International Seaways - Earnings Call - Q2 2021
August 9, 2021
Transcript
Speaker 0
Good morning, and welcome to the International Seaways Second Quarter twenty twenty one Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to James Small, General Counsel.
Please go ahead.
Speaker 1
Thank you. Good morning, everyone, and welcome to 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 anticipated cost savings and other synergies and benefits from our merger with Diamond S Shipping any plans to issue dividends our prospects purchases and sales of vessels construction of newbuild 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 2021 or other periods estimated capital expenditures in 2021 or other periods projected scheduled drydock 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 statement. Factors, risks and uncertainties that could cause International Seaway's actual results to differ from expectations include those described in quarterly reports on Form 10 Q for the 2021, our 2020 Annual Report on Form 10 ks and in other filings that we have made or in the future may make with the U. S. Securities and Exchange Commission.
With all of that out of the way, I would like to turn the call over to our President and Chief Executive Officer, Ms. Lois Zabrocki. Lois?
Speaker 2
Thank you very much, James. Good morning, everyone. Thank you for joining International Seaway's earnings call to discuss our second quarter twenty twenty one results. During the second quarter, we maintained an unrelenting focus to strengthen our industry position and to enhance our ability to create long term value for our stakeholders. On Slide four, we review our transformational and accretive merger.
We detail our fleet optimization and recap our return of capital to our shareholders. Starting with the first bullet. We're excited to have completed our merger with Diamond S last month. The merger solidified Seaway's status as an industry bellwether with enhanced scale and capabilities as well as significant financial strength. Combining the two leading U.
S.-based diversified tanker owners with long term customer relationships and a shared deep culture of achieving stringent safety and operational standards, We're now poised to deliver compelling strategic and financial benefits to our shareholders and to our stakeholders as the tanker market moves into its recovery stage. The merger doubles our net asset value and triples the size of our fleet to 100 ships. We have created the largest U. S.-listed diversified tanker company. Among other benefits, we expect the merger to be accretive to both earnings and cash flow per share.
We estimate we will realize annual cost savings of $23,000,000 and revenue synergies of 9,000,000 Importantly, we expect these synergies to be fully realized in 2022. We have increased our equity market capitalization and our trading liquidity, which we anticipate will provide opportunities for a rerating of our equity valuation going forward. We have preserved our financial strength, and we maintain one of the lowest net leverage ratios in the tanker shipping. The next bullet, our second quarter net loss was $14300000.0.00 $51 per share, excluding vessel impairment charges. Importantly, please note, as of the end of the quarter, we had a total liquidity of $174,000,000 This includes $134,000,000 of cash.
This cash is serving us well throughout the challenging rate environment. As of today, we have approximately $200,000,000 in total liquidity. Fleet optimization. We have been actively selling older ships at attractive prices. These prices reflect the resilient secondhand market.
We expect net proceeds of $75,000,000 after repayment of $50,000,000 in debt. We have preserved a combined $34,000,000 of forward dry dock and ballast water expenses. These costs would have been incurred in 2021, remaining 2021 and in 2022. The additional liquidity protects our balance sheet, and this provides capital allocation flexibility going forward. Further details on these sales is found in the appendix.
Now moving to the final bullet. Since the beginning of 2020, we have returned over $70,000,000 to our shareholders. This includes 10,100,000 of regular dividends, dollars 30,000,000 in share repurchases and $31,500,000 in a special dividend that we paid just prior to the merger closing. Let's move to Slide five. Here, we talk about our transformational strategic combination with Diamond S.
We joined together two U. S.-based tanker companies with strong and complementary positions in the crude and product tanker sectors. We solidified our power alleys in large crude sector focused on bees and Suezmaxes, while we created a new power alley of strength in the product sector. We have a sizable and diversified fleet of crude and product tankers. We're positioned to benefit from the positive long term industry fundamentals ahead of us as well as near term developments as global oil demand recovers, inventory destocking completes and OPEC plus executes higher production levels.
