Hello everyone, and welcome to the International Seaways, Inc. Third Quarter 2024 Earnings Conference Call. My name is Carla, and I will be coordinating your call today. 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 for the third quarter of 2024. Before we begin, I would like to start off by advising everyone with us on the call today of the following. 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 of the demand for and production of oil and other petroleum products; the effects of ongoing and threatened conflicts around the globe, the company's strategy and 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 new build 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, and other political, economic and regulatory developments globally. Any such forward-looking statements take into account various assumptions made by management based on a number of factors, including management's experience and perception of historical trends, current conditions, expected and future developments and other factors that management believes are appropriate to consider in the circumstances. 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 report 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 Commission. Now let me turn the call over to Ms. Lois Zabrocky, our President and Chief Executive Officer. Lois?

Thank you very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call for the third quarter of 2024. Starting on Slide 4 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 vessel sales and other one-off items, adjusted net income for the third quarter was $78 million or $1.57 per share. Our EBITDA was over $143 million with adjusted EBITDA at $130 million. Referencing our balance sheet on the upper right-hand chart, we have nearly $700 million in 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 value is historically low at under 14%. With no maturity until the next decade and 34 unencumbered vessels, the cash breakeven on our spot fleet is under $13,500 per day. We've referenced our fleet optimization on the lower-left section of the slide, as we sold another vessel for $24 million in net proceeds. Overall, during 2024, we sold three 15-year-old MRs for a total of $72 million and acquired six MRs under 10 years old for $232 million partially funded by 624,000 shares issued in the second quarter. On the lower right, using proceeds from our last vessel sale, we purchased and retired over 500,000 shares at an average price of under $50 per share. In the same quarter, we paid a combined dividend of $1.50 per share. 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, Seaways has returned over 12% of our average market cap. We continue to believe in our balanced capital allocation approach, positioning the company for the future with opportunistic fleet renewal and enhancing our balance sheet while sharing in our upcycle with a double-digit dividend yield to our shareholders. On Slide 5, we've updated our set of bullets on tanker demand drivers with a subtle green up arrow next to the bullet represented as positive for tankers. The black dashes representing a neutral impact and a red down arrow, meaning 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. While China has lost some steam in its oil demand growth, we're monitoring the impacts 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 Libyan disruption. OPEC Plus has now decided to hold off increasing output from December until January of 2025. The outcomes of elections worldwide may impact tanker demand. 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, but over time this slips to a positive factor for tankers as demand calls for barrels on the water. On Slide 6, 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. Not factored in on this chart but 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 life. There are another 1,500 plus vessels that are turning 20 years old above the delivery schedule that need replacement. This is significant for the tanker industry as a 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 Seaways well positioned to continue capitalizing on the market conditions. You can count on us to utilize our balanced capital allocation approach, renewing our fleet, adapting to industry conditions, and keeping a strong balance sheet while returning to shareholders. I'm now going to turn it over to our CFO, Jeff Pribor to provide the financial review.

