your question as we look forward to 2024.
Having achieved that low level of debt and with a lot of the debt that's lasting.
Are we kind of call quality that like your.
Home mortgage that's below current interest rates that you receive.
Jeffrey D. Pribor: You know, we're... I don't know if it conforms to the word, but we are satisfied that we've reached a level of debt where our priorities are what you've heard today, renewing the fleet, like the six MRs we just talked about, and continuing to return cash to shareholders, where for the second quarter in a row, we've returned 60% of net income in the form of a regular combined dividend, which I think speaks for itself. So I think that's the picture for going forward. Great Thanks for the color on that.
I don't know if contents to where but we are.
Satisfied that we've reached a level of debt, where our priorities are what you've heard today is renewing the fleet like the six mr's, we just talked about.
And continuing to return cash to shareholders, where for the second quarter in a row. We've returned 60% of net income in the form of regular combined dividend, which I think speaks for itself. So I think I think thats the picture for going forward.
Yeah.
Great. Thanks for the color on that and maybe just a follow up on liam's question would be with.
Lois K. Zabrocky: And maybe just to follow up on Liam's question about the older MRs, you know, you just said that you're well-capitalized, but six MRs coming in, is this purely just fleet renewal, or do you like the size of the MR fleet now, and you're maybe just looking to build and expand within the MR space? Well, I guess what I would say is, you know, when you look at the MR sector, the fundamentals and the earnings that they have put up, they have been by far the best performing sector throughout the tanker market. Now we're well into year three, and the market continues to be very strong.
The older Mr's.
You just said that you will capitalize but.
Six mr's coming in is this.
Purely just fleet renewal.
You like the size of the MRM fleet now and you're maybe just looking to build and expand within the EMR space.
Well I guess, what I would say is.
When you look at the MLR sector.
The fundamental.
And the earnings that they have put up they have been by far the best performing sector.
Throughout the tanker market now.
Now we're going into.
Well into.
Year three.
The market continues very strong so.
Lois K. Zabrocky: You know, you look at where our book days are in Q1. And you can see why we're bringing these ships. Great, thanks guys. Thank you. Good morning, everyone.
When you look at where we are booked as our in Q1.
And <unk>.
You can see why we're bringing these ships.
Great.
So I'll turn it over.
Thank you.
Keith.
Our final question comes from the line of Harry.
Okay.
T. Archie your largest seismic please go ahead.
Sherif Ehab Elmaghrabi: Thanks for taking my questions. Lois, is there any way to kind of think about the composition of the Dark Fleet in terms of different types of vessels? On the dirty side, it's probably Afris, but what about on the clean side?
Good morning, everyone. Thanks for taking my questions.
Is there any way to kind of think about the composition of the dark fleet in terms of different types of vessels on the dairy side has probably Africa, but what about on the clean side.
Okay. Thank you for the question.
Derek G. Solon: Okay, thank you for the question. I'm looking at Derek, you know, as we do, there's a healthy amount of both crude and product that is moving in the dark. But if you think about it, it's going to be more crude. I'm thinking...
Looking at Derek.
As we.
There's a healthy amount of both crude and product.
That that is moving in the dark blue, but yeah, but if you think about it it's going to be more crude.
I'm thinking.
I think if we.
Derek G. Solon: I think we've agreed. You get the whole darker gray fleet around 700. Some of that has to be on the, would be my view, Sherif. So it's both, to your question, it's both crude and clean.
You get the whole darker gratefully at around 700 ships.
Some of that has to be on the claim side.
Would you mind could be my view Sherry. So it's both for your question is both crude.
And clean.
<unk>.
Derek G. Solon: So I guess your specific question, you know, you have the Dark Fleet doing some of the sanctioned trades out of Venezuela and Iran, so that's... You know, that's one element of that fleet. And then you have, as you said, the gray fleet, which is doing a little bit more of the Russian trade. You know, is it or isn't it under the price cap? What are the requirements for showing that you're under the price cap? When do the authorities pay attention to if you are violating or if you aren't violating the price cap?
