International Seaways, Inc. Q4 FY2024 earnings call

• Fleet modernization: Sold two oldest VLCCs and paid $3 million in cash for three ECO MRs built in 2015, aiming to reduce vessel ages and enhance fleet efficiency.
• Balance sheet: Total liquidity was $632 million, with $157 million in cash and $475 million on the revolving credit facility; net loan-to-value ratio below 16%; spot breakeven rates about $13,700 per day.
• Tanker demand drivers: Oil demand growth near term at historical rate of ~1% per year, crude production growth from Americas supportive of tanker demand; geopolitical situations and inventory changes impact tanker market.
• Fleet age: 45% of the fleet headed towards 20-plus years, with ~900 ships already 20 years old and ~1,500-plus vessels turning 20 over the next few years, supporting strong tanker earnings.
• Capital allocation: Returned over $300 million to shareholders in 2024, with $0.70 dividend announced for March, payout ratio around 75% going forward.

For the fourth quarter, net income was $36 million or $0.72 per diluted share. Excluding a loss on vessel sales, adjusted net income was $45 million or $0.90 per diluted share, and adjusted EBITDA was $95 million. The lightering business had over $9 million in revenue in the quarter, contributing nearly $3 million in EBITDA in the fourth quarter and approximately $20 million annually in 2024.

• TCE: Blended average spot TCE of about $26,500 per day fleet-wide and 70% of first quarter expected revenues; can generate significant free cash flow during the quarter.
• Expenses: Updated guidance for expenses in the first quarter and estimates for 2025, including quarterly expected off-hire and CapEx.
• Breakeven: Forward spot breakeven rate about $13,700 per day, composed of fleet-wide breakeven of about $16,200 per day less nearly $2,500 per day in time charter revenue.

• Factors causing actual results to differ from expectations include those in annual report on Form 10-K for 2024 and other filings, such as geopolitical conflicts, changing global regulatory environment, and company's ability to achieve financing and other objectives.

Q: Ben Nolan asked about charter-out strategy, particularly regarding crude tankers and the gap between spot and charter markets.

A: Lois Zabrocky mentioned 14 time charters out of 78 vessels, and Derek Solon stated they continue to evaluate time charters with the right partners, term, and rate.

Q: Omar Nokta inquired about dividend payout ratio and future expectations, and fleet transaction implications.

A: Jeffrey Pribor said shareholders should expect a minimum 75% payout ratio, and Lois Zabrocky explained the vessel swap was to drive down fleet age and not deemphasize crude but shed older inefficient ships.

Q: Chris Robertson asked about breakeven components and LR1 segment competitiveness.

A: Jeffrey Pribor discussed keeping costs in line, and Derek Solon noted the LR1 segment continues to outperform with a strong niche despite some rate decreases.

Q: Liam Burke asked about SUEZ MAX outlook and cash return methods.

A: Lois Zabrocky said SUEZ MAXs will follow VLCCs' ride with market components, and Jeffrey Pribor mentioned payout ratio is primary cash return method but flexibility for share repurchase exists.

Q: Sherif Elmaghrabi asked about charter sentiment and Red Sea transit.

A: Lois Zabrocky noted charters may have incremental flex based on tonnage availability, and William Nugent stated no current pressure from charters for Red Sea transits due to market seeking stability in the region.