Thanks, Lois, and good morning everyone. On Slide 8, net income for the third quarter was $92 million or $1.84 per diluted share. This includes gains on vessel sales and a minor provision for the settlement of our U.K. multi-employer pension funds. Excluding these impacts, our net income was $78 million or $1.57 per share. On the upper right chart, adjusted EBITDA for the third quarter of 2024 was $130 million. In the appendix, we provide a reconciliation from reported earnings to adjusted earnings. Our expense guidance for the third quarter was largely within the range of expectations except for vessel expenses. During the third quarter, some of our older VLCCs had repairs and increased off hire. As a result, we did receive a retroactive pool point adjustment on the fleet that somewhat impacted our TCE earnings for the period. Our lightering business continues to prosper with nearly $13 million in revenue in the quarter, combined with about $3 million in vessel expenses, $4 million in charter hire and $1 million of G&A, the lightering business contributed over $4 million in EBITDA in the third quarter and brought year-to-date EBITDA contribution to about $17 million. Turning to our cash bridge on Slide 9, we began the quarter with total liquidity of $682 million comprised of $176 million in cash and $506 million in undrawn revolver capacity. Following along the chart from left to right on the cash bridge, we first add $130 million in adjusted EBITDA for the third quarter, less $24 million in debt service, less our drydocking capital expenditures of about $21 million and a working capital benefit largely due to the collection of receivables of about $29 million. We therefore achieved our definition of free cash flows of about $150 million for the third quarter. This represents an annualized cash flow yield of over 20% on today's share price. The remaining bars on our cash bridge reflect our capital allocation for the quarter. We sold a 2008-built MR during the quarter for net proceeds of $24 million. We also repaid $50 million that was drawn on our $500 million revolving credit facility in the prior quarter, which increased our RCF capacity by a net $35 million as the facility reduced in capacity by about $15 million per quarter. Lastly, this quarter we returned nearly $100 million to shareholders through a dividend of $1.50 per share or about $74 million and $25 million in share repurchases. These returns represent 84% of the prior quarter's adjusted net income. Altogether, these components led to ending liquidity of $694 million comprised of $153 million in cash and short-term investments and $541 million in undrawn revolving capacity. Moving now to Slide 10, we have a strong financial position detailed by the balance sheet you see on the left-hand side of the page. Cash and liquidity remains strong at nearly $700 million. Vessels on the books at cost are approximately $2 billion versus current market values of over $3.7 billion. And with about $657 million in gross debt at September 30th, this equates to a net loan to value of below 14%. Our debt at September 30th was 80% hedged or fixed rates, equating to an all-in weighted average interest rate of about 619 basis points or less than 150 basis points above today's SOFR rate. We continue to enhance the balance sheet to create the financial flexibility necessary to facilitate growth and returns to shareholders. We have $541 million in undrawn revolvers. Our nearest maturity in the portfolio isn't until the next decade. We continue to lower our breakeven costs and we share in the upside with double-digit returns to our shareholders. On the last slide that I'll cover, Slide 11, reflects our forward-looking guidance and booked-to-date TCE aligned with our spot cash breakeven rates. While I remind you that actual TCE during our next earnings call may be different, but as of today, we have a blended average spot TCE of about $27,200 per day fleet wide so far this quarter. On the right side of the slide, our forward spot breakeven rate is about $13,300 per day composed of a fleet wide breakeven of about $16,000 per day, less nearly $2,700 per day in time charter revenues. Based on our spot TCE booked-to-date and our spot breakevens, it looks like Seaways will continue to generate significant free cash flows during the fourth quarter and build on our track record of returning cash to shareholders. On the bottom left-hand chart, we provide some updated guidance for our expenses in the fourth quarter and our estimates for 2025. We also include in the appendix our quarterly expected off-hire and CapEx. I don't plan to read each item line by line, but I encourage you to use these for your modeling purposes. Now that concludes my remarks. I'd like to turn the call back to Lois for her closing comments.

Thank you, Jeff. On slide 12, we've provided you with Seaways investment highlights, which I encourage you to read in its entirety. In brief, International Seaways has built a track record of returning to shareholders, maintaining a healthy balance sheet and growing the company. Our total shareholder return is close to 400% since our inception, representing a 20% compounded annual return. Over the last 12 months, our combined dividend of $5.77 represent a yield of over 12%. We continue to make strides to keep our fleet below the global tanker average in what we see as the sweet spot for tanker investments and returns. We've invested in a range of asset classes, cast a wider net for growth opportunity and to supplement our scale in each class by operating in larger pools. We will keep our balance sheet fortified for aiming down turn in the cycle. We have over 540 million in undrawn credit capacity to support our growth. Our net debt is under 14% of the fleet's current value, and we have 34 tankers that are unencumbered. When our spot ships collectively earn over $13,400 per day, we breakeven looking forward 12 months. We expect to continue generating cash that we will put to work creating value for the company and for our shareholders. And with that said, operator, we would like to open the lines for questions.

We will now begin the question-and-answer session. And our first question comes from the line of Omar Nokta from Jefferies.

Thank you. Hi Lois and Jeff. Good morning. Just have a couple of questions. First… Yes, morning, Lois. Yes, I just wanted to ask kind of about the tanker market as it is now and products especially as we move here forward into the fourth quarter. Obviously, a theme in the second and third quarters was the crude tankers 'invading' and cannibalizing some of the product trades. There's a lot of talk obviously of crude rates improving. Their ships have now moved away from the product fleet, but rates have continued to remain soft here for products. Wanted to get a sense from you on what's driving that softness here? And then what do you see on the horizon potentially that could lead to a reversal?