So I guess your specific question and then you have the dark sleep doing some of the sanction trades.
Out of Venezuela, and Iran. So thats.
That's one element of that fleet and then you have like you said the great fleet, which is doing a little bit more of the Russian trade is it or isn't it under the price cap.
What are the requirements for showing you under the price cap when do the authorities pay attention to if you are or if you aren't violating the price gap.
Derek G. Solon: But, you know, that composition is probably half of that whole dark gray fleet. And it's a little bit less than, you know, a quarter of it would be clean. That would be just an estimation, if that helps. That is helpful. Thanks, Derek. And then the order backs split out by vessel type in Class 6, which is interesting because not all parts of the fleet are growing evenly next year. So I think LR2s are leading product tanker fleet growth, while MRs, for example, are more muted. And so I guess my question is, does that shift the balance of trade between LR2s and MRs, or is it more to do with some kind of shifting refinery capacity? Sheriff, it's Derek again. If I could take that, I mean... Obviously, the numbers are the numbers, so I agree with you that the LR2 fleet is growing, and the order book is growing pretty rapidly.
But that composition is probably half of that whole dark for a fleet and it's a little bit less than a quarter of it would be clean would be just an estimation Jerry.
If that helps.
That is helpful. Thanks Derek.
And then on the order book split out by vessel type our classics excuse me, which is interesting because not all parts of the fleet are growing evenly next year. So I think LR twos are leading tanker fleet product tanker fleet growth, while Mris for example, and more muted.
So I guess my question is do you see that shifting the balance of trade between LR twos and M ours or is it more to do with kind of shifting refinery capacity.
I assure you. This is Eric again, if I could take that I mean.
Obviously the numbers are the numbers so I agree with you that alerts.
It's growing at the order book is growing pretty rapidly.
Derek G. Solon: We've been talking about LR2s cannibalizing the MR trade for the past 20 years, so I think the MRs will continue to be the workhorse of that fleet. But some of the geopolitical events that we see right now are really helping that LR2 to go. I think not so much the Russia-Ukraine situation but clearly the Israel-Hamas conflict and what that's bringing to the Red Sea. There, you're starting to see the LR2s having to go around the Cape of Good Hope a lot more, adding a ton of miles so that market's really, really running. Is that larger LRT site going to replace DMRs? I don't really think so. If you find trade patterns and then, you know, that does leave the after fleet a little bit vulnerable as well because they'll just switch to dirty depending upon what's better.
We've been talking about <unk> cannibalizing the March rate for the past 20 years.
So I think the <unk> will continue to be the workhorse of that suite.
But some of the geopolitical events that we see right now are really helping that LR typically go I think.
Not so much.
The Ukraine situation, but clearly.
Israel, Hamas conflict and what that is bringing over the Red Sea bear youre starting to see the LR twos, having to go around the Cape of good hope a lot more adding to ton miles so that market is really really running.
Is that larger LR to start going to replace the amas I don't really think so she's done trade patterns and then.
That definitely theatrics wait a little bit vulnerable as well it could go to switch to dirty depending upon what's what's better.
That's helpful. Thanks, everyone.
Derek G. Solon: That's helpful, thanks everyone. Thank you. Time would like to thank you very much everyone for joining International Seaways as we share with you our 2023 record earnings. We really appreciate it, and we look forward to talking soon. Thank you very much.
Thank you.
Thank you if there are no additional questions at this time I'd like to hand, the conference call back over to Larry <unk> for closing remark.
Mark.
Okay.
Thank you very much everyone for joining international Seaways as we shared with you. Our 2023 record earnings we really appreciate it and we look forward to talking to you. Thank you very much.
Ladies and gentlemen, I would like to thank you for joining us on today's call I have a quite Westfield today you may now disconnect your line.
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