International Seaways - Earnings Call - Q1 2021

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by, and welcome to the International Seaways First Quarter twenty twenty one Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr.

James Small, General Counsel. Please go ahead.

Speaker 1

Thank you. Good morning, everyone, and welcome to International Seaway's earnings release conference call for the 2021. Before we begin, I would like to start off by advising everyone with us on the call today of the following. During this call, 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, 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 the ongoing coronavirus pandemic, the company's strategy, the timing and likelihood of the completion of our announced merger with Diamond S Shipping, any plans to issue dividends, any anticipated synergies or other benefits from the proposed transaction and the party's respective prospects, purchases and sales of vessels, construction of new build vessels, and other investments, anticipated financing transactions, expectations regarding revenues and expenses, including vessel charter hire and G and A expenses, estimated bookings and TCE rates in the first quarter, 2021 or in other periods, estimated capital expenditures in 2021 or other periods, projected scheduled dry dock and off hire days, the company's consideration of strategic alternatives, the company's ability to achieve its financing and other objectives, and other economic, political, and regulatory developments around the world.

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 COA's actual results to differ from expectations include those described in its quarterly report on Form 10 Q for the 2021, our 2020 annual report on Form 10 k, our recently filed registration statement on Form s four, and in other filings that we have made or in future may make with the US Securities and Exchange Commission. With that out of the way, I would like to turn the call over to our president and chief executive officer, miss Lois Zabrocki. Lois?

Speaker 2

Thank you very much, Jane. Good morning, everyone. Thank you for joining International Seaways earnings call to discuss our first quarter twenty twenty one results. The first quarter was transformational for International Seaways. We took important steps to unlock significant value for our shareholders.

This includes our highly accretive merger agreement that will create an industry bellwether with enhanced scale and capabilities. We are again capitalizing on an attractive opportunity to further renew our fleet at a cyclical low point for the benefit of shareholders. If you would turn to Slide four, we review the compelling value creating transactions and our first quarter financial results. Starting with the first bullet, our all stock merger agreement with Diamond S brings together two leading US based diversified tanker owners with long term customer relationships, deep cultures of achieving stringent safety, operational standards, and strong governance. With this, we expect to deliver a number of compelling strategic and financial benefits to our shareholders and to stakeholders of both companies.

The combination of International Seaways and Diamond S doubles our net asset value and triples the size of our fleet to 100 vessels. We are creating the second largest US listed tanker company by vessel count and the third largest by deadweight. We expect to solidify our power alley in the large crude sector focused on Versus and Suezmaxes and to create a power alley in the MR product sector. Among other notable benefits, we expect the merger to be highly accretive to both earnings and cash flow per share with the estimated annual cost of synergies $23,000,000 and revenue synergies of $9,000,000 We will increase our equity market capitalization and our liquidity, which we anticipate will provide an opportunity for a rerating of our equity valuation. We preserve our significant financial strength and maintain one of our lowest, the lowest net leverage ratios in Global Shipping.

As part of this attractive transaction, we have continued to ensure the return of capital to our shareholders. This is highlighted by the $31,500,000 special dividend to be paid to shareholders immediately prior to completing the merger. We reaffirm our commitment to paying a quarterly dividend and opportunistically executing on our $50,000,000 share repurchase program following the close. On the second bullet, we highlight our dual fuel VLCC project. We have contracted to build three dual fuel LNG VLCCs from top tier Korean shipyard DSME for delivery in early twenty twenty three.

We are executing our balanced and accretive capital allocation strategy. Adding these state of the art vessels on seven year time charters to Shell provides a strong stable cash flow with a base rate and profit sharing that allows us to capture upside. Importantly, these tankers are well suited to adhere to future environmental regulations throughout their life. They're 40% more fuel efficient than a ten year old VLCC and 20% more efficient than a modern eco VLCC. In line with our ESG principles, these are highly efficient ships that will surpass today's IMO energy efficiency design index, and they will substantially outperform the twenty twenty five EEDI targets.