As we focus on continuing to seamlessly integrate the merged company, we welcome the newest members of our Seaways team, and we look forward to working together to create lasting value for all of Seaway's customers and our shareholders. To illustrate the combined entity's earnings power ability, the combined company of 100 vessels in 2020 would have earned time charter equivalent revenue greater than $800,000,000 with an EBITDA of $420,000,000 Please turn to Slide six. We're smoothly progressing on building our three dual fuel LNG VLCCs. Daiwu is on target for delivery in early twenty twenty three. These state of the art vessels will adhere to future environmental regulations throughout their lives, being 20% more efficient than a modern eco VLCC and 40% more efficient than a ten year old VLCC.
These vessels will be in line with International Seaways' ESG principles. These vessels will be highly efficient and will surpass today's IMO Energy Efficiency Design Index and substantially outperform the 2025 EEDI targets. Building on our signing of the first sustainability linked refinancing in the industry in early twenty twenty. We're very proud to be implementing sustainability initiatives in our fleet in the maritime sector. The $96,000,000 price achieved for these three vessels has since materially appreciated, reflecting the strength in steel plate prices and the rapidly filling yard with LNG and container vessels.
Vessels value estimates that our ships have appreciated by $15,000,000 per ship. With these VLCCs secure on seven year time charters to Shell and providing strong stable cash flows with a base rate that is protecting our downside and profit sharing that is allowing for us to capture the upside, we expect to earn rates significantly exceeding the benchmark route. Slide seven. This chart illustrates our commitment to working with the tanker cycle. Since becoming an independent publicly traded company more than four years ago, Seaways have invested over $900,000,000 to renew our fleet at the low point in the tanker cycle.
And acquiring Diamond S for $361,000,000 in stock is no different, including at the bottom of current tanker cycle. As the chart on the slide shows, the nine ships that we acquired have materially appreciated in value since their acquisition on an age adjusted basis and have contributed a cumulative $111,000,000 in operating income during 2020 alone. Our Shell new buildings, this project and the transformative merger with Diamond S further illustrate our ability to adeptly identify attractive opportunities and move at the right time in the cycle. The Shell new buildings' appreciation of $45,000,000 or zero eight nine dollars per share of INSW stock represents this. Let's turn to Slide eight.
We provide an update on oil supply and demand. In spite of the Delta variant COVID case increases throughout the world, OPEC plus is acting on their agreement to increase supply by 2,000,000 barrels per day over the period from August to December. This will add to the market 400,000 barrels per day monthly. This increase is on top of the 2,100,000 barrels per day of increase implemented from May through July. Right now, in the world, 4,400,000,000 vaccination shots have been administered globally.
We're currently at a pace in the world of administering over 42,000,000 COVID shots per day. This has enabled a stronger economic growth, and oil demand jumped by 3,200,000 barrels per day in June. The IEA projected July demand to be up by 5,400,000 barrels per day year over year, and they forecast 2022 demand to increase by 3,000,000 barrels per day. In the chart on the right hand of this slide, consistent with the recovery in oil demand, oil inventories have declined by 700,000,000 barrels over the last year, and they are now at twenty nineteen levels, pre COVID levels. These stock drawdowns were needed to set the stage for a tanker market recovery, and we are encouraged by the magnitude of the drawdown.
Combined with the OPEC plus production increases and a surge in demand for oil as global economic recovery and reopenings begin, air travel rebounding and vaccinations being administered globally, we're optimistic that all this signals a strengthening in our rate environment going forward. Slide nine. On the ship supply side, the overall tanker order book remains at historic low levels. This is reflected in the 31 VLCC orders in 2019, the same number in 2020 and '27 year to date ordered in 2021. Uncertainty in the market, decarbonization regulations, higher newbuilding costs, all have suppressed and tempered newbuilding ordering on tankers.
Looking at recycling potential. There are numerous candidates based on the aging global fleet. When we take a look on the Bs, on the right hand side of the slide, 17% of the existing D fleet is at least 17.5 years old. 8% is at least 20 years old. So this aging 25% of the VLCC fleet then compares to an order book at 9.5% on the VLCC sector.
