International Seaways, Inc. Price & Performance (INSW)

Before we begin, I would like to start off by advising everyone with us on the call today of the 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 topics: outlooks for the crude and product tanker markets, changes in trading patterns, forecasts of world and regional economic activity, and of the demand for and production of oil and petroleum products the company's strategy and business prospects expectations about revenues and expenses, including vessel, charter hire and G and A expenses, estimated future bookings, TCE rates and capital expenditures vessel sales and purchases, newbuild vessel construction, the effects of ongoing and threatened conflicts around the globe, the changing global regulatory environment the company's ability to achieve its financing and other objectives, its consideration of strategic alternatives anticipated financing transactions and plans to issue dividends, the company's relationships with its stakeholders and other political, economic and regulatory developments globally. Any such forward looking statements take into account various assumptions made by management based on the 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. Of which are beyond the company's control. Those 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 differ from expectations include those described in our annual report on Form 10 ks for 2024 and in other filings we have made in the future may make, with the U. S. Securities Exchange Commission. Now let me turn the call over to Ms. Loath of Rocky. Our President and Chief Executive Officer Thank you very much, James. Good morning, everyone.

Thank you for joining International Seaways earnings call for the fourth quarter and the full year 2024. On Slide four of the presentation, which you can find in the Investor Relations section of our website, Net income for the fourth quarter was $36,000,000 or $0.72 per diluted share. Excluding a loss on vessel sales, adjusted net income for the fourth quarter was $45,000,000 or $0.9 per diluted share and our adjusted EBITDA was $95,000,000 We are proud to announce today that we continue to modernize our fleet during the fourth quarter. With a vessel swap as you can see in the upper right hand corner of the slide, we sold two of our oldest VLCCs and paid $3,000,000 in cash for three ECO MRs built in 2015.

The swap is less indicative of a specific for any one particular class of shifts but more showcases Our ability to opportunistically reduce our vessel ages, across various ship classes enhanced our fleet efficiency while limiting risk compared to a full cash transaction. We have optimized earnings across our tanker [indiscernible] Which gives us plenty of flexibility to execute fleet optimization, The various transactions within the swap created some temporary changes to our balance sheet in the fourth quarter. And the first few months of twenty twenty five. During the fourth quarter, we paid $53,000,000 in cash or deposits and the delivery of one MR vessel. Due to this temporary timing difference, We borrowed $70,000,000 on our revolving credit facility which has been repaid in the first quarter following the final execution of the swap. As a result, to a still quite healthy $475,000,000 at the end of the fourth quarter. We expect that to be around $5.00 $6,000,000 on a pro form a basis.

Our balance sheet highlights our strong Shown in the bottom left of the slide, dollars $632,000,000 of total liquidity composed of $157,000,000 of cash and $475,000,000 on the revolving credit facility. We have $695,000,000 of debt with a net loan to value ratio of below 16% and our spot breakeven rates are about $13,700 per day. On the lower right, we are proud to have shared for a second consecutive year over $300,000,000 returned to shareholders in 2024.

We paid $5.77 in dividends during 2024 representing a 12% dividend yield on our average share price over the time. We also used proceeds from that sale of an older MR to repurchase 500,000 shares for $25,000,000 during 2024. Today, we announced $0.7 that we will pay in March representing a payout ratio of about 77%. Marking our highest since we've been supplementing our regular $0.12 dividend we believe in sharing with our shareholders during this cycle and we expect a payout ratio similar to this last two quarters of around 75% to continue into the future. We believe in our balanced capital allocation approach so that we can provide competitive returns to our shareholders and still position the company for the future [indiscernible] while maintaining a healthy balance sheet to support growth. On Slide five, we've updated our standard set of bullets on tanker demand drivers with the subtle green up arrows next to the bullets represented as good for tankers, the black dash representing a neutral impact and a red down arrow that particular topic is not good for 1% per year Which on 100,000,000 per day of demand is about 1,000,000 to 1,500,000 barrels [indiscernible] anticipated for 2025, Oil demand growth specifically is spread across the world in 2025 with no one large outlier as China has been for many years.

