International Seaways, Inc. (INSW) Earnings

Management highlights

- Financial and Shareholder Return Highlights * Delivered record Q2 2026 results: $295 million adjusted net income ($5.91 per diluted share), $345 million adjusted EBITDA, and $261 million in free cash flow (a company record, $100 million higher than the prior best quarter). * Declared a record quarterly dividend of $5.05 per share, reflecting management's commitment to returning at least 85% of adjusted net income to shareholders. The firm returned $500 million to shareholders in the first half of 2026, after returning $1 billion over the prior 5 years. * Maintains strong balance sheet: $935 million in total liquidity at quarter end ($409 million cash, $526 million undrawn revolving credit capacity), net loan-to-value of 6%, 25 unencumbered vessels, and a total cost of debt of ~5.5% with almost all debt fixed or hedged. Fleet Strategy and Expansion * Ordered four additional LR1 newbuild vessels for delivery in H2 2028, priced at the same rate as orders placed three years prior despite industry-wide double-digit increases in newbuild pricing. When complete, the firm will hold 10 LR1 vessels in the Panamax International Pool. * Fully integrated Tankers International into the International Seaways business, and launched the consolidated Tankers International Suezmax pool, marking a strategic expansion of the firm's commercial pool operations. Market Fundamentals * Confirmed solid tanker demand fundamentals, supported by sharply increased ton-mile demand from route diversions caused by geopolitical disruptions in the Straits of Hormuz and Bab Al Mandeb, which handle ~25 million barrels per day of crude and oil products. * Drawdowns of strategic petroleum reserves have offset current supply disruptions, keeping commercial oil inventories and demand stable. Near-term inventory replenishment would add additional demand if disruptions ease, while prolonged disruptions could negatively impact global economic activity and oil demand. * On the supply side, new vessel deliveries are offset by a large aging global fleet: ~30% of the world's tanker fleet is already over 20 years old, and that figure is expected to exceed 50% by 2030, driving large-scale required fleet renewal through the decade. Management remains disciplined in evaluating newbuild investments based on long-term fundamentals.

Guidance

- As of the call date, ~48% of Q3 2026 expected revenue days have been booked at a blended spot TCE of $61,000 per day across the fleet; final Q3 TCE may vary as additional open periods are fixed through the quarter. - Updated full-year 2026 expense guidance, along with quarterly expected off-hire days and capital expenditure projections, are provided in the presentation appendix for modeling purposes. - Management maintains a constructive long-term outlook for the global tanker market based on balanced supply and demand fundamentals.

Segment performance

Crude Tankers: Generated total revenue of $253 million, which includes $51 million in profit sharing from time charter contracts. Profit sharing arrangements boosted blended BLCC earnings to over $150,000 per day across both spot and time charter vessels. VLCC time charters with profit share delivered an average of $214,000 per day in the quarter, versus a base rate of approximately $30,000 per day. Lightering: Contributed $13 million in total revenue, and $5 million in EBITDA, with $3 million in vessel expenses, $4 million in charter hire, and $1 million in G&A. LR1 Panamax: LR1 vessels were standout performers in Q2 2026, with the Panamax International Pool averaging over $70,000 per day over the prior nine months. MR product tankers posted average rates of almost $35,000 per day in the quarter. Company-wide: Blended fleet spot TCEs (weighted by revenue days) hit $79,000 per day in Q2 2026, up from $27,500 per day year-over-year and $55,600 per day in Q1 2026. The fleet-wide spot cash breakeven remains below $14,000 per day.

Risks & headwinds

- Ongoing and threatened geopolitical conflicts, particularly in the Middle East (including disruptions in the Straits of Hormuz and Bab Al Mandeb), create significant market uncertainty. If these disruptions are prolonged, they could weigh on the global economy, reduce oil demand, and negatively impact tanker market rates. - While current new ordering activity is broadly balanced against the needs of an aging fleet, unexpected surges in new vessel ordering could negatively impact long-term supply-demand balance for tankers. - Tanker market rates are inherently volatile and will continue to evolve with changing market conditions, meaning near-term booked rates may not hold through the full third quarter. - Forward-looking statements are inherently uncertain, and actual results may differ materially from projected results due to risks and factors outside of the company's control.

Analyst Q&A

• Q: How are production trends in the Atlantic Basin and current sector dislocation affecting LR1 and Suezmax rates, and what is the outlook for product tankers? /

  A: Geopolitical disruptions have pulled larger vessels east, creating dislocation that created strong market opportunities for LR1s, which were standout performers in Q2. Crude production is stable and growing across the Atlantic Basin (US, Guyana, Brazil, Argentina), with growing demand from East Asia that supports strong long-term fundamentals. For product tankers, Russian refinery disruptions and inconsistent Middle Eastern product exports have left supply tight, with high US product exports (1.5 million bpd diesel, 1 million bpd gasoline) concentrated on MR tankers. China has resumed product exports (~800,000 bpd) which also supports the MR market, and rates remain strong at almost $35,000 per day, with continued strong demand and limited available capacity.

• Q: What is the strategic plan for the expanded LR1 fleet, and what is the outlook for the profit share structure of the VLCC time charters? /

  A: The four new LR1 newbuilds, delivering in 2028, will replace older aging vessels in the fleet to complete a full series of 10 sister ships. The LR1 fleet is focused on its established, profitable niche in Latin American trade that fits the vessel size, and the firm plans to continue operating in this niche. For VLCC time charters with profit share, investors should assume profit share will align with global VLCC average spot rates, as the firm's limited VLCC fleet operates across multiple global routes and has remained fully utilized.

• Q: With International Seaways' strong balance sheet and liquidity, will the firm consider expansion outside its core crude and product tanker business, and what is the potential impact of Hormuz bypass projects on ton-mile demand? /

  A: The firm's strategy remains focused on its core oil tanker space, where it has a proven competitive advantage, and it will stick to this core for the time being, while still evaluating niche opportunities within the segment. While Gulf producers are moving quickly to develop Hormuz bypass projects, no long-term fixtures linked to these new routes have been observed to date. Currently, the market is seeing increased demand for secured tonnage, such as the recent purchase of VLCCs by Abu Dhabi, that is pushing vessel prices higher, and long-term capex on bypass projects has not yet translated to new long-term charter activity.