Q3 2024 International Seaways Inc Earnings Call
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Hello, everyone and welcome to the International Seaways, Inc. Third quarter 2024 earnings Conference call. My name is Carla and I will be coordinating the call today.
During the presentation you can register your question about pricing stocks all of my one on your telephone keypad.
And if you change your mind. Please press star followed by two.
I will now hand, you over to your host James small general counsel at International Seaways to begin James. Please go ahead. Thank you good morning, everyone and welcome to International Seaways earnings call third quarter of 2024.
Before we begin I would like to start off by advising everyone with us on the call today.
Sure.
During this call and in the accompanying presentation 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.
Outlooks for the crude and product tanker markets and changes in oil trading patterns.
Forecasts of World and regional economic activity and the.
Demand for and production of oil and other petroleum products.
The effects of ongoing and threatened complex around the globe.
The company's strategy and business prospects.
Expectations regarding revenues and expenses, including vessel charter hire and G&A expenses.
Estimated future bookings TCE rates and capital expenditures.
Projected scheduled dry dock and off hire days.
Purchases and sales of vessels and construction of Newbuild vessels.
The company's consideration of strategic alternatives.
Anticipated financing transactions and plans to issue dividends.
The company's relationships with its stakeholders.
The company's ability to achieve its financing and other objectives.
Another political economic and regulatory developments.
Any such forward looking statements taken into account various assumptions made by management based on a number of factors, including management's experience and perception of historical trends.
Alright conditions expected and future developments.
And other factors that management believes are appropriate to consider in the circumstances.
Forward looking statements are subject to risks uncertainties and assumptions many of which are beyond the company's control.
That could cause actual results to differ materially from those implied or expressed by the statements.
Factors risks and uncertainties that could cause international seaways actual results to differ from expectations.
Include those described in our annual report on Form 10-K for 2023.
Our quarterly reports on Form 10-Q for the first three quarters of 2024.
And in other filings that we have made or in the future may make with the U S Securities and exchange question.
Now, let me turn the call over to MS lowest the Brian.
And Chief Executive Officer Lewis.
Thank you very much Jim.
Good morning, everyone. Thank you for joining international Seaways earnings call for the third quarter of 2024.
Starting on slide four and noting our presentation can be found under Investor relations on our website.
Net income for the third quarter was $92 million.
Or $1.84 per diluted share.
Excluding the gains on sale and other one off items.
Net income for the third quarter was $78 million or $1 57 per share.
Our EBITDA with over a $143 million with adjusted EBITDA at $130 million.
Referencing our balance sheet on the upper right hand chart.
We have nearly 700 and total liquidity, which includes over 540 million of Undrawn revolver capacity.
With our gross debt is $660 million and our net debt at $500 million, our net loan to vessel values is historically low at under 14%.
With no maturity until the next decade and.
And 34 unencumbered.
The cash breakeven on our spot fleet.
$13500 per day.
Overall during 2024, we sold 315 year old M ours for total of $72 million and acquired six Mr's under 10 years old or $232 million, partially funded by 624000 shares issued in the second quarter.
On the lower right.
Using proceeds from our last sale, we purchased and retired over 500000 shares at an average price of $150 per share.
In the same quarter, we paid a combined dividend of $1 50 per share. This.
This combined $100 million in returns to shareholders over the third quarter represented 84% of our adjusted net income from the prior quarter.
Today, we announced a combined dividend of $1 20 per share equating to over 75% of our third quarter adjusted net income.
Over the last 12 months.
<unk> has returned over 12% of our average market cap.
We continue to believe in our balanced capital allocation approach.
<unk> the company for the future the opportunistic fleet renewal.
And enhancing our balance sheet, while sharing in our up cycle with a double digit dividend.
To our shareholders.
On slide five.
David or set of bullet on tanker demand drivers with the celebrate up there next to the bullet represented as positive.