Crude production growth is largely coming from The Americas. Which is supported for tanker demand as much of the incremental growth will be exported the global economy is still settling the dots. From a post-twenty twenty four election period And there have always been headline grabbers particularly from The United States, The geopolitical situation are not going away. They may modify and that could have an effect on the tanker But with many moving parts, the markets will adjust. We expect The United States to take a stronger position Iran, and we see tanker movements shadowing that. Pun intended. The Israel Hamat Conflict Is Still Very Tense And Most Ships Are Weary Of Their Safety In The Red Sea. Russia, Ukraine, And even if there is a resolution on the horizon, we believe that the unwinding could last longer for Russian crews moving to the West. We embrace these tanker markets because we can't control them in any K. And we believe that sanctions and their enforcement can only help the legitimate commercial In the chart below on Slide five, inventories in the OECD drew about 100,000,000 barrels in the second half of the year. This in the short term impacted tanker rates and will refill over time based on hit The United States SPR has grown in 2024 in small chunks President Trump has indicated refilling the SPR is a priority to historic levels This would mean around 300 plus million barrels which may include imports of medium sour crude which has historically been Or me.

On Slide six, the order book popped in 2024 particularly in the middle of the year. But as seen in the lower left chart, shifts on order are still quite low relative to the size of the fleet historical context. We added a weighted average tanker rate In the chart, as an indicator that orders grow, when the market is hot. But as we've shown many times, not factored into the chart on the last is the longer time horizon that many of these shifts on order are expected to deliver over the next four years and the corresponding age [indiscernible] on the water over this time. The chart on the right reflects that 45% of the fleet is headed towards twenty plus years the age where we identify as removed from the commercial fleet. Compared to 14% of the fleet that exists on order As you can see, there are about 900 ships that are already twenty years old.

And there are still another fifteen hundred plus vessels that are turning 20 during delivery schedule that will need This is significant for the tanker industry as the limited tanker supply continues to be supportive of strong tanker earnings.

We believe this should translate into a continued over the next few years, and Seaways remains well positioned to capitalize on these market conditions. We will continue to execute our balanced capital allocation approach to renew our fleet and adapt to industry conditions.

With a strong balance sheet while returning to shareholders. I'm now turning it over to our CFO, Jeff Freebore, who will provide the financial review. Jeff?

Thanks Lois and good morning everyone. On Slide eight, net income for the fourth quarter was $36,000,000 or $0.72 per diluted share, This includes a loss of vessel sales as a result of timing of the vessel swap that Boas discussed earlier.

Excluding this, our net income was $45,000,000 or $0.9 per diluted share. On the upper right chart, adjusted EBITDA for the fourth quarter of twenty twenty four was $95,000,000 In the appendix, provided a reconciliation from reported earnings to adjusted earnings. While our revenue based on market conditions was largely within expectations in the fourth quarter, our expenses were a little higher than our guidance from last quarter.

Scel expenses were higher in the fourth quarter due to the to the timing of stores and spares at the end of the year and additional repairs and maintenance. G and A was higher primarily for one off EagleBens. Our lightering business continues to prosper with over $9,000,000 in revenue in the quarter. Mining this was about $3,000,000 in vessel expenses dollars 3,000,000 in charter hire, and $1,000,000 of G and A the lottery business contributed nearly $3,000,000 in EBITDA in the fourth quarter as well as an annual EBITDA contribution of nearly $20,000,000 2024. Turning now to our cash bridge on Slide nine. We began the quarter with total liquidity of $694,000,000 composed of $153,000,000 in cash dollars $540,000,000 in undrawn revolving capacity. Following along the chart from left to right of the cash bridge, we first add $9,500 in adjusted EBITDA for the fourth quarter. Less $23,000,000 in debt service and another $18,000,000 of drydock at capital expenditures. Offset by working capital benefit of about $24,000,000 due to the timing of deferred revenue payables or accruals. We therefore achieved our definition of free cash flow of about $78,000,000 in the fourth quarter This represents an annualized cash flow yield of over 17% on today's share price.

