Q1 2025 International Seaways Inc Earnings Call
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Operator: Hello and welcome to the International Seaways first quarter 2025 earnings conference call. My name is Carla and I will be coordinating your call today. During the presentation, you will have the opportunity to ask questions by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two.
Carla: Hello, and welcome to the International Seaways first quarter 'twenty 25 earnings Conference call. My name is Carla and I will be coordinating your call today. During the presentation you will have the opportunity to ask questions I'll present thoughtful of buy one.
James: On your telephone keypad, if you change your mind simply press Star followed by Chi I would now like to hand, you over to the general counsel of genes small to begin James. Please go ahead when you're ready.
James Small: I would now like to hand you over to the General Counsel James Small to begin.
James Small: James, please go ahead when you're ready. Thank you, operator.
James Small: Good morning, everyone. Welcome to International Seaways earnings call for the first quarter of 2025. Before we begin, I would like to start off by advising everyone with us on the call today of the following.
James Small: Thank you operator.
Speaker Change: Good morning, everyone and welcome to International Seaways earnings call for the first quarter of 2025.
James Small: Before we begin I would like to start off by advising everyone with us on the call today as well.
James Small: During this call, and in the accompanying presentation, management may make forward-looking statements regarding the company or the industry in which it operates. which may address, without limitation, the following... Outlooks for the Crude and Product Tanker Market. Changes in trading pattern. forecasts of world and regional economic activity and of the demand for and production of oil and petroleum products. Company Strategy and Business Prospects. Expectations about revenues and expenses, including vessel, charter hire, and G&A. estimated future bookings, TCE rates, and capital expenditures. projected dry dock and up higher days. New Build Vessel Construction The Effects of Ongoing and Threatened Conflicts Around the Globe Economic, Regulatory, and Political Development in the United States and Globally.
Speaker Change: During this call and in the accompanying presentation.
Speaker Change: It may make forward looking statements regarding the company or the industry in which it operates which may address without limitation the following toms.
Speaker Change: <unk> for the crude and product tanker markets changing.
Speaker Change: Changes in trading patterns forecasts.
Speaker Change: <unk> forecast of World and regional economic activity.
Speaker Change: Demand for production of oil and petroleum products.
Speaker Change: The company's strategy and business prospects.
Speaker Change: Expectations about revenues and expenses, including vessel charter hire and G&A expenses.
Speaker Change: Estimated future bookings TCE rates and capital expenditures.
Speaker Change: Projected dry dock and off hire days.
Speaker Change: Vessel sales and purchases.
Speaker Change: Newbuild vessel construction.
Speaker Change: The effects of ongoing and threatened conflicts around the globe.
Speaker Change: Economic regulatory and political developments in the United States and globally.
James Small: The company's ability to achieve its financing and other objectives, and its consideration of strategic alternatives. anticipated financing transactions and plans to issue dividends. and the company's relationships with its stakeholders. Any such forward-looking statements take into account various assumptions made by management based on a number of factors. Including management's experience and perception of historical trends, current conditions, expected and future developments, and other factors that management believes are appropriate to consider in the circumstances. Forward-looking statements are subject to risks, uncertainties, and assumptions, many of which are beyond the company's control, that could cause actual results to differ materially from those implied or expressed by the statement.
Speaker Change: The companys ability to achieve its financing and other objectives and its consideration of strategic alternatives.
Speaker Change: Anticipated financing transactions and clients to issue dividends.
Speaker Change: The company's relationships with its stakeholders.
Speaker Change: 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.
Speaker Change: The future developments and other.
Speaker Change: Other factors that management believes are appropriate to consider in the circumstances.
Speaker Change: 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 those statements.
James Small: Factors, risks, and uncertainties that could cause the company's actual results to differ from expectations. include those described in our annual report on Form 10-K for 2024 and our quarterly report on Form 10-Q for the first quarter of 2025, as well as in other filings that we have made or in the future may make with the U.S. Securities and Exchange Commission.
Speaker Change: Factors risks and uncertainties that could cause the company's actual results to differ from expectations.
Speaker Change: Include those described in our annual report on Form 10-K for 2024, and our quarterly report on Form 10-Q for the first quarter of 2025.
Speaker Change: As well as in other filings that we have made are the future may make with the U S Securities and exchange question.
Lois Zabrocky: Now, let me turn the call over to Mrs. Lois Zabrocky, our President and Chief Executive Officer. Thank you very much. Thank you for joining International Seaways' earnings call for the first quarter of 2025. on slide four of the presentation, which you can find in the investor relations section of our website. Net income for the first quarter was $50 million, or $1 per diluted share. Excluding gains on vessel sales, adjusted net income for the first quarter was $40 million, or $0.80 per diluted share, and adjusted EBITDA was $91 million, essentially in line with our previous quarter.
Speaker Change: Now, let me turn the call over to Mr. Brock, our President and Chief Executive Officer Lewis.
Speaker Change: Thank you very much team.
Speaker Change: Everyone. Thank you for joining international Seaways earnings call for the first quarter of 2025.
Speaker Change: On slide four of the presentation, which you can find in the Investor Relations section of our website.
Speaker Change: Net income for the first quarter with $50 million or $1 per diluted share.
Speaker Change: Excluding gains on investment sales adjusted net income for the first quarter was $40 million or 80 cents per diluted share and adjusted EBITDA was $91 million essentially in line with our previous quarter.