The black dashes, representing a neutral impact and they read down arrow means the driver is not positive for tanker demand.
Pulling some highlights.
Oil demand growth over the next two years is still at or above the growth rate over the last 30 years.
Well, China has lost some steam oil demand growth, we're monitoring the impact of their announced stimulus, which has yet to be factored into oil demand forecast for 2025 and beyond.
During the third quarter, we saw weaker production from OPEC plus.
Largely due to the Libyan disruption.
Okay, plus has now decided to hold off increasing output from discern.
Until January of 2025.
The outcome of the elections worldwide many impact.
And it remains uncertain, how shifting world politics will ultimately impact us.
Finally at the bottom of the page the chart shows OECD inventories with a slight build in the third quarter.
U S inventories, which are readily available each week has shown draws over the last few months.
Inventory draws negatively impact tanker demand in the short term.
Her time this flip to a positive factor for tankers as demand calls for barrels on the water.
On slide six.
The order book of tankers, it creep up during 2024.
the order book of tankers did creep up during 2024. Still, as you can see in the lower left-hand chart, ships on order are still quite low relative to the size of the fleet in historical context.
Well as you can.
See in the lower left hand chart ships on order are still quite low relative to the size.
Historical context.
Factored in on this chart up reflected on the lower right hand side of the page new orders that deliver over the next four years barely replace the fleet that is turning 25 years old.
The natural end of a ship flight.
There are another 1500 pumped about.
That are turning 20 years old above the delivery schedule that knee replacement.
This is significant for the tanker industry and the limited tanker supply continues to be supportive of strong tanker earnings.
We believe this translates into a continued strength over the next few years with Seaway is well positioned to continue capitalizing on the market condition.
own it, defend it, and be very strong. Book days in the fourth quarter, you're looking at close to 21,000 per day. You're seeing those rates sort of defend. The US is putting out a lot of product.
between, you know, we're not loading Russian barrels, but you're seeing a lot of Russian diesel in Brazil. That's pretty long haul. The U.S. is defending. So, you know, as you look at the product,
Stances towards M&A and I do believe that Youll continue to see consolidation and regulations.
Just get tougher and tougher on tank car owners.
Need to spend more and more on research.
Research and development and making sure you're keeping up on the sustainability front.
Okay.
Speaker Change: Thanks very much.
Thank you.
Okay.
Speaker Change: Okay. As a quick reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: Our next question comes from Liam Burke from B Riley.
Speaker Change: Thank you and good morning, Louis Good morning, Jeff.
Speaker Change: Good morning.
Speaker Change: Good morning.
Lois: Lois you touched on the OPEC plus holding firm on production cuts.
Speaker Change: With demand growth still in place that would mean a shift of production away from OPEC plus to non OPEC countries like Latin America U S. How does that affect either tonne mile demand or demand for different classes of crude vessels.
Speaker Change: Yeah, you know that that's really the right question because in 2025, youre looking at demand growth projections anywhere.
Speaker Change: Barrels 10 million and a half and non OPEC growth of about a million and a half so it kind of.
Nice.
Speaker Change: EMEA on growth and then it comes to battle it out on.
Speaker Change: Whether or not how many.
Speaker Change: How much we go to the outside of that or not and then whether or not OPEC plus releases a lot of extra barrels and then it does kind of affect the different classes.
Speaker Change: Status quo at present.
Speaker Change: It is a good construct not OPEC is largely west right from the Americas and Youre moving those barrels some are going into Europe, and some are going to eat.
Speaker Change: That is attitude for ton miles.
Speaker Change: When it as we see OPEC, bringing back their barrels that'll be that'll be a little bit of it is just for the BDC.
Speaker Change: Great. Thank you.
Speaker Change: On the asset acquisition you've got.
Speaker Change: You've got quite a bit coming online how does that pipeline look for you have tremendous amount of financial flexibility, even with your debt amortization in your returning cash to shareholders.