This builds on our signing of the first sustainability linked refinancing in the industry, which was completed at the beginning of last year. We're proud to continue to be at the forefront of sustainability initiatives in the maritime sector. We believe the addition of these vessels at attractive prices represents a compelling opportunity to once again renew our fleet at the bottom of the cycle. Newbuilding VLCC prices have risen by close to 10% subsequent to our contract date. This purchase is consistent with our track record of opportunistically deploying capital for growth since becoming an independent public company more than four years ago.

On the final bullet of this slide, our first quarter net loss was $13,000,000 or $0.48 per share. In a weakened rate environment where oil inventory destocking adversely impacted tanker demand, we generated an adjusted EBITDA of $11,000,000 It's important to note that as of the end of the quarter, we had ample total liquidity of $212,000,000 including $172,000,000 in cash. On slide five, we discussed our disciplined and accretive capital allocation track record. This chart highlights our success investing over $900,000,000 to renew our fleet at the low point in the tanker cycle. As the chart on the slide shows, the nine ships acquired at the bottom of the cycle, which includes six VLCCs acquired in 02/18 for $434,000,000 and two Suezmaxes and one VLCC acquired in 2017 for a combined $169,000,000 have materially appreciated in value since their acquisition on an age adjusted basis.

Most importantly, these nine shifts contributed a cumulative $225,000,000 in operating income through the end of the first quarter. Further illustrating our ability to adeptly identify attractive fleet renewal opportunities, you can see that we ordered our Shell Project newbuildings at a cyclical low point as well. And as I just mentioned, newbuilding prices are on the rise. If you'll turn to slide six, we provide an update on oil supply and demand. OPEC has announced increased production, and Saudi Arabia will roll back its voluntary cuts.

This will amount to an additional 600,000 barrels per day in May, 700 in June, and 800,000 barrels per day in July. Based on its April forecast, the IEA estimates that 2021 oil demand will be up by 5,700,000 barrels per day. This is actually an increase from the last report of 300,000 barrels per day. The EIA's 2021 demand forecast is even more robust. They expect demand to average 97,700,000 barrels per day this year.

Consistent with this recovery in demand, the EIA expects global oil inventory will fall by 1,800,000 barrels per day in the first half twenty twenty one. We believe that this continued straw drawdown is what was needed to set the stage for tanker market recovery. And when combined with the OPEC plus production increases, a surge in demand for oil as the world begins to open up and vaccinations are administered globally. This all signals improvement in the tanker market. Our positive view of the long term outlook for crude end product tanker demand is one of the major reasons that we are so excited for our merger with Diamond S.

On slide seven, we examine developments in the clean product market. Due to the COVID-nineteen slowdown in global demand during the 2020, refinery outages globally approached almost 12,000,000 per day, recovered somewhat in the second half of the year. Record cold temperatures in The United States in the first quarter led to a similar increase in refinery outages. These outages have since decreased, and refineries are running close to five year highs. The US Gulf refinery utilization rate only yesterday popped over 90%.

This is a very strong indicator. This allows for increased diesel oil exports from The US Gulf, and we're also seeing increases in gasoline demand in The United States where we're very close to 9,000,000 barrels per day. We've been seeing over a million barrels a day of gasoline imports into the East Coast. All of these recent moves bodes very well for the MR sector, and we see that the spot market is starting to increase. Turning to slide eight, we take a look at ship supply.

We've mentioned this previously, and it continues to be the case that overall tanker order book remains at historic lows. This is reflected in the 31 VLCC orders in 02/2019, same amount in 2020, and 27 orders to date this year. We believe that uncertainty regarding the market as well as decarbonization regulations And higher steel input costs and increasing new building prices are tempering the orders. On the bottom half of the slide, we take a look at the potential for recycling. There's a number of candidates based on the aging global fleet.

You can see in the chart on the right hand side of the slide, nearly 20 of the existing VLCC fleet is now at least seventeen and a half years old, and 8% are 20 or older, representing the majority of the VLCC order book. Another nine v's will reach 20 years old in 2021. As each ships reach these deadlines, the expenses increase and ballast water treatment installations loom. This greater capital investment is required to keep them trading. Based on these combined dynamics, the potential for recycling has been building.

Only four VLCCs were recycled in 2019 and 2020. We expect to see recycling increase particularly given the current low spot rate environment and the increase in recycling prices. I'd now like to turn it over to Jeff to give the financial review. Jeff?