Lois Zabrocky: During the quarter, we saw month-on-month increases in the rate environment that continued into the second quarter, with our weighted average rate at over $30,000 per day on 45% of our revenue data. compared to our cash break even of about $13,500 per day as in the bottom left quadrant of the slide four. It looks to us like we're in for another strong quarter. We ended the first quarter with $673 million in total liquidity, which includes almost $550 million of undrawn revolver capacity. We have just over $600 million in gross debt at the end of the first quarter, which is about 15% net loan-to-value on our March vessel value.
Speaker Change: During the quarter.
Speaker Change: We saw month on month increases in the rate environment that continued into the second quarter with.
Speaker Change: With a weighted average rate at over $30000 per day, and 45% of our revenue days.
Speaker Change: Compared to our cash breakeven of about $13500 per day is in the bottom left quadrant of the slide four.
Speaker Change: It looks to us like we're in for another strong quarter.
Speaker Change: We ended the first quarter with $673 million in total liquidity.
Speaker Change: This includes almost $550 million of Undrawn revolver capacity.
Speaker Change: We have just over $600 million and gross debt at the end of the first quarter, which is about 15% net loan to value on our March vessel values.
Lois Zabrocky: On the upper right-hand side, we already mentioned the swap in our last quarter's earnings call. We swapped two older VLTCs, plus $3 million in cash, for three EcoMRs. A majority of the swap was executed in the first quarter, but due to the timing of these transactions, we had net proceeds of $50 million in the first quarter and net cash outflows for deposits and one MR in the prior quarter of $53 million. We also increased our time charter exposure to lock in fixed revenue. In April, we agreed on a one-year time charter on one of our Suez to reach $295 million in fixed revenue, most of which comes over the next two years.
Speaker Change: On the upper right hand side, we already mentioned the swap in our last quarters earnings call.
Speaker Change: We swapped two older Vlccs plus $3 million in cash for three eco mr's.
Speaker Change: We already have the swap was executed in the first quarter, but due to the timing of these transactions. We had net proceeds of $50 million in the first quarter and net cash outflows for deposits and one MLR in the prior quarter of $53 million.
Speaker Change: We also increased our time charter exposure to lock in fixed revenue in.
Speaker Change: In April we agreed on a one year time charter on one of our Suezmax is to reach $295 million in fixed revenue most of which comes over the next two years.
Lois Zabrocky: On the lower right, for the third consecutive quarter, we have announced another dividend representing 75% of our adjusted net income. The combined dividends will be paid in June, equating to $0.60 per share. We believe in following through on our intentions to return to shareholders as part of our balanced capital allocation strategy. after returning over $300 million. To shareholders in consecutive years, we continue to share in our upsides, and we remain in position to do so today with our healthy balance sheet and strong tanker environment. Referencing the last bullet on slide four. We also have a repurchase program of up to $50 million.
Speaker Change: On the lower right.
Speaker Change: For the third consecutive quarter, we have announced another dividend representing 75% of our adjusted net income.
Speaker Change: The combined dividend will be paid in June equating to 60 per share.
Speaker Change: We believe in following through on our intention to return to shareholders as part of our balanced capital allocation strategy.
Speaker Change: After returning over $300 million.
Speaker Change: To share holders in consecutive years, we continue to share in our upside and we remain in position to do so today with our healthy balance sheet and strong tanker environment.
Speaker Change: Referencing the last bullet on slide four.
Speaker Change: We also have a repurchase program of up to $50 million.
Lois Zabrocky: on slide five. We've updated our standard set of bullets on tanker demand drivers, with the subtle green up arrows next to the bullet represented as good for tankers, the black dash representing a neutral and a red down arrow. meaning the development is not positive for tanker demand. Without reading these bullets individually, we pull high-level. Oil production in 2025 and in 2026 is expected to increase by over a million barrels per day. non-sanctioned OPEC plus. to reinforce their output increases, which is supportive of VLCC trade. As a result, non-OPEC productions may continue to increase their output, and yet they are more sensitive to price fluctuations if the market becomes oversupplied and prices decline.
Speaker Change: On slide five.
Speaker Change: We've updated our standard set of bullets on tanker demand drivers with the southern Green Arrows next to the bullet represented is good for tankers, the black dash, representing a neutral impact and a red down arrow.
Speaker Change: Meaning the development is not positive for tanker demand.
Speaker Change: Without reading these bullets individually we pull highlights.
Speaker Change: Oil production in.
Speaker Change: 2025, and in 2026 is expected to increase by over 1 million barrels per day.
Speaker Change: Non sanctioned OPEC plus continues to reinforce their output increases which is supportive of VLCC trade.
Speaker Change: As a result, non OPEC production may continue to increase their output.
Speaker Change: And yet they are more sensitive to price fluctuations, if the market becomes oversupplied and prices decline.
Lois Zabrocky: Production from non-OPEC is important for ton-mile demand. since much of the growth is expected in the Americas region, supportive of long-haul trade. Oil demand should grow in line with its historical growth rate of 1% or about 1 million barrels per day for the next few years. This takes into account forecasts which have recently dropped by as much as a couple hundred thousand barrels per day due to the ongoing geopolitical environment. With much uncertainty about establishment and enforcement of regulations that affect global trade, there may be a lack of investment that slows the global economy. On the other side of that is the increase in changes to tanker routing that is less efficient and longer haul.
Speaker Change: Production from non OPEC is important for ton mile demand since.
Speaker Change: Since much of the growth is expected in the Americas region supportive of long haul trades.
Speaker Change: Oil demand should grow in line with its historical growth rates of 1% or about 1 million barrels per day for the next few years.
Speaker Change: This takes into account forecasts, which have recently dropped by as much as a couple of hundred thousand barrels per day due to the ongoing geopolitical environment.
Speaker Change: With much uncertainty about establishment and enforcement of regulations that affect global trade there may be a lack of investment that slows the global economy.