Yes, absolutely, Omar. What's interesting? If you look at our spot performance on the MRs in the third quarter at $29,000 a barrel, it's just incredibly strong. And if you compare year-over-year to 2023, it was $26,500 in 2023 in the third quarter. So the MRs have just continued to really hold their own and defend 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 U.S. is putting out a lot of product and between we're not loading Russian barrels, but you're seeing a lot of Russian diesel and kind of Brazil, that's pretty long haul, the U.S. is defending. So as you look at the product, I think there's a sentiment in the market that they run their course. And yet, when we look forward to 2025, refinery margins are under pressure, and it looks like you're going to see some more EU refineries close down, one on the U.S. coast to send announced U.S. West Coast, but you still have the demand there for the product. So, it seems to us that I wouldn't write off the product side too early here as we look at 2025.

Thanks, Lois. And that makes sense. I guess, yes, the 29 clearly very strong rate to begin with in the third quarter. And actually pretty, I'd say, solid outperformance relative to what we've seen with the broader indices. I guess maybe just in general, because there's this general, I'll use the word malaise in a research note, but just in terms of kind of people's view on the sector. Even though rates are still healthy, you're generating good free cash flow. There just seems to be the sense of unexcitement. What are you seeing perhaps maybe just in the sale and purchase or in the term charter market specifically? Has any of that sort of equity kind of, I don't know, say sloppiness, but just unexcitedness? Has that kind of made its way into the physical market too? Or is it meant two completely separate things at this point?

I'm going to turn it over to Derek, our Chief Commercial Officer, just to opine on that Omar.

Thanks, Lois. Good morning, Omar. I think with rates coming off a little bit in the MR side specifically. We haven't seen that hit the term charter market that hard, yet if we will. I mean, what we're working through on the MR side, like even though has already talked about was is sort of invasion of the larger ships into the clean market. Like you said, most of them have gone back to the crude market, so we expect the clean markets to continue to improve. So and I think we're seeing that in term rates, but they haven't really come off all that much. S&P market, sale and purchase market did there, Omar, there is a decent amount of inventory out there for some of the older ships to sell. We haven't seen too much of a price decrease yet.

Okay. Thanks, Derek. And Lois, thank you. I'll turn it over.

The next question comes from Chris Robertson from Deutsche Bank.

Good morning, Lois and Jeff. How are you guys?

Good morning. Good. Thank you, Chris.

Good. I just wanted to ask a little bit of a geopolitical question here as it relates to some comments made by some Trump advisors here on potentially increasing energy sanctions on Russia. If that came to fruition, what do you think the impact would be on the tanker market on the product tanker side specifically, but also on crude?

Well, on the election, Chris, what we would say is that, impact on oil tankers could be more sanctions, reducing some uranium flow, maybe squeezing out some sanctioned parties and tankers and potentially some on Venezuela as well. Potentially, you could see more U.S. drilling and exports, early indicators, Brent's holding around $75. So that kind of equals the market thinking oil demand for 25. It seems like uncertainties just, even though we have certainty now in the elections, you still have uncertainty of policy developments feeding into an uncertainty of the political world. And we'll have to see how that feeds into action. I'm not sure how any of that is specifically made it related to the Russian flows other than potentially sanctioning, those who have not followed the price ceiling. Is that what you're talking about in reference?

It's hard to know exactly what the policies are. So I'm not sure, to be honest with you. Maybe I can ask some more company-specific questions so we don't have to scratch our heads here. Just on the $50 million for the repurchase program that remains, how are you guys thinking about that just in terms of you did $25 million of repurchases during the third quarter. Are you trying to target maybe a similar amount in the fourth quarter or is the opportunity here with shares trading at a significant discount to NAV, you would potentially look to try to do more in the fourth quarter?

Jeff, do you want to add anything?

Certainly. We utilized that tool in the third quarter and replenished it to 50 because we intend to keep that option available. We've focused on dividends as our preferred method for returning cash to shareholders, and we will continue with that approach as it has been successful for us. However, I think it is important to communicate that by recharging the repurchase program, we are keeping that tool available and are willing to use it, but there are no specific guidelines or target prices; we will simply monitor the market.

Sure. Okay. That makes sense. Thank you, Jeff. I'll turn it over.

Thank you, Chris.

The next question comes from Ben Nolan from Stifel.

Yes, hi. This is Frank Galanti on for Ben. Thanks for taking our questions. I wanted to ask about the closure of the Los Angeles refinery, and how does that impact the West Coast Panamax business?

I'm going to turn it over to Derek Solon just to opine on that one.