Speaker 3

Thanks, Lois, and good morning, everyone. Let's move directly to reviewing the first quarter results in more detail. Before turning to the slides, let me quickly summarize our consolidated results. In the first quarter, we had an adjusted EBITDA of $10,700,000 Net loss for the first quarter was 13,400,000.0 or $0.48 per diluted share compared to net income of $33,000,000 or $1.13 per diluted share in the 2020. Now please turn to Slide 10.

I'll first discuss the results of our business segments beginning with the Crude Tankers segment. Time charter equivalent or TCEs for the Crude Tankers segment were 36,000,000 for the quarter compared to $89,000,000 in the first quarter of last year. The decrease primarily resulted from the impact of lower average money rates in the VLCC, Suezmax, Aframax and Panamax sectors. Turning to the Product Carrier segment, TCE revenues were $9,000,000 for the quarter compared to $31,000,000 in first quarter of last year. This is due to lower period over period average daily blended rates earned by the LR2, LR1 and MR fleets.

In addition, our product revenues were impacted by a decrease in LR1 revenue days as a result of increased off hire for scheduled dry docks and a decrease in MR revenue days due to the redelivery of four time chartered in MRs to their owners between March 2020 and July 2020. Overall, as reflected in the chart top left Overall, as reflected in the chart top left, consolidated TCE revenues for the 2021 were $45,000,000 compared to $120,000,000 in the 2020. The decrease was principally driven by substantially lower average daily rates earned across the fleet for this quarter compared to last year's first quarter. Looking at the chart at the top right of the page, adjusted EBITDA was $11,000,000 for the quarter compared to adjusted EBITDA of $74,000,000 in the first quarter twenty twenty. And again, the decrease was principally driven by lower average daily rates.

On the bottom half of the page, we look at our results over the last twelve months on a year over year basis. Consolidated TCE revenues and adjusted EBITDA for the last twelve months ended 03/31/2021 were three twenty seven million dollars and $157,000,000 respectively, compared to $356,000,000 and $192,000,000 for the prior year LTM period. Now turning to Slide 11, we provide a first quarter review and second quarter twenty twenty one earnings update. For a look at results in Q2 thus far, with 63% of our q two spot days for VLCCs, they've been done at an average of approximately $15,200 per day. 75% of our available Suezmax spot days at an average of 16,000 per day, 37% of our available LR two spot days at an average of $11,100 per day, and 49% of our available Panamax spot days at an average of approximately $21,000 per day.

On the MR side, with 65% of the second quarter accounted for, spot days are approximately $12,600 a day. When we look at it on a blended basis of time charters and spot, and as a concrete example of the benefits of our opportunistically executed time charters done last year, if you look at the number on the top right hand side of this page, you'll see that the combined spot and time charter rates for our VLCCs are $19,800 for Q2 with 67% of days accounted for. Now I'd like to turn to slide 12. The cash cost TCE breakeven for the twelve months ended 03/31/2021 are illustrated on this slide. International Seaways overall breakeven rate was $21,000 per day over the last twelve months.

These rates are the all in daily rates our own vessels must earn to cover vessel operating costs, dry docking costs, cash G and A expense, debt service costs, which means scheduled principal amortization as well as interest expense. After taking into consideration distributions from our FSO JV and the fixed time charter revenue, the overall breakeven rate for the last twelve months dropped to $17,500 a day. We've also now on this slide shown breakeven excluding principal amortization for reference. In this case, the overall fleet wide breakeven fell to $15,000 a day. On the far right hand side of the page, the bar chart shows the all in daily breakeven cost for the next twelve months.

Taking into consideration contracted revenue from the SSO and our time charters, the overall breakeven rate is $18,900 per day. At this time, I'd like to give cost guidance for the year for your modeling purposes. Please note this is not taking into account expected cost synergies following the anticipated close of the merger. For the remainder of 02/2021, we expect regular daily OpEx, which includes all running costs, insurance, management fees, and other similar related expenses for our various classes to be as follows. For VLCCs, $8,900 per day.

For Suezmax, $8,000 per day. For Aframax, $8,200 per day. For Panamax, 7,900. And for MRs, $7,600 per day. In each case, excluding any impact attributable to COVID nineteen.