Speaker Change: On the other side of that is the increase in changes to tanker Rudy.
Speaker Change: That is less efficient and longer haul.
Lois Zabrocky: This is supportive to our industry. In turn, we may see a forward curve in the crude price that incentivizes storage, which is needed, as you can see in the chart at the bottom left of slide 5. OECD inventories have drawn 100 million barrels since August of 2024, which has muted the tanker markets in the short As the price curve flattens, as is the case today, we could see some restocking, which is positive for the tanker demand. On the lower right...
Speaker Change: This is supportive to our industry.
Speaker Change: In turn we May see a forward curve and the crude price then incentivize the storage, which is needed as you can see in the chart at the bottom left of slide five.
Speaker Change: We see the inventories have drawn 100 million barrels since August of 2024, which has muted the tanker markets in the short term.
Speaker Change: As the price curve flattened as is the case today, we could see some restocking which is positive for the tanker demand.
Speaker Change: On the lower right side.
Lois Zabrocky: I don't think we had a page big enough, or an update fast enough, to cover the intensity of geopolitical environments. Canadian barrels on the West Coast are shifting a bit more toward a longer haul into Asia. The Red Sea remains on edge and ships are still rerouting to avoid the area. The USTR legislation on Chinese vessels is still uncertain, but could create more division in the tanker system. It's too early to predict how these events and others not yet in the headlines can impact the tanker markets over the medium term.
Speaker Change: I don't think we had a page big enough or an update fast enough to cover the intensity.
Speaker Change: Geopolitical environment.
Speaker Change: Canadian barrels on the West coast are shifting a bit more toward our longer haul into Asia.
Speaker Change: The Red Sea remains on edge and ships are still rerouting to avoid the area.
Speaker Change: The USTR legislation on Chinese vessels is still uncertain, but could create more division in the tanker space.
Speaker Change: It's too early to predict how these events and other not yet in the headlines can impact to take her markets over the medium term.
Lois Zabrocky: On slide six, the supply side continues to support a compelling case for tinkership. Tankers currently on order represent 14% of the fleet that deliver over the next four years. And by the time those ships deliver, 47% of the fleet will be over 20 years old, which we identify as the age where generally those ships trade in a different environment. Some charters or some ports may not accept vessels of this vintage. The simplest way to summarize this is that there's not enough ships to replace the current aging fleet. We also saw an increase of recycling in the first quarter, the highest volume of ships since the second quarter of 2022.
Speaker Change: On slide six the supply side continues to support a compelling case for tanker shipping tanker.
Speaker Change: Tankers currently on order represent 14% of the fleet that deliver over the next four years.
Speaker Change: And by the time those ships deliver 47% of the fleet will be over 20 years old, which we identified at the age where generally those ship trade in a different environment.
Speaker Change: Some charters or some port may not accept vessels of the vintage the simplest way to summarize this is that they're not enough ships to replace the current aging fleet.
Speaker Change: We also saw an increase of recycling in the first quarter the highest volume of ship since the second quarter of 2022.
Lois Zabrocky: If vessels continue to recycle, and it's hard to say at any pace since not all ship owners are alike, there may be a shortage of vessels on the water for commercial trading. We believe this should translate into a continued upcycle over the next few years, and Seaways remains well positioned to continue capitalizing on these market conditions. will continue to execute our balanced capital allocation approach. to renew our fleet and to adapt to the ever-changing industry conditions with a strong balance sheet while returning to our shareholders.
Speaker Change: That will continue to recycle and it's hard to say at any pace since not all ship owner or like there may be a shortage of vessels on the water for commercial trade.
Speaker Change: We believe this should translate into a continued up cycle over the next few years and see what age remains well positioned to continue capitalizing on these market conditions.
Speaker Change: We will continue to execute our balanced capital allocation approach.
Speaker Change: To renew our fleet and to adapt to the ever changing industry conditions with our strong balance sheet, while returning to our shareholders.
Jeffrey Pribor: Now, I'd like to turn it over to our CFO, Jeff Pribor, to provide the financial review. Jeff? Thanks, Lois, and good morning, everyone. On slide 8, net income for the first quarter was $50 million, or $1 per diluted share. Excluding gains on vessel sales, our net income was $40 million, or $0.80 per diluted share. On the upper right chart, adjusted EBITDA for the first quarter of 2025 was $91 million.
Speaker Change: Now I'd like to turn it over to our CFO, Jeff <unk> to provide the financial review.
Jeff: Thanks Lois.
Jeff: And good morning, everyone.
Jeff: On slide eight net income for the first quarter was $50 million or $1 per diluted share.
Jeff: Excluding gains on vessel sale, our net income was $40 million or 80 cents per diluted share.
Jeff: On the upper right chart adjusted EBITDA from the first quarter of 2025 was $91 million.
Jeffrey Pribor: In the appendix, we provide a reconciliation from reporter earnings to a justice. Our revenue and expenses were largely within expectations in the... pleased that our vessel expenses improved from last quarter and much of 2024 with reductions to repairs in May. Our linering business had over $8 million in revenue. Combine that with a bid under $3 million in vessels. Less than $3 million in charter hire, and about $1 million in G&A. Providing business contributed about $2 million in EBITDA in the first quarter. Turning to our cash bridge on slide 9, we began the quarter with total liquidity of $632 million.
Jeff: In the appendix, we have provided a reconciliation from reported earnings to adjusted earnings.
Jeff: Our revenue and expenses were largely within expectations in the first quarter.
Jeff: I'm pleased that our vessel expenses improved from last quarter and much of 2024 with reductions to repairs and maintenance.