Thank you, Lois. Good morning. I appreciate the question. The closure of the refinery presents an interesting scenario for us in terms of both crude and product. The refinery is shutting down for business rather than demand-related issues. On the clean product side, we anticipate increased imports into PAD 5. Furthermore, much of the crude previously sourced locally will be affected. As TMX Vancouver starts ramping up its exports, it will create a need for more barrels to be diverted from further distances. Overall, this development should ultimately work in our favor.

Okay. Thank you. And then, switching gears a little bit, given sort of the recent pullback in the tanker market and equity values specifically, does that sort of make it harder to consider M&A? And how likely do you think see consolidation in the industry in the next year or two?

Interestingly, Frank, that could be influenced by Trump policy. Who knows? You had a very strict application of non-compete policies, none of the tanker market is very fragmented in any case. But perhaps we'll see friendlier stances towards M&A. And I do believe that you'll continue to see consolidation as regulations just get tougher and tougher on tanker owners. And you need to spend more and more on research and development and making sure you're keeping up on the sustainability front.

Okay. That makes sense. Thanks very much.

Thank you.

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

Thank you. Good morning, Lois. Good morning, Jeff.

Good morning.

Good morning.

Lois, you touched on the OPEC plus, holding firm on production cuts. 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 ton mile demand or demand for different classes of crude vessels?

Yes, that's an important question. By 2025, demand growth projections range from 1 million to 1.5 million barrels, with non-OPEC growth around 1.5 million as well. This aligns with the expected demand growth, and it will all come down to how much we can exceed that and whether OPEC plus will release additional barrels, which would impact the various segments. Currently, the situation is favorable, as non-OPEC production is largely in the west, particularly the Americas, with some barrels heading to Europe and others going east, which adds to ton miles. As OPEC increases their production, it will provide some support for our operations.

Great. Thank you. And, on the asset acquisition, you've got quite a bit coming online. How does that pipeline look for you? You have a tremendous amount of financial flexibility even with your debt amortization and your returning cash to shareholders.

No. That's great. I appreciate that. It's kind of sets me up to the one comment I wanted to really make on this call, which is at Seaways throughout '23 and in '24, what you see is us fully deploying all of our free cash flow, primarily through shareholder returns, secondarily through renewing the fleet. And, thirdly, 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, again to have that optionality of whether or not we want to pay down the non-amortizing facility. So we're putting all of our cash flow and work, and it just puts us in a great spot. We've got the LR1 buildings in the pipeline. We don't feel like we're in a happy situation. We're in a look for opportunity situation.

Great. Thank you, Lois.

Thank you.

Our next question comes from a representative at BTIG.

Hey, good morning. Thanks for taking my question. First, very simply…

Good morning.

First, very simply, what do you think gets ship recycling higher? The fleet continues to age, thanks to how well spot rates have done and possibly the needs of the dark fleet at the recent volatility and notwithstanding?

We could see some of that occur if tightened sanctions force some of these older vessels out from trading, making it difficult for them to return to legitimate markets, which could lead to some recycling. The tanker market remains strong. While we may hear terms like tepid and lukewarm, they're okay given the current situation. The pace of new orders has slowed significantly. Our order book is in the double digits, specifically around 12%, and it's spread out over the next four years. By 2025, we're looking at a backloaded schedule with only a small percentage of new deliveries coming soon. Overall, our fleet is aging, with tankers nearing an average age of 14 years as we approach 2025. This will necessitate renewal eventually, and we will need to determine how to phase out these older vessels.

I see. So a few catalysts coming up, maybe entering a little bit of sweet spot there with some of the vessels continuing to age. So, second, Jeff, for the vessels on sale leasebacks, the maturities are all pretty far out under those arrangements. But can you remind us if there are any upcoming repurchase options that could see Seaways accelerate deleveraging, especially considering where asset values are at the moment versus where most of these vessels are going to be financed at?

Some of the sale leasebacks are not advantageous, while others are at such favorable rates that they will likely remain for a long time. It is widely known that one of these has a purchase option coming up towards the end of 2025, which we will evaluate. So there is one in the latter part of the 2025 calendar.

Okay. Thanks very much for taking my question.

Does that answer your question? Yes. So it's actually specifically November 25, and then some of the others come up in '26. 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 '25 if we want to.

All right. Thanks, Jeff.

As we currently have no further questions in the queue, I will hand back over to Lois Zabrocky for any final remarks.

Thank you very much everyone for joining us, and we look forward to the next quarter as we build on Seaways' strong performance. Thank you so much.

That does conclude the International Seaways, Inc. third quarter 2024 earnings conference call. We appreciate your presence of participants. Have a nice day. You may now disconnect.