Further, we expect drydock and stock and CapEx expenses to be $24,900,000 and $38,400,000 this year. For details on that, you can look off hire days, you can refer to slide 16 in the appendix for an update. Continuing with cost guidance, we expect 2021 cash interest expense will be about 24,800,000.0, which compares to an actual cash interest expense of $30,800,000 in 2020. For the year, we expect cash G and A to be in the region of $25,900,000 and finally, we expect about $20,800,000 in equity income from JVs, dollars 65,700,000.0 for depreciation and amortization, which is about $9,000,000 below last year. Now if I could ask you to turn to Slide 13, we look at our cash bridge.

Moving from left to right, we began the first quarter with total cash and liquidity of $256,000,000 During the quarter, adjusted EBITDA was $10,700,000 equity income from JVs was a decrease of 5,000,000 and the cash distributions from JVs was 3,000,000. We expect we expanded $12,000,000 on dry docking and CapEx, cash interest and scheduled principal payments under debt was 21,000,000. And finally, taking into account the $2,000,000 quarterly dividend and a negative impact to working capital and certain other charges of 14,000,000. The net result was that we ended the quarter with approximately $172,000,000 of cash and a $40,000,000 undrawn revolver yielding total liquidity of $212,000,000 Now please turn to Slide 14. I'd just like to briefly touch on our balance sheet.

As of March 31, we had $1,600,000,000 of assets compared to $450,000,000 of long term debt. In addition, we have a $40,000,000 revolving credit facility that remained undrawn as of March 31. As you can see on the right hand side, our net debt to total capital stands at 26%, where our net loan to value stands at about 33%, and our last 12 adjusted EBITDA was a strong $157,000,000, and therefore, our net debt to EBITDA for the last twelve months was 2.23x. That concludes my remarks. Lois, I'd like to turn the call back over to you.

Speaker 2

Thank you very much, Jeff. As I summarize our first quarter, suffice it to say, this has been a truly instrumental and transformational quarter for International Seaways. We signed a merger agreement with Diamond S, and we contracted to build three dual fuel LNG VLCCs. Our all stock combination with Diamond S will double International Seaways' net asset value. It will triple the size of our fleet.

It will create an industry bellwether that will rank as the second largest US tanker owner by ship count. We anticipate significant accretion to our earnings and our cash flow per share. We have a forecasted annual cost savings of synergies of $23,000,000 and revenue synergies of $9,000,000 We expect to maintain one of the lowest net leverage ratios in the global shipping market and enhance our trading liquidity through a larger market capitalization. We continue to demonstrate our commitment to returning capital to investors. This is highlighted by our intention to pay $1.1 special dividend to International Seaways shareholders immediately prior to the completion of the merger.

In addition, we remain committed to paying a quarterly dividend and opportunistically drawing on our $50,000,000 share repurchase program authorization to increase further value post merger. Complementing this highly accretive merger, we're excited to partner with Shell, market leading counterparty, on our agreement to build three LNG dual fuel VLCCs for delivery in early twenty twenty three. In addition to the seven year time charters providing strong stable cash flows and added upside, these highly efficient vessels offer significant environmental benefits and further reflect our commitment to ESG in the maritime sector. This is the latest example of Seaways capitalizing on an opportunity to renew our fleet at a cyclical low point. This is consistent with our disciplined and accretive capital allocation track record.

Going forward and based on the two important transactions we entered into in the first quarter, we are in a strong position to take advantage of positive long term TANFER fundamentals and further create enduring value well into the future. This concludes our prepared remarks, and we'd like to open it up for questions. Operator?

Speaker 4

Thank you.

Speaker 0

Your first question comes from the line of Randy Giveans from Jefferies. Your line is open.

Speaker 5

Thanks, operator. Howdy, Lois, Jeff and David, how's it going?

Speaker 2

Very good. Good morning, Randy.

Speaker 5

Good morning. All right. Two questions for me. I guess first, you know, there's been some chatter on maybe your average fleet age, being a little older than peers. That said, you know, doesn't seem to be a material negative as you have now, I guess, much less obsolescence risk, right, when it comes to IMO 02/1930.