Jeff: Our licensing business had over $8 million in revenue in the quarter.
Jeff: Combine that with a bit under $3 million in vessel expenses.
Jeff: $3 million in charter hire.
Jeff: $1000 in G&A, providing business contributed about $2 million of EBITDA in the first quarter.
Jeff: Turning to our cash bridge on slide nine.
Jeff: We began the quarter with total liquidity of $632 million.
Jeffrey Pribor: composed of $157 million in cash. $475 million in undrawn revolving credit capacity. Following along the chart from left to right on the cash. We first add $91 million in adjusted even-tops of the quarter, plus $23 million in debt service, and another $19 million in dry dock and capital expenditures. offset by a working capital benefit of about $7 million due to the timing of payables and receipts. We therefore achieved our definition of free cash flow of about $56 million for the first quarter. This represents an annualized cash flow yield of over 12% on today's share price.
Jeff: $157 million in cash and.
Jeff: $475 million Undrawn revolving credit capacity.
Jeff: Following along the chart from left to right on the cash bridge, we first add $91 million and adjusted EBITDA for the quarter.
Jeff: About 23 billion of debt service and another $19 million of Drydock and capital expenditures.
Jeff: Offsetting by working capital benefit of about $7 million.
Jeff: Due to the timing of payables and receivables.
Jeff: We therefore achieved our definition of free cash flow of about $56 million from first quarter.
Jeff: This represents an annualized cash flow yield of over 12% on today's share price.
Jeffrey Pribor: We received $48 million in connection with the now fully-executed vessel swap, which began in the fourth quarter of 2024. Also in connection with that swap, we repaid $70 million on the revolving credit facility that we drew on in the fourth quarter.
Jeff: We received $48 million in connection with the now fully executed vessels.
Jeff: Again in the fourth quarter of 2024.
Jeff: Also in connection with that swap, we repaid $70 million on the revolving credit facility that we drew out in the fourth quarter.
Jeffrey Pribor: which is included in the Do You Ever column. This column also includes a net $12 million payment where we utilized and repaid amounts on the RRCS for general cash management. So the total in the quarter is $82 million. To the right of this column, you will find our remaining capital allocation for the quarter, which was $10 million in new building installments and $34 million in dividends, representing $0.70 per share. The remaining $3 million on the waterfall represents cash taxes paid for vesting or share equity. Altogether, these components led to ending liquidity of $673 million, comprised of $133 million in cash.
Jeff: Which is included in the Delever column.
Jeff: This call also includes a net $12 million payments, where we utilize and repaid amounts on the Rcs general cash management purposes.
Jeff: The total in the quarter's $82 million.
Jeff: Yes.
Jeff: To the right on this call you will find our remaining capital allocation for the quarter, which was $10 million in new building installments.
Jeff: <unk> 4 million in dividends, representing 70 per share.
Jeff: The remaining $3 million on the waterfall represents cash taxes paid for vesting of share exercises.
Jeff: Altogether. These components led to ending liquidity of $673 million comprised of 133 million in cash.
Jeffrey Pribor: and 540 men in broad revolving capacity.
Jeff: $540 million Undrawn revolving capacity.
Jeffrey Pribor: Moving to slide 10. We have a strong financial position detailed by the balance sheet on the left-hand side of the Cash and liquidity remain strong at $673 million. We have invested about $2 million in vessels that cost, which are currently valued at about $3 million. And with $600 million of gross debt at the end of the first quarter, our net loan to value is below 15%. Our debt at March 31st was nearly 80% hedged toward fixed rates, equating to an all-in weighted average interest rate of about 617 basis points, or just about 180 basis points above today's so-called fixed rates.
Jeff: Moving to slide 10, we have a strong financial position and detailed by the balance sheet on the left hand side of the page.
Jeff: Cash and liquidity remained strong at $673 million.
Jeff: <unk> invested about $2 billion in vessels that costs, which are currently valued at about $3 billion.
Jeff: And with $600 million of gross debt at the end of the first quarter, our net loan to value is below 15%.
Jeff: Our debt at March 31, with nearly 80% hedged toward fixed rates equating to an all in weighted average interest rate of about.
Jeff: 617 basis points.
Jeff: About 180 basis points above todays tougher right.
Jeffrey Pribor: On the lower right-hand table, we have detailed our debt portfolio as of March 31. Since that time, I would note that we've repaid $36 million on the RCF, of which about $16 million represents a reduction in RCF capacity that occurs at the end of every quarter. We like this practice of moderate payments to maintain our RCF capacity in order to support growth. And with $540 million undrawn, we have the Apple McLaren. Also, as we noted in our 10-Q that we filed this morning, our intention is to repay the ocean yield debt that carries interest at SOFR plus 405 basis points.
Jeff: On the lower right hand table, we give details of our debt portfolio as of March 31.
Jeff: Since that time I would note that we repaid $36 million on the Rcs.
Jeff: It's about $16 million represents a reduction in Rcs capacity that occurs at the end of every quarter.
Jeff: We like this practice of moderate payments to maintain our rcs capacity in order to support growth.
Jeff: And with $540 million Undrawn, we have ample liquidity for growth.
Jeff: Also as we noted in our 10-Q that we filed this morning, our intention is to repay the ocean yield debt carries interest at software plus 405 basis points.
Jeffrey Pribor: The outstanding principal amount of the loan is approximately $250 million as of the fourth quarter, when payment will be made. And we are reviewing our opportunities to maintain our maturity profile and reduce our We continue to enhance our balance sheet to maintain the financial flexibility necessary to facilitate growth that returns to shareholders. Our nearest maturity in the portfolio isn't until the next decade. We have 34 unencumbered vessels and we have ample undrawn RCF capacity. We continue to explore ways to lower our breakeven costs even more and share in the upside with double digit returns.