Speaker Change: No. That's that's great I appreciate that it's it kind of sets you up to the one comment I wanted to really make on this call which is.
Speaker Change: And sea Ray throughout 'twenty, three and then 24, what you see is a fully deploying deploying all of our free cash flow.
Speaker Change: Primarily through shareholder return.
Speaker Change: Secondarily to regain the fleet.
Certainly.
Speaker Change: Jeff and his team did a stellar job here of enhancing the balance sheet again in 2024 and that allows us to choose but not going to have that optionality, whether that we wanted to pay down.
Speaker Change: And amortizing facility so.
Speaker Change: We're talking to all of our cash flow and work and it just puts us in a great spot we've got the LR one building pipeline.
Speaker Change: We don't feel like we're in a have been situations where in a look for opportunities situations.
Great.
Louis: Thank you Louis.
Thank you.
The next question comes from Chevron.
Karate from BT I T.
Speaker Change: Hey, good morning, Thanks for taking my question.
Louis: First very simply what do you think that ship recycling higher.
Louis: <unk> continues to age thanks to high <unk> spot rates have done and possibly the needs the dark fleet.
Speaker Change: The recent volatility notwithstanding.
Speaker Change: We could see some of that happen. If indeed, you did see tightened sanctions.
Speaker Change: And if it did for some of these.
Speaker Change: Aged vessels out of being able to trade it.
Speaker Change: Get back into double digit trades.
Speaker Change: First out of the.
Speaker Change: The sanctioned markets you could see some recycling.
Speaker Change: All the markets.
Speaker Change: Still very strong I know you know we hear you know tepid in Bourbon.
Speaker Change: That's okay construct where we are right now you see the order it.
Speaker Change: They slow down right now.
Speaker Change: Our order book.
It is.
Speaker Change: Now its double digits, but it's not to 15% is like 12% and it's spread over four years. So 2025, that's back loaded and you only have a couple of percent comment so.
Speaker Change: Yeah, I think we have a toll.
Speaker Change: So on the water with.
Speaker Change: Paying for aegis approaching 14, as we head into 'twenty five on average.
Speaker Change: Gonna need renewable at some juncture and then we're just going to see how <unk>, how do we push these older ladies out.
Speaker Change: I see so.
Speaker Change: Catalysts coming up may be entering a little bit of sweet spot there with some of the vessels continuing to age.
Speaker Change: The second yeah, Jeff for the vessels on sale leasebacks.
Speaker Change: Maturities are all pretty far out under those.
Speaker Change: Arrangements, but can you remind us are there any upcoming repurchase options that could see few ways accelerate deleveraging, especially considering where asset values are at the moment.
Speaker Change: First is where most of these vessels are going to be finance that.
Speaker Change: Sure so some of that back.
Speaker Change: So it's a favorable if some of these sale leasebacks are at such favorable.
Great.
Speaker Change: Happily stay there for a very long term, but I think it's a it's well known that there's one of ours that does have a purchase option.
<unk>.
Speaker Change: Coming up in the ER.
Speaker Change: Towards the end of 'twenty five so that's something we'll certainly evaluate.
Speaker Change: There is one in calendar 'twenty five towards the backend.
Speaker Change: Okay. Thanks, very much for taking my question does that answer your question yes.
Speaker Change: Yeah. So it's actually specifically November 25, and then some of the others come up in 'twenty six but again, we'll look at it on a case by case basis, but we do have some optionality for refinancing in the back end of 'twenty five and if we want to.
Jeff: Alright, Thanks, Jeff.
Yeah.
Yes.
Speaker Change: As we currently have no further questions in the queue I will hand back over to Luis <unk> for any final remarks.
Luis: Thank you very much everyone for joining us we look forward to the next quarter as we build on <unk> strong performance. Thank you so much.
Luis: That does conclude the international Seaways, Inc. Third quarter two earnings conference call. We appreciate your presence or participants have a nice day you may now disconnect.
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