So how do you feel about your fleet, possible fleet renewal in terms of maybe some sales candidates and additional modern acquisitions?

Speaker 2

Okay, Randy. So just, you know, kinda taking that and starting to address it first with fleet age. You know, since International Seaways became independent four and a half years ago, Derek Thorn and his team have sold over 21 older vessels, and they've done extremely well. So, you know, we've continued to modernize the fleet. And, you know, as we look forward, right now, if you were to look at vessel values, which is just an independent service on ship valuations, you'll see that secondhand values are are ticking north, you know, really daily.

So as we look forward to 2021, we believe that the conclusion of the merger with Diamond S, the ships are going to start earning higher TCEs and also be at a higher valuation. And, you know, we will look all the time at every ship as to, you know, whether or not we selectively sell any vessels. So we'll just continue the same disciplined approach that we've had all along. And when we look at buying more modern ships, I I would say that at the moment, I I think International Seaways, we will, you know, are focused on concluding our merger, building our new buildings, and that's gonna put us in really good shape.

Speaker 3

Well, if I could just add one one comment. Randy, I think we're really happy with with what I would call the portfolio of ages we have in our fleet. You know? It's it's a really nice mix of the shell new buildings, other modern vessels, sort of, you know, eight to ten year vessels, thirteen, fourteen year old age vessels. It really is the fleet we wanted to put together for this point in the cycle.

Speaker 6

Okay. Makes sense. And then I

Speaker 5

guess lastly, following up on the upcoming merger with DSSI, what are your updated thoughts on the FSO venture? I know we've asked about it before, but, at these levels, are you more likely to sell your 50% ownership, buy your own NAVs 50% ownership, or just kinda keep your current 50% as is?

Speaker 2

So, you know, regarding the FSO, we've been you know, we continue to work very closely with our joint venture partner, Euronav, and it's it's a very positive discussion with them. And we are you know, we look at opportunities to monetize the FSO, and we're continuing to do that. We're not in any particular rush, and, you know, we believe that that there's significant value potentially to be unlocked on those FSOs.

Speaker 5

All right. Well, that's it for me. Thanks so much.

Speaker 2

Thank you, Randy. Thanks.

Speaker 0

Your next question comes from the line of Omar Nokta from Clarksons Plateau. Your line is open.

Speaker 6

Hi. Thank you. Hi, Lois. Hi, Jeff.

Speaker 2

Hey, Omar.

Speaker 6

Hi there. I I sort of have just a general question, you know, about, and this is maybe a bit bigger picture, but sort of like the the use of pools, in the future, especially as it's really a big part of how you deploy your ships and soon to be, you know, the 100 ships you'll have, you know, following the proposed merger, with Diamond S. You know, we're getting to a place where ship, you know, ships are becoming much more differentiated, more so I think than, say, in the past. You've got eco versus noneco, scrubber, non scrubber, and, you know, now dual fuel as you're investing versus traditional bunkers. How do you see that just affecting pools and and how they operate, going forward, and particularly, you know, for for Tankers International?

Any thoughts on that?

Speaker 2

You know, Omar, that's that's a great point. You know, Tankers International has been around for over twenty years, and and the International Seaways owns half. Euronav owns half. And I think for pools in the future to be successful, they actually will have to look a lot the way that TI does, which is a pool that is really a lower cost overhead type pool and has to be it has to be a very close relationship between the owners and the pool because as we need to capture more data on vessel performance, we have to enhance how the ships are are performing for the company's technical and commercial needs to be closer than ever. So I think TI is actually extremely well positioned, and there's a high level of collaboration between the the the owners in the pool and the commercial and the technical teams.

And you're gonna have to see that in order for pools to thrive in the future.

Speaker 6

Yeah. That that makes sense, Lois. And I think it's how do you think the, you know, the potential for, say, carbon tax, to play into this? You know, we've got the EU is discussing it. You know, The US is increasingly coming on board with that idea.

And, you know, I guess it it sort of seems that you you'll have the pool making decisions on, you know, maximizing you know, maximizing rate and earnings potential. And then the owner might be seeing an outside carbon tax bill. And so I guess, you know, in this as this discussion on carbon tax starts to really gain steam here as there's more clarity, you know, do you see that as being, a risk within pools? Or I guess it just sort of comes down to what you just said, which is closer collaboration between the pool loan operators and and the owner.