Jeff: The outstanding principal amount of the loan.
Jeff: Approximately $250 million as of the fourth quarter.
Jeff: That will be made and we were reviewing our opportunities to maintain our maturity profile and reduce our interest costs.
Jeff: We continue to enhance our balance sheet to maintain the financial flexibility necessary to facilitate growth and returns to shareholders.
Jeff: Our nearest maturity in the portfolio isn't until the next decade.
Jeff: We have 34 unencumbered vessels and we have ample undrawn rcs capacity.
Jeff: We continue to explore ways to lower our breakeven costs, even more share in the upside with double digit returns to shareholders.
Jeffrey Pribor: On the last slide that I'll cover... Slide 11 reflects our forward-looking guidance and book-to-date TCE aligned with our spot-cash break-even. starting with TCE pictures for the second quarter of 2025. I'll remind you, as I always do, that actual TCE reported during our next surveys call may be different. As of today, we currently have a blended average spot TCE of about $31,200 per day statewide. 45% of our second quarter expected revenue. On the right-hand side of the slide, our forward spot break-even rate is about $13,500 per day. opposed to the fleet-wide breakeven of about $16,000 per day, nearly $2,600 per day.
Jeff: On the last slide that I'll cover <unk>.
Jeff: Slide 11 reflects our forward looking guidance on book to date, TCE align with our spot cash breakeven rate.
Jeff: Starting with TCE Im curious for the second quarter of 2025.
Jeff: Ill remind you as I always do that actual TCE reported during our next earnings call maybe different.
Jeff: As of today.
Jeff: Currently have a blended average spot TCE of about $31200 per day Mcguire.
Jeff: And 45% of our second quarter expected revenue.
Jeff: On the right hand side of the slide our forward spot breakeven rate of about $13500 per day.
Jeff: Composed of a fleetwide breakeven of about $16000 per day less nearly $2600 per day time charter revenues.
Jeffrey Pribor: Let's try and try to wrap. Based on our SPOT TCE book to date and our SPOT breakeven, it looks like Seaways can continue to generate significant free cash flows during the second quarter and build on our track record of returning cash On the bottom left-hand chart, we provide some updated guidance for our expenses in the second quarter and our estimates for 2025. We also include in the appendix a quarterly expected off-hire and cap. I don't plan to read each item line by line, but I encourage you to use these for modeling purposes.
Jeff: Based on our spot TCE booked to date in our spot breakeven it looks like Seaways can continue to generate significant free cash flow during the second quarter to build on our track record of returning cash to shareholders.
Jeff: On the bottom left hand chart, we provide some updated guidance for our expenses in the second quarter and our estimates for 2025.
Jeff: We also included in the appendix quarterly expected off hire a capex.
Jeff: I don't plan to read each item line by line.
Jeff: Courage you to use for modeling purposes.
Jeffrey Pribor: That concludes my remarks.
Lois Zabrocky: I'd now like to turn the call back to Lois for a closing. Thank you very much, Jeff. On slide 12, we have provided you with Seaways Investment Highlights.
Jeff: That concludes my remarks, I'd now like to turn the call back to Lois for closing comments.
Lois: Thank you very much Jeff.
Lois: On slide 12, we have provided you with Seaways investment highlights.
Lois Zabrocky: Summarizing them briefly. Over the last eight years, International Seaways has built a track record of returning cash to shareholders. maintaining a healthy balance sheet and growing the company. Our total shareholder return represents around 20% compounded annual return. We continue to renew our fleet so that our average age is about 10 years old. in what we see is the sweet spot for tanker investments in return. We've invested in a range of asset classes to cast a wider net for growth opportunities and to supplement our scale in each class by operating the larger pool. We aim to keep our balance sheet fortified for any down.
Lois: Summarizing them briefly.
Lois: Over the last eight years International Seaways has built a track record of returning cash to shareholders, maintaining a healthy balance sheet and growing the company.
Lois: Our total shareholder return represents around 20% compounded annual return.
Lois: We continue to renew our fleet.
Lois: Our average age is about 10 years old.
Lois: And what we see is the sweet spot for tanker investments and returns.
Lois: We've invested in a range of asset classes.
Lois: That's a wider net for growth opportunities and to supplement our scale in each class by operating two larger pools.
Lois: We aim to keep our balance sheet fortified for any down cycle.
Lois Zabrocky: We have over $500 million in undrawn credit capacity to support our growth. Our net debt is under 15% of the fleet's current value. And as Jeff mentioned, we have 34 vessels that are unencumbered. Lastly, we only need our spot ships to collectively earn less than $13,500 per day to break even in the next 12 months. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders.
Lois: We have over $500 million and Undrawn credit capacity to support our growth.
Lois: Our net debt is under 15% of the fleets current value.
Lois: And as Jeff mentioned, we had 34 vessels that are unencumbered.
Lois: Lastly, we only meet our spot ships to collectively earn less than $13500 per day to breakeven in the next 12 months.
Lois: At this point in the cycle, we expect to continue generating cash.
Lois: We will put to work to create value for the company and for shareholders.
Operator: We'd like to thank you very much, and operator, we'd like to open up the lines for questions. Thank you, Lois. We will now begin the question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. We will make a quick pause here for the questions to be registered.
Lois: We'd like to thank you very much and operator, we'd like to open up the lines for questions.
Speaker Change: Thank you Louise we will now begin the question and answer session. If you'd like to ask a question. Please press star followed by one on your telephone keypad.