As these ships age and reach the ballast water treatment deadlines, a substantial capital investment is required to keep them trading. Based on these dynamics, the potential for recycling has been building, particularly given low spot rate environment and record steel prices. I'm going to now turn it over to Jeff Prebore, our CFO, who will give us the financial review. Jeff?
Speaker 3
Thanks, Phyllis, and good morning, everyone. Let's move directly to reviewing the second quarter results in more detail. Before turning to the slides, let me just quickly summarize our consolidated results. In the second quarter, we had EBITDA of $10,000,000 The net loss for the quarter was $18,800,000 or $0.67 per diluted share compared to net income of $64,400,000 or $2.24 per diluted share in the 2020. When we exclude the impact of vessel impairment charges and merger and integration related costs, the net loss narrows to $14,300,000 or $0.51 per diluted share.
Now if I could ask you to turn to Slide 11. I'll first discuss the results of our business segments, beginning with the Crude Tankers segment. TCEs or time charter equivalent for the Crude Tankers segment were $31,000,000 for the quarter compared to $106,000,000 in the second quarter of last year. The decrease primarily resulted from the impact of lower average blended rates in each of the VLCC, Suezmax, Aframax and Panamax sectors. Turning to the Product Carrier segment, TCE revenues were $14,000,000 for the quarter compared to $29,000,000 in the second quarter of last year.
This was also due to lower period over period average daily blended rates earned by our LR2, LR1 and MR fleets. Overall, as reflected in the chart top left, consolidated TCE revenues for INSW for the second quarter twenty twenty one were $45,000,000 compared to $135,000,000 in the second quarter twenty twenty. The decrease was principally driven by substantially lower average daily rates earned across the fleet for this quarter compared to last year's second quarter. Looking at the chart on the top right of the page, adjusted EBITDA was $10,000,000 in the quarter compared to adjusted EBITDA of $96,000,000 in the 2020, again, 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 06/30/2020 were $237 and $70,000,000 respectively, compared to $438,000,000 and $267,000,000 for the prior year LTM period. Now turning to Slide 12. I'd like to highlight our track record in returning capital to shareholders since the beginning of 2020. We've returned over $70,000,000 to shareholders in the form of special and quarterly dividends as well as share buybacks. As you can see from the pie chart, we paid over $10,000,000 in regular quarterly dividends, repurchased nearly 5% of our outstanding shares worth $30,000,000 and paid a $31,500,000 or $1.12 per share special dividend to INSW shareholders immediately prior to closing the merger.
Based on our pre merger market cap, this represents an approximately 8% return in 2020 and a further 8% in 2021 year to date. Creating enduring shareholder value remains a priority for us, and we are committed to continuing to pay a quarterly dividend and opportunistically utilizing our $50,000,000 share repurchase program authorization to unlock further value post merger. Now turn to Slide 13. We provide a second quarter review and third quarter earnings update. For a look at results in Q3 thus far, we booked 61% of our available Q3 spot days for VLCCs at an average of approximately $10,800 per day 45% of our available Suezmax spot days at an average of $6,500 per day 50% of available Aframax LR2 spot days at an average of $11,600 per day and 51% of our Panamax spot days at approximately $10,100 per day.
On the product side, we booked 42% of our third quarter MR spot days at approximately $9,600 per day and 26% of our Handysize spot days at $4,000 per day. Now if we could turn to Slide 14. The cash cost TCE breakevens for the 12 ended 06/30/2020, are illustrated on this slide. International Seaways' overall breakeven rate was $20,700 per day over the last twelve months. These amounts are the all in daily rates our owned vessels must earn to cover vessel operating costs, dry docking costs, cash G and A expense and debt service costs, which means scheduled principal amortization as well as interest expense.