Speaker 2

Well and you know what, Omar? I think, you know, in our industry, there's a lot of innovation and, you know, the pools are are populated by really sharp commercial people. And you we're starting to see carbon monitoring desks in within the pools themselves. And, you know, because all of us as owners realize that we need to, you know, be paying close attentional you know, attention and be part of the solution here moving forward. So I think that you're hitting on what will be the biggest growth area in, you know, in trading probably in the future, which is gonna be carbon tax, and how critical it is for all of us as owners to be part of that conversation as this develops.

Speaker 6

Yeah. No. Definitely very interesting to see how things develop on that front. You know, and and just maybe one follow-up just maybe to Randy's question about the the FSOs. It's been this ongoing discussion.

It feels like every quarter it comes up. Is there a way maybe that the JV is leaning when it comes to monetizing it? Is it is it outright selling the ships, or do do you think, you know, securitizing them with, you know, securitizing the cash flow with some sort of debt facility? Any way you're leaning so far?

Speaker 2

Well, you know, it's funny, Omar, because it it does seem like a long time, but we actually just concluded these two JVs for an additional ten years to 2032 in the fourth quarter. So so it would you know, it's a fairly recent achievement. And and I would say that we are still evaluating, you know, all different opportunities, and we're gonna work together with our partners to make sure that we maximize our our outcome on the FSO. So like I said, you know, we've got two really strong teams working on that, and, you know, we'll look at whatever's going to bring us the absolute best value.

Speaker 6

Okay. That's clear enough. Thanks, Lois. Appreciate it.

Speaker 2

Thank you.

Speaker 0

Your next question comes from the line of Magnus Fear from H. C. Wainwright. Your line is open.

Speaker 7

Yes. Good morning, Lewis and Jeff.

Speaker 6

Hi, Jeff.

Speaker 7

Couple of questions here. First, going to Slide 11. Thanks for

Speaker 6

the liquidity.

Speaker 7

Looks like you're able to capitalize on the spread between low sulfur and high sulfur. Can you talk a little bit I mean, is the first quarter I've seen that breakout. Can you talk a little bit about the challenges over the last year with since the IMO twenty twenty came into regulation? And what you expect going forward there as far as if there are any challenges that you can address?

Speaker 2

You know, Magnus, I I would say that, you know, one challenge is that that true to form, shipping never does exactly what you think. And, you know, the original differentials that we had expected to be between the low sulfur fuel oil and the conventional fuel were more narrow. However, presently, and it has been, you know, maybe now for about four or five months, maybe maybe that's overstating, but we've been at about a 100 per ton. So as you can see, the differential is, something like 5 to $6,000 per day between the scrubber Zs and the the non scrubber fitted Zs. That that critical outperformance is just when we need it most at at this moment in the cycle.

And then, Bill, maybe I would ask you, our head of operations, Bill Nugent, you know, from from a fuel perspective, I mean, the fuel has been available. The heavy sulfur and the and the low sulfur fuel has been available. Have have we seen quality issues, or have we been able to overcome these largely to date?

Speaker 8

Hello, Magnus. Thank you, Lois. The on the heavy fuel side, for the ships with, exhaust gas cleaning systems, we've been very fortunate. We've not had any issues, getting fuel or any quality issues there. It it's actually been quite stable and and, quite quite okay.

On the very low sulfur side, on the the IMO twenty twenty fuels, we've seen a lot more variation in the nature of the fuels, which is something that was anticipated by the market, and we certainly anticipated it. But, again, with some good planning, we've been able to manage through those issues. So, no, Lois, I think, generally, we've come through okay.

Speaker 2

Thank you, Bill.

Speaker 3

And can I just jump in with one Magnus, before you move on, just for because this is for help for everybody and planning purposes, that scrubber days in in in q two, that's just gonna be twenty seven days? Sorry. The non scrubber days in q two, just twenty seven. So I wanted to get that out there. Or twenty four.

I apologize. That's the correct number.

Speaker 7

Okay. Thanks for that color. I mean, do you I'm I'm with the spread now, you know, a little over a $100, do you guys take a view on that, or is there maybe some thoughts on locking in that spread?