Lois: It has changed your mind. Please first off on the right you went through.
Lois: Referring to ask your question. Please ensure your devices and muted locally who will make a quick pause here for questions to be registered.
Lois: Okay.
Omar Nokta: And our first question comes from Omar Nokta, which...
Jeffrey: And our first question comes from Omar not TV Jeffrey.
Omar Nokta: Hi Lois and Jeff, good morning. I have just a couple of maybe finance questions. So maybe to you, Jeff, on the six LR1s, you've got a little over, you know, $300 million in payments to make on those. You've also got the $540 million of undrawn capacity. Do you expect to use that for financing these remaining installments? Or do you intend to secure a separate financing package for those installments?
Speaker Change: Thank you Hi, Lewis and Jeff Good morning.
Speaker Change: But just a couple of finance questions. So maybe to you Jeff.
Speaker Change: On the sixth LR once you've got a little over $300 million in payments to make on those you've also got the $540 million of Undrawn capacity do.
Speaker Change: Do you expect to use that for financing the remaining installments or do you intend to secure a separate financing package for those installments.
Jeffrey Pribor: Good morning, Omar. We're still evaluating. We'll let Jeff answer that one. Yeah, sorry. Yeah, morning. Yeah, lots of options, still evaluating. The great thing about the revolver is you always know you have that. We kind of have the optionality to evaluate other financing possibilities, and we're doing that. So not too much more I can say right now, but lots of attractive, well-priced, and good-terms options for us. So I look forward to telling you about it when we get closer. Okay, all right.
Speaker Change: Good morning, Omar we're still evaluating that.
Jeff: Well, let Jeff answer that one.
Speaker Change: Yes, sorry.
Speaker Change: Yeah good morning.
Speaker Change: Yes lots of options still evaluating.
Speaker Change: The great thing about the revolver as you always do you have that.
Speaker Change: We kind of.
Speaker Change: Have the optionality to evaluate other other financing possibilities and we're doing that so not too much more I can say right now but lots of attractive.
Speaker Change: Well priced in terms of options for us.
Speaker Change: I'll look forward to telling you about it when we get closer.
Omar Nokta: That sounds like perhaps maybe you're still evaluating but something may be in the works is what I'm Inferring from that, uh Then, I guess, definitely, Jeff, you mentioned the lease financing. Again, you mentioned a facility that you're looking to refinance an amount of $250 million. Just thinking about the bar chart you show on slide 11, where your combined break-even is $16,100. With that refinancing, kind of, What do you think that comes down to? Is that a magnitude of $300 or $400, or am I doing back-of-the-envelope math wrong? Thank you, Omar. Yeah, go ahead, Jeff. Following up...
Speaker Change: Okay, alright, so it sounds like perhaps maybe you're still evaluating but.
Speaker Change: Something maybe in the works and it's what I missed.
Speaker Change: <unk> from that.
Speaker Change: Hi.
Speaker Change: Then I guess.
Speaker Change: Separately, Jeff you mentioned.
Speaker Change: The lease financing as Ken mentioned, a facility that youre looking to refinance and the amount of $250 million.
Speaker Change: Just thinking about the bar chart that you show on Slide 11, where you combined breakeven of 16100 with that refinancing kind of.
Speaker Change: What do you think that comes down to.
Speaker Change: Is that magnitude of three to $400 is doing.
Speaker Change: So in back of the envelope math too.
Speaker Change: Wrong.
Speaker Change: Thank you Omar.
Speaker Change: Yes go ahead, Jeff.
Speaker Change: Yeah.
Jeffrey Pribor: Yeah, so back to the first question for a second. Yes, I think you would expect us to evaluate lots of options that we're fortunate to have on the financing side. So we will do that knowing we always have to evolve. Back to the question you asked. Yeah, I mentioned in my remarks that this facility now is at SOFR plus 405, which was very attractive when it was done because it was virtually 100% financing. But now that the outstanding amount that I mentioned as of the payment date to approximately $250 is in the 50% of value, special value area, you can expect to be refinancing that at a savings of at least a couple hundred basis points on interest.
Speaker Change: I followed following up.
Speaker Change: Yes.
Speaker Change: Back to the first question for a second yes, I think you would expect us to evaluate lots of options that we're fortunate to have on the financing side. So.
Speaker Change: The growth of that going to be always have football.
Speaker Change: Back to the question you asked yes, I mentioned in my.
Speaker Change: Remarks that.
Speaker Change: <unk>.
Speaker Change: This facility now that sofa, plus 405, which was very attractive.
Speaker Change: When it was done because it was virtually 100% financing.
Speaker Change: But now that the outstanding amount that I mentioned that the payment days to approximately $2 50 is.
Speaker Change: 50% of value special value area.
Speaker Change: Would you expect to be refinancing that at a.
Omar Nokta: If you look at our recent trend on financings with revolvers, there's likely to be significantly less amortization. So I would go with your estimate of several hundred dollars a day reduction in break evens is the opportunity that we see in doing that refinancing. So spot on. Okay, all right, great. Jeff, thank you. Lois, thank you.
Speaker Change: Savings of at least a couple of hundred basis points on interest if you look at our recent trend.
Speaker Change: <unk> dealt.
Speaker Change: With revolvers.
Speaker Change: It's likely to be significantly less amortization.
Speaker Change: So I would go with your estimate of several hundred dollars a day reduction in.
Speaker Change: Breakeven.
Speaker Change: Opportunity that we see and enjoy that refinancing.
Speaker Change: Product.
Omar Nokta: I'll pass it back.
Speaker Change: Okay Alright, great.