We spent $53,000,000 in connection with the vessel swap due to the timing of deposits [indiscernible] Of the MRs in this swap. Due to the temporary timing difference, we borrowed $70,000,000 on our lines of credit that we repaid in the first quarter twenty twenty five. The remaining bars under cash grades reflect our capital allocation We repaid $20,000,000 of debt early in the fourth quarter made $12,000,000 in installment payments for our LR1 newbuildings and also paid $59,000,000 in dividends to shareholders equating to $1.2 per share.

Altogether, these components led to any liquidity of $6.00 $3,000,000 with $158,000,000 in cash and short term investments and $475,000,000 in ongoing revolving capacity. Now moving to Slide 10, We have a strong financial position detailed by the balance sheet at left hand side of the page. Cash and liquidity remained strong at $632,000,000 We have invested about $2,200,000 of vessels at cost which are not on the books currently at a value of $3,500,000 And with $695,000,000 of gross debt at the end of the year, our net loan to value is below 16%. Our debt at December 31 was over 70% hedged or at fixed rates. Leading to an all in weighted average interest rate about six fourteen basis or under 200 basis points above today's silver. Following our repayment in the first quarter of twenty twenty five, we expect our fixed rate hedged about to be closer to eight We continue to enhance the balance sheet to create the financial flexibility that's necessary to facilitate growth and returns to shareholders. We have $475,000,000 in undrawn revolvers at year end This grows to about $560,000,000 pro form a of our debt repayment following the close of the swap transaction.

Our nearest maturities portfolio is in October next decade. We continue to lower our breakeven costs and we share the upside with double digit returns to shareholders. On the last slide that I'll cover, Slide 11 reflects our forward looking guidance and book to date TCE line with our spot cash breakeven rate. Starting with TCE Pictures for the first quarter twenty twenty five, and I'll remind you that actual TCE during our next earnings call be different. Currently, we have a blended average spot TCE of $26,500 per day fleet wide, and 70% of our first quarter expected revenues. On the right hand side of the slide, our forward spot breakeven rate is about $13,700 per day composed of a fleet wide breakeven of about $16,200 per day less nearly $2,500 per day in Time Charter revenue. Based on our spot TC book to date, and our spot breakevens, it looks like Seaways can continue to generate significant free cash flow during the quarter and build out our track record of returning cash to shareholders. On the bottom left hand chart, we provide some updated guidance for expenses in the first quarter and our estimates for 2025. We also included in the appendix our quarterly expected off hire in CapEx.

I won't plan to read each item line by line, but encourage you to use them for modeling purposes.

That concludes my remarks. So I'd now like to turn the call back to Lois for her closing comments. Thank you so much, Jeff. On Slide 12, we have provided you with Seaways investment highlights which we encourage you to read in its entirety. And I will summarize Over the last eight years, International Seaways International built a track record of returning cash to shareholders. Maintaining and improving our healthy balance sheet, and growing the company. Our total shareholder return represents around 20% compounded annual return. The second consecutive year, we returned over $300,000,000 to shareholders which is about 25% combined return over the last two years. We continue to renew our fleet so that our average age is about 10 years old.

In what we see as the sweet spot for tanker investments and returns.

We've invested in a range of asset class to cast a wider net [indiscernible] and to supplement our scale in each class by operating in larger pools. We aim to keep our balance sheet four to five We have over $500,000,000 in undrawn credit capacity to support our growth. Our net debt under 16% of the fleet's current value and we have 36 vessels that are unencumbered.

Lastly, we only need our spot ships to collectively earn $14,000 per day to breakeven in the next twelve months.

At this point in the cycle, we expect to continue generating cash and we will put to work to create value for the company and for our shareholders. Thank you very much. And with that said, operator, we'd like to open the lines for questions.