Speaker 2

You know, we we constantly monitor it. I I wouldn't say that we're looking to lock it in at the moment only because, you know, as you've seen in 2021, oil prices have been rallying and and increased significantly, and the spread tends to widen as you see the prices move up. So at at the moment, I I think we'll let it ride, but we do monitor it.

Speaker 7

Alright. Good. And just lastly, I was looking through the slide deck here. I can't find anything on the line ring business here, I guess, in the last couple years, but maybe you can touch a little bit on what's going on there. I mean, what's going on there during the last year?

I mean, as far as activity level, seems like The US crude exports are are still pretty robust, and I guess we've addressed a lot of the pipeline capacity issues.

Speaker 2

So we closed 2020. You know, our I believe our EBITDA was over 4,000,000 for lightering. However, we have seen lightering be COVID affected as you've seen, you know, the The US demand numbers were down. I mean, this week, just yesterday, we see that The United States exported over 4,000,000 barrels per day of crude in, you know, in the in the last week. Now that's the first time we've seen that in in a very long time.

You know, in The United States, you know, we're looking at GDP maybe six and a half percent in 2021, high level of vaccination penetration and, you know, gasoline usage is, as I mentioned, almost 9,000,000 barrels a day. It's up 2,000,000 barrels a day from last year, but still down one from 02/2019. So when you look at lightering, it is picking up, and it's getting busier. It was certainly COVID affected just like the rest of the world, where when you saw fewer imports and and lower exports in and out of The United States, it was COVID affected as well.

Speaker 7

Okay, great. Thank you.

Speaker 2

Thank you.

Speaker 0

Your next question comes from the line of Greg Lewis from BTIG. Your line is open.

Speaker 4

Hi. Thank you, and good morning and good afternoon, everybody.

Speaker 6

Lewis, I I guess I just

Speaker 4

wanted to follow-up on on on Magnus' question, and welcome back, Around the lightering, it it seems like it's funny how time flies. It seemed like forever ago, we had heard a lot about whether it's an oil company or alternative investor thinking about building VLCC export terminals. Any kind of update there in terms of as we think about that push and pull on the lightering business? Have those projects moved forward? Have all have all kind of been of pushed to the right like everything else?

Speaker 2

Yeah. A lot of those projects have been pushed to the right, Greg. You know, we we we do see where Suezmaxes can now load and also go out and and, you know, fill up a v. But lot of those projects have been pushed to the side. It's interesting.

We do a lot of lightering in Panama. Very biz you know, busy in the in The Bahamas. The West Coast was affected by COVID and imports, which is now starting to pick up. And, of course, The US Gulf is the biggest hub for lightering. And and there are, you know, projects that you know, to to deepen and widen, but each one is specific.

And, you know, I have to follow-up with you, Greg, to kinda get into, you know, the the specific different projects. But a lot of them, know, there were really too many that were on the boards. And then with COVID, a lot of those have gotten delayed.

Speaker 4

Okay. Okay. Great. And then and then I wanted to follow-up on on what Omar was was discussing, but but from a different angle. You know, clearly, the the the the transaction with BS Diamond S hasn't hasn't closed yet.

But but, I mean, you are gonna be taking on, you know, a large pool of MRs and and Mhmm. And and I'm realizing that those were already managed. How how are we how is INSW thinking about, you know, the management and and and the opportunities for those vessels just given that, you know, some of those MRs are, you know, are a little bit older and and and might be facing issues. Is is there any thought about, you know, the company kind of partnering with one older MR owner? Or I mean, how are we thinking about that, I guess, is is probably my question.

Speaker 2

Yeah. Well and and as I'm sure many of you are aware, you know, Diamond S MRs are commercially managed by Noriant in April, and also another contingent ship is commercially managed by Capital. And I think on both fronts, you you you know, you've seen them be able to increase, you know, their, you know, marketability or or to stand pretty strong. I think in Orient, been posting quite strong results. So, you know, we we are always looking and benchmarking at the best places to trade the ship.