Speaker Change: Thank you Louis Thank you I'll pass it back.
Sherif Elmaghrabi: And the next question comes from Sherif Elmaghrabi with BTI. Hey, good morning. Thanks for taking my question. Lois, you highlighted the 400,000 barrels a day OPEX cost bump this month and next. Has that shown up in conversations with charters or is the benefit to tankers on a bit of a lag given some Middle Eastern overproduction there?
Speaker Change: The next question comes from shares and will probably would see Ti T.
Speaker Change: Hey, good morning, Thanks for taking my questions.
Speaker Change: Lowest you highlighted the 400000 barrels a day OPEC cost bump.
Speaker Change: And next is that showing up in conversations with charters or is it the benefits tankers.
Speaker Change: On a bit of a lag given some middle eastern overproduction there.
Lois Zabrocky: Yeah, good morning. And thank you for the question. It seems that it's a little bit of a lag at the moment. From what we're sitting and seeing for the forward fixing markets, I mean, for sure the VLCCs have picked up in recent weeks, but they're a little bit sideways in the spot market at the moment. So we're anticipating increased listings as we head into the next quarter.
Speaker Change: Yes, good morning, and thank you for the question.
Speaker Change: That is a little bit of a lag at the moment.
Speaker Change: From what we are sitting and seeing a further forward 16 markets the need for sure that the VLCC has picked up in recent weeks, but they're a little bit sideways in the spot market at the moment. So we are anticipating increased lifting as we head into the next quarter.
Speaker Change: [laughter].
Sherif Elmaghrabi: Thanks.
Sherif Elmaghrabi: And then I've got one for Jeff. You guys completed some pretty substantial deleveraging over the last four months. So I guess on the other side of Omar's question, is there a leverage target you keep in mind, or are we just being opportunistic, bearing in mind you've got some new built Go ahead, Jacqueline, and share your views on that. Sure. Thanks, Sherif. As we've said before... We like the leverage level we're at now, broadly, sub-20%. We have to be sub-15% net loan-to-value. That's low leverage, not. Zero leverage. I don't know. At this point in the cycle, that gives us...
Speaker Change: Thanks, and then I've got one for Jeff you guys completed some pretty substantial deleveraging over the last four months.
Speaker Change: So I guess on the other side of Walmart question is there a leverage target you keep in mind or are we just being opportunistic bearing in mind, you've got some newbuild payments to make.
Speaker Change: Go ahead John.
Speaker Change: Sure your views on that.
Speaker Change: Sure. Thanks.
Speaker Change: Thanks Terry.
Speaker Change: As we've said before.
Speaker Change: We.
Speaker Change: Like the leverage.
Speaker Change: Level, we're at now.
Speaker Change: Hardly sub 20% has to be sub 15% net loan to value that.
Speaker Change: Low leverage.
Speaker Change: Zero leverage.
Speaker Change: Uh huh.
Jeffrey Pribor: the opportunity to put some more leverage on when it's the right time to do it. You know, refinancing the lease that we mentioned, that doesn't increase leverage. The LR1 will require a little leverage, definitely put some on one way or another, but that's not going to be a substantial increase in leverage. So, you know, we can easily absorb that and still have room for additional leverage when the time comes for more investment in assets. Is that what you were asking or can I fill in more?
Speaker Change: At this point in the cycle that gives us.
Speaker Change: The optionality to put some more leverage on.
Speaker Change: It's the right time to do it so.
Speaker Change: I don't think that.
Speaker Change: Refinancing the Lee.
Speaker Change: So we mentioned that doesn't increase leverage the LR ones.
Speaker Change: <unk> acquire a little leverage definitely put some on one way or another.
Speaker Change: But that's not going to be a substantial increase in leverage.
Speaker Change: We could easily absorb that.
Speaker Change: We'll have room for.
Speaker Change: Additional leverage when the time comps.
Speaker Change: Or.
Speaker Change: More investment in assets.
Speaker Change: Is that what youre, asking what can I do anymore.
Sherif Elmaghrabi: I think you've addressed it.
Sherif Elmaghrabi: Thanks very much for taking my question.
Speaker Change: No I think you've I think you've addressed it thanks very much for taking my questions.
Operator: And just as a reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad.
Speaker Change: Sure.
Speaker Change: Just as a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad. The next question comes from Chris Robertson The Deutsche Bank.
Christopher Robertson: The next question comes from Chris Robertson with Deutsche Welle.
Lois Zabrocky: Hey, good morning, Lois and Jeff. Thanks for taking my question. Good morning. Just a market question for me. Since you operate in both the product and crude segments, you'll be in an advantaged position to answer this. Some of your product tanker peers have talked about the LR2 order book and their expectation around, you know, a pretty big percentage of those trading dirty. I guess, can you speak to your views on the LR2 market and where those new builds might trade? You know, absolutely. I mean, we have one LR2. We do have it out at a lucrative time chart around 40 grand a day at the moment, but we always think of APRAs and LR2s as one combined fleet of, you know, coming on 1,300 vessels with an aging profile on the APRA side.
Chris Robertson: Hey, good morning, Louis and Jeff Thanks for taking my questions.
Speaker Change: Good morning.
Speaker Change: Just a market question for me.
Speaker Change: Since you operate in both the product and crude segments, you'll be an.
Speaker Change: Advantaged position to answer some of your product tanker peers have talked about the LR to order book.
Speaker Change: Their expectation around.
Speaker Change: Pretty big percentage of those trading dirty.
Speaker Change: I guess can you speak to your views on the LR to market and where those new builds might trade.
Speaker Change: Yeah.