Our first question comes from Ben Nolan with Stifel.

I appreciate it. Hey, good morning, Jeff, Lois and team.

So I've got a couple. The first relates to sort of maybe your charter out strategy at the moment. And I think this is particularly true for some of the crude tankers the charter market is is pretty elevated relative to certainly where you've built some of your spot vessels and generally I think spot. Obviously, that's pointing to an inflection up in the spot market. But I'm curious if you think about just given that dislocation maybe taking a little risk off the table and locking in some capacity just because they're there is a gap between the two at the moment?

Okay. Good morning. How are you? So I'll start to answer that question. Sorry, Ben. I didn't wait for your remaining questions. Let me answer that one and then yes, and then we'll take your second one. How's that?

Okay, sounds good.

We have 14 time charters in our books right now out of our 78 vessels that are on the water and then we have our six new buildings that will be arriving. Right? So we have nearly 20% of our Chinese fund time charter present and then I would just have Derek jump in there.

Shirlos, thanks. Good morning, Ben.

Further to your question, we would continue to look at time charters like we always do with the right partners. The right term and the right rate then. It's something that we're always Okay. But there's nothing about the market at the makes you more or less compelled to to move in that direction, I suppose, is the answer. Sorry, go ahead. Go ahead. [indiscernible] I was going to ask my next question, but if you would we're going to add any more to that's fine. But well, my next question just to have it out there in the quarter, the MR you guys thus far in the first quarter, your MR rates were were pretty decent thus far for what you have booked. Just curious if maybe you can give a little color, like is there a specific geographic focus? Is this how should we think about the remainder of the quarter? Is it just how things are going pretty well there? At the moment, Ben, it's Derek again, if I can take that one. Thank you. Yes, the Q1 bookings we're pleased with so far. Well when we look at our peer group. I think We're starting to see We're starting to see a little bit of dislocation in the MR rates.

We've been kind of carried by the Atlantic Basin over the last couple of quarters. We're seeing U. S. Gulf start to come down a little bit.

But we do have a good deal of exposure but we're seeing Asia come up and luckily with an MRF native of our size and our we have good exposure to the East market as well. So we should be covered to capture some of that Eastern upside.

Okay. I appreciate it.

Thank you.

Our next question comes from Omar Nakhta with Jefferies.

Thank you. Hey, guys. Good morning. Good update. Just wanted to ask a couple of questions.

Clearly, over the past few years, you've done a lot in terms of strengthening the balance sheet. Debt is now, as you say, below 16%.

You have plenty of liquidity. Fleet renewals, and consistent capital returns whether buyback, dividends, Just in terms of dividend at the moment, the 4Q payout 77% of earnings that's up from 75% previously and that 50% to 60% you were doing going back to the beginning and say in 2022? How should we think about this ratio going forward? I know it's moving it's been moving upwards, but just in general 77% what we should be expecting going forward And then how do we think about what that payout looks like as earnings kind of move up and down And then if rates strengthened materially kind of go back to where they were in 2023, should we expect kind of a a more normal payout kind of coming down closer to that 50% threshold again. Kind of color you can give on what you're thinking of the payout ratio, especially in terms of earnings swinging?

Sorry for the question. No. No, good morning and excellent tee up for Omar because we do want to highlight that And as you know, we have steadily increased the percentage of adjusted net income that we have been returning to shareholders And we have to have Jeff Hess' thunder here on what you should expect going forward.

Hi, Amar. You recapped it well. We raised the payout ratio gradually from 2022 until the end of last year as we were allocating free cash flow capital to delever. Having reached a level of leverage which is sufficiently low, 50% Yes. 20%. Gross We were able to move up the payout ratio to 75% or a little more last quarter and again, this quarter, as you noticed, so it's 77% I think what I hear from shareholders, what we hear from shareholders most [indiscernible] or potential shareholders most often is through clarity and consistency around this return of capital.