I think that you as the market recovers, you will see International Seaways take a larger portion of our fleet to look at time charters as the market strengthens into itself. You know, when you weren't running a 100 vessels, you know, maybe we won't have such a high percentage of of spot exposure. And then we will opportunistically look at sales, you know, as you do all the time. So it's it's there's not one answer. It's it's a part of an approach that involves making sure, you know, while you have the ships, they're absolutely earning the best they can and then in best hands they can be.

And then you look at opportunistically pruning the fleet moving forward.

Speaker 4

Okay, great to hear. Thank you very much.

Speaker 2

Thank you, Maggie.

Speaker 0

Your next question comes from the line of Liam Burke from B. Riley. Your line is open.

Speaker 9

Yes, thank you. Good morning, Lois. Good morning, Jeff.

Speaker 2

Good morning.

Speaker 9

Lois, if we look at your VLCC partnership with Shell and the charters associated with it and potential upside with those charter agreements, How does that translate to your return on capital profile and your and your return on capital discipline?

Speaker 2

Jeff, why don't you jump in there?

Speaker 3

Yeah. Yeah. Hi, Liam. It's it's fits

Speaker 4

Hey, John.

Speaker 3

And hey. Very, very nicely. We've we've discussed this before. The the the combination of the low purchase price, which Lois mentioned here in her remarks, really at the low point of the cycle, combined with a a a very well thought out collaborative contract with Shell that provides a base rate and a profit share. It's gonna work out well for both parties.

Said it before and I'll say it again, with that profit share the way it works, which we can't go into details, but we're expecting it to be a double digit return type of contract. So it's gonna be fits perfectly well with our capital allocation strategy.

Speaker 9

And I mean, obviously post DSSI merger, how does these types of projects fit into your overall fleet management strategy?

Speaker 2

That's a that's a really good question. And I think that, you know, going forward, I mean, we will continue and and welcome these types of projects. You know, it's really great to see the oil companies and owners coming together because that's what it's gonna take to innovate and decarbonize, you know, the propulsion moving forward. So I think that we will welcome these types of projects, and we'll evaluate each one on on the merits, and and the, you know, the the projected returns, Liam.

Speaker 9

Great. Thank you, Lois. Thank you, Jeff.

Speaker 2

Thanks, Jeff.

Speaker 3

You too.

Speaker 0

Your next question comes from the line of John Conrad from G. Capin. Your line is open.

Speaker 10

Hey, Lois and team. Congratulations on navigating a difficult year. Thank you, John. My my question is about inflation. The Federal Reserve said that inflation is transitory, but a lot of banks are wondering about inflation in the long term.

I wonder how your company is positioned and also the overall tanker market if inflation gets out of hand and exceeds the Fed's expectations?

Speaker 2

Well, that's that's that's an interesting, you know, question. I think that, you know, when you're in an inflationary, you know, environment, it's good to be in hard assets. I think that we're certainly a a ways from seeing that flowing through. But when you have periods of strong GDP and, you know, to be clear, you know, it's it's projections if we can hold the coronavirus at bay. I mean, again, we're looking at over 6% in The United States GDP growth, over 8% in China.

You know, India had been looking at 12%, which is massive, and I'm sure that will be moderated now by COVID. But, you know, when you start to see strong GDP growth, oil consumption growth is a derivative of that. In other words, you know, we're we're usually about you know, oil consumption growth will grow at a little bit less than half of GDP growth. So, you know, for the tanker market, where where we're headed here with, you know, increased GDP growth in the world into in the backside of 2021 is is quite welcome. And then from Jeff's perspective regarding our debt, maybe just talk about how much of our debt is hedged, Jeff.

It's it's pretty significant.

Speaker 3

It's right there on pay page 14 of the deck. It's 96% of our debt is either fixed or hedged, and most of that is floating rate debt that has been hedged. So we're we're we feel we're pretty very well protected on that front.

Speaker 10

Excellent. Thank you so much, guys.

Speaker 2

Thank you.

Speaker 0

There are no further questions at this time. I will turn the call back to Lois Sabrocki, CEO, for closing remarks.

Speaker 2

Well, thank you, everyone, for joining us for our first quarter wrap up call and our earnings today. And at International Seaways, we're going to be laser focused on getting our merger completed and driving the business forward. So thank you very much.

Speaker 0

Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You may now disconnect.