Speaker Change: Absolutely I mean, we have one LR too we do have it out at a lucrative time charter around 40 Grand a day at the moment.
Speaker Change: We always think afterwards, and LR twos as well.
Speaker Change: <unk> combined fleet of.
Speaker Change: You know coming on 1300 vessels with an aging profile on the Atlas side.
Lois Zabrocky: Folks that are ordering LR2s, you know, looks like, you know, it's kind of the size of vessel at this time where you just elect to coat due to the cost of the coating being, you know, in relative to your overall asset investment to give yourself that optionality. You know, we tend to see the vessels dirty up when they become older. The more modern vessels tend to train clean. And so when you look at that whole sector as a whole, even though there's a lot of LR2s on order, that entire fleet is aging fairly rapidly. And you have had strong growth in your ton miles on both the Atlas and the LR2.
Speaker Change: And.
Speaker Change: Folks that are ordering LR too.
Speaker Change: Looks like it's kind of the size of vessel at this time, where you just left to cope.
Speaker Change: Due to the cost of the coding.
Speaker Change: And relative to your overall asset investment to give yourself that optionality.
Speaker Change: We tend to see the vessels dirty up when they become older.
Speaker Change: More modern vessels.
Speaker Change: Clean and so when you look at that whole sector as a whole, even though theres a lot of LR twos on order that entire fleet.
Speaker Change: Is it fairly rapidly.
Speaker Change: And we have had strong growth in your ton miles on both the offers and the LR to it.
Christopher Robertson: Got it. Yeah, that makes sense. That's really it for me. I'll turn it over.
Speaker Change: Got it yeah that makes sense, that's really it for me I'll turn it over.
Christopher Robertson: Thank you.
Liam Burke: And our next question comes from Liam Burke. Be ready to... Thank you.
Speaker Change: Thank you.
Speaker Change: [laughter] mhm.
Speaker Change: And our next question comes from Liam Burke, the B Riley Securities.
Liam Burke: Good morning, Lois. Good morning, Jeff. Good morning, Liam. Hi. Lois, the step up in OPEC plus production has boosted DLCC rates, but we've also got additional production coming out of non-OPEC plus countries as well. Where do you see, does that benefit significantly your Suez Max vessels, even though we're seeing nice lift in DLCC rates? Yeah, thank you. Yeah, absolutely. I mean, now you've seen the VLTC take sort of their leadership position for the first time in probably three years, and the Suez Maxis have always had a strong correlation, something, you know, around 85% in tandem with the V's, and you've seen them step up as well.
Speaker Change: Thank you and good morning, Louis Good morning, Jeff.
Louis: Good morning Liam.
Speaker Change: Alright.
Speaker Change: Uh huh.
Speaker Change: Well, let's see.
Speaker Change: The step up in OPEC.
Speaker Change: <unk> production has boosted VLCC rates, but we've also got additional production coming out of non OPEC plus countries as well where do you see that.
Speaker Change: Fifth significantly your suezmax vessels, even though we're seeing nice nice.
Speaker Change: In VLCC rates.
Speaker Change: Yeah.
Speaker Change: Yes. Thank you.
Speaker Change: Absolutely I mean.
Speaker Change: Uh huh.
Speaker Change: Now you've seen the VLCC take toward their leadership position for the first time in probably three years and the Suezmax is have always had a strong correlation something around <unk>, 5%.
Lois Zabrocky: I think another factor, you know, that's playing very well for, let's say, the legitimate trading fleet in the world is these low oil prices are creating a situation where the Russian barrels are going on legitimate tonnage, and that's creating more business for owners that have followed the right line all the way. Great, thank you.
In tandem with the Geneva, and you've seen them step up as well.
Speaker Change: I think another factor.
Speaker Change: That's playing very well for them.
Speaker Change: Legitimate trading fleet in the world of low oil prices are creating a situation where the Russian barrels are going on legitimate tonnage and that creates more business for owners.
Speaker Change: That has.
Speaker Change: It's probably the right line all the way.
Lois Zabrocky: And you've been pretty adept at lowering the age of your fleet in a very shareholder friendly manner. Are you seeing more opportunities to do that? You know, we're always, we're always out there looking, Liam, and, you know, so we can never be idle, right? You know, and indeed, we have our eyes open and are looking for those opportunities, you know, as we speak. Fair enough. Thank you, Lois. Thank you.
Speaker Change: Great. Thank you.
Speaker Change: But pretty adept at lowering the age of your fleet in a very shareholder friendly manner.
Speaker Change: Are you seeing or opportunities to do that.
Speaker Change: Yeah.
Speaker Change: We're always we're always out there looking.
Speaker Change:
Speaker Change: So we can never be idle right now.
Speaker Change: Indeed, we have our eyes open and looking for those opportunities.
Speaker Change: Yeah.
Speaker Change: Fair enough. Thank you.
Lois Zabrocky: Just as a final reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. And as we currently have no further questions in the queue, I will hand back over to Lois Zabrocky for any final comments. We just want to thank everybody for tuning in with International Seaways and we look forward to speaking with you in the coming months. Thank you very much. Thank you everyone.
Speaker Change: Thank you.
Speaker Change: Just as a final reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: And as we currently have no further questions in the queue.
Louise Rocky: Hand back over to Louise Rocky for any final comments.
Louise Rocky: Yeah, we just want to thank everybody for tuning in with international Seaways and we look forward to speaking with you in the coming months.
Operator: This concludes today's call. You may now disconnect. Have a good rest of your day.
Louise Rocky: So very much.
Louise Rocky: Thank you everyone. This concludes today's call you may now disconnect have a good rest of your day.
Louise Rocky: [music].