To shareholders program and I think we can say clearly that shareholders should expect 75% or minimum of 75% pay operation helpful to have a round number like 70. So dollars per share [indiscernible] I think that's the clear message. And to the second part of your question, I think if rates were to moderate or go up, Net income will go up and the payout ratio sits still works. The payout will go up or down depending on how the year develops. So I think it's fair to say that we ourselves in a position to have a payout ratio of a minimum of 75% That's the message. Okay. That's clear. Appreciate that. And that's really helpful. And maybe just second question, the VLCC MR swap certainly a bit innovative and we've been hearing about that for a while, at least in the shipping circles, something that was in the hopper Just in general, as we think about that transaction, should we think about it in terms of What your plan has been? Is it deemphasizing the VLCCs in favor of products Or is it really deemphasizing older tankers and then that's one sort of part one. And then part two, I guess, would be as you think about further transactions, from here, what part of the the fleet profile do you look try to increase the ratio up.

Thank you.

Yes, Omar, it would be the latter of your what you were opining essentially, we really want to drive down the age of the fleet going forward and because we're in each of these sectors and we have a very broad network, we were able to come up with what I think was a pretty creative deal from the team and execute that pretty flawlessly here. And our overall age on the fleet is right around ten years.

And selling ships that are two ten and then bringing in two fifteen, you just you're buying yourself that longer horizon. To capture that upside. I think that would come into the summation. And then when you we're not deemphasizing crude at all. It simply happened to be an opportunity for us to shed some older inefficient Okay. Thanks, Lois. And just quickly on in terms of is it thinking about expansion or adding vessels or fine tuning further, is there any part of the fleet that you want to bolster or is it just kind of It'll depend on what the opportunity set is at the time.

It certainly will depend upon the opportunity set at the time. And over time, you should look for us to add to the big crude side, which is where we've had a little bit of attrition now, right? So, that will be a focus As and when that suits. Very good. All right. Thanks, Lois. And thanks, Jeff.

I'll pass it back. [indiscernible] Our next question comes from Chris Robertson with Deutsche bank.

Hey, good morning, Louis and Jeff. Thank you for taking my questions. Jeff, this might be a question for you. Just turning to the breakeven Just broadly speaking, looking at what makes that up, As you look forward, and there's maybe a bit of a deemphasis here on further delevering So maybe there's not more savings with regards to breakeven there. But as you look at OpEx and other components to it, where do you see kind of the floor that you could theoretically get to?

Chris. That's a good how are you?

That's a good question. I think that we're always working on keeping costs in line and from going up too much. I don't think you'd expect us to be driving down OpEx, but it holds as low as we can. G and A We're always working on that to make sure it's on a per ship basis. That's a good number. And if we were if we find ourselves growing as we have done in the past, the right time that does bringing a little lower per day cost on G and A. In terms of interest, I think we're Interested the debt cost, I think just a little bit that you can look forward to in the future without us trying to deleveraging further. Just as we have a little bit of debt that's the tire price that will roll off We have the ability to think about more revolvers as opposed more amortizing debt. As we look out towards the end of this year and into next year. So it's kind of incremental I think we feel good about our breakevens right now, right? So I'm not I think when you're looking to sleep, it has everything from DLCCs down to MR to have a breakeven rate that's $16,000 before taking into account time charters and under 14,000 taking into account time charters feel good about that.

We'll always like to find incremental ways to be able to lower it even more. Okay.

Okay, great. Yes, that's what I like to hear on that.

Turning to the LR1 segment, I know this is a segment that you guys have outperformed historically speaking. So I was wondering if you could just talk about that particular segment for a moment. With the current market dynamics there are and you still have kind of a competitive advantage there?

I'll leave that Floats and then I'll turn to Derek. I think you can see, when you stack up the LR1 Panamax sector against the competition in the fourth quarter, we continue to I'll earn our competition and that market continues to use strong niche.

Thanks, Will. Yes, as you said, we continue to be a strong niche and And Chris, I think you're probably raising the question, is the rates from sort of the start of the year to the end of the year have come down a good deal, both like you said, it's still a good niche for us. A lot of the decrease in rates have to do with just overall market but also a little bit from Ecuador. We're seeing a little bit of Ecuador sending more of their barrels out to China, so that will ship bigger ships. That dynamic shifts to come back to sort of the West Coast Of The Americas, we expect that market to pick up even more again. Hope that answers your question, Chris.

Yes. Thank you very much. I'll turn it over.

Our next question comes from Liam Burke with B. Riley.

Thank you. Good morning, Lois.

Good morning, Jaffin.

Good morning.

Lois, there's lots of puts and takes out there.

In terms of sanctions, redistribution of production. And most of the discussion has been on the effect on VLCCs. Specifically, how are you looking at the outlook for the Suezmaxes?

So the Suezmax has had prior to, I would say, the last three years had a very tight correlation pretty systematically with VLCCs, with something along 85% to 90% correlation with the Versus. And I think that as you see the components of [indiscernible] coming into place piece by piece with a lot of the political news that we read every day and the over four fifty ships or like 100 of these on [indiscernible] you know, As you see those components start to build, and the bees can hopefully get a little bit more of a ground swell here and continue to improve. You're going to see the Suezmaxes come along for that [indiscernible] Great.

Thank you. Jeff, on the with your liquidity sits you have a tremendous amount of flexibility Are opportunistic buybacks in the mix or is the payout ratio your primary method of returning cash to shareholders? [indiscernible] Liam, is the simple answer not to be cute as both? You're right. I mean, payout ratio is the primary method that we anticipate that we have been and expect to continue returning cash However, as you asked, share repurchases [indiscernible] in the mix in the sense that we have a $50,000,000 share repurchase program $25,000,000 of share purchasing, right, after we sold the ship for roughly the same amount in last year. So we have the ability to look at that again but I'd say the primary plan is So focus on the payout ratio [indiscernible] We have the flexibility to do share repurchase as well. Great. Thank you, Lois. Thank you, Jeff. Thank you. Thanks, Liam.

Our next question comes from Sheriff Elmgravi with BTIG. Hey, good morning. Thanks for taking my questions. So a couple on, I guess, Charter sentiment. You highlighted that nearly 20% of the tanker fleet is over 20 years old. But given that newbuild deliveries aren't going to replace those older vessels at the same rate, do you think we could see charters relaxing Specification requirements, if there isn't as much modern tonnage available, I would say that you do see a bit of flex on the margin from charters depending upon what the tonnage availability is and what the strength of the overall markets are. Right?

So So very well maintained vessels I think, could retain their ability to trade in their efficiency. On the other hand, the OFAC list of the 100 Bs is rare exception that there's one under a few there that are under twenty years right? So you do tend to see these ships that are on the water and yes, highly efficient and really marginalized being older and certainly controlled by those that are not doing a high level maintenance.

So I think it will be incremental from the charters It's never going to be wholesale.

And then on on Red Sea Transit, I appreciate nobody wants to be the first mover in the Red Sea, and everyone has a different opinion on when trains could resume, but is this something that charters are pushing for at this time?

I'm going to turn it over to our Head of Box, [indiscernible] just happy to give a little bit of an opening there. Thank you. Lois?

Yes, we don't talk about our specific security measures or policies. What I can say, I think, is that the whole market is looking for a bit more of a [indiscernible] And the de escalation. So to answer your question, I'm not aware of any pressure or inquiries from charterers to go through. And grateful for their support and like thinking Got it. Thanks, Lois, and thanks, Bill.

And that was our final question So I will back hand back over to you Louise for any final remarks.

No, I would just like to thank everyone for joining us today, and we live in very interesting times. And are watching the news frequently, right? So we see an overall construction and tanker market to be really rather robust And we hope to hear from you next quarter. Thank you very much.

So this concludes today's call. Thank you everyone for joining Infopet participating. Have a great day. You may now disconnect.