On this slide, we've also shown breakevens excluding principal amortization, in this case, the cash breakeven for the trailing twelve months was $15,200 per day. Now the far right hand side of the bar chart shows the estimated all in daily breakeven rates for the larger INSW fleet inclusive of Diamond S vessels, which I will refer to as the combined fleet. Over the next twelve months, the cash breakeven for the combined fleet is $17,700 per day, as you can see in the box on the right hand side. At this time, I'd like to provide some cost guidance for the combined company for your modeling purposes. For the remainder of 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, dollars 8,800 per day Pursuit's Max, 7,600 per day Aframax, 8,200 Panamax, 7,900 and for MRs, 7,200 per day and finally, for Handysize, 7,400 per day.
In each case, excluding any impacts attributable to COVID-nineteen. For details on projected dry dock CapEx and off hire days by quarter, again, on a combined company basis, you can refer to Slide 20 in the appendix for an update. Continuing with cost guidance for the combined company. For the remainder of 2021, we expect cash interest expense will be about $11,000,000 per quarter. For the remainder of the year, we expect cash G and A to be in the region of $11,000,000 per quarter as well.
This reflects previous guidance for both INSW and Diamond S, now combined, less a factor for transitioning in approximately 25% of expected G and A synergies from the merger. As previously stated, full cost synergies are expected to be achieved in 2022. And finally, we expect about $6,000,000 in quarterly equity income and $31,000,000 is the figure for quarterly depreciation and amortization. Now if we could turn to Slide 15 for our cash bridge. Moving from left to right, International Seaways began the second quarter with total cash and liquidity of $212,000,000 During the quarter, our adjusted EBITDA was $10,000,000 equity income from JVs decreased by $5,000,000 and the cash distributions from the FSL JVs were positive $1,000,000 We expended $13,000,000 on drydocking and CapEx and $14,000,000 on the first installment as part of our agreement to build the three dual field LNG VLCCs.
We received $4,000,000 in deposits on two vessel sales that are to be littered to buyers in the third quarter twenty twenty one and cash and interest scheduled principal payments interest and scheduled principal payments on our debt were $21,000,000 Finally, taking into account the $2,000,000 quarterly dividend and the positive impact of working capital and other charges of $2,000,000 the net result was at the end of the quarter with approximately $134,000,000 of cash and $40,000,000 of undrawn revolver, yielding total liquidity of $174,000,000 As of today, as Lois mentioned, total liquidity stands at approximately $200,000,000 Now turning to Slide 16. I'd like to briefly talk about our balance sheet. As of June 30, International Seaways pre merger had $1,500,000,000 of assets compared to $445,000,000 of long term debt. In addition, we had $440,000,000 of revolving credit that remained undrawn as of that date and still remains undrawn. As you can see on the right hand side of the slide, our net debt to total cap at that date was 28%, while our net loan value to our conventional fleet was 37%.
Now if we move to Slide 17, we provide pro form a combined company debt as of June 30, accounting for the merger. The total debt balance was approximately $1,200,000,000 And as Lois mentioned, post merger, we continue to maintain low net leverage ratios with net debt to capital of 33% and net loan to asset value of 45%. The debt facilities listed on this slide reflect our highly competitive cost of capital, including weighted average interest cost of just 2.72% in our quarterly amortization schedule as well and note the 56% note that 56% of the debt at this point is fixed or hedged. In addition, I would point out the vast majority of the debt maturity dates are no earlier than 2024. And finally, I'd like to highlight that we continue to have very strong relationships with a leading group of diverse global banks.
We very much appreciate the ongoing support of this group, which now includes 12 major shipping banks. Lois, that concludes my remarks. I'd like to turn the call back to you for your closing comments.
Speaker 2
Thank you so much, Jeff. On Slide 18, I want to conclude our call by detailing the strategic vision of the new International Seaways. We're focused on capitalizing on our position as a tanker sector leader, executing on our disciplined and balanced capital allocation strategy and taking further steps to maximize shareholder value. With enhanced scale and capability, combined with a best in class ESG track record and focus, we're ideally suited to continue achieving the highest operational standards and to meet the evolving needs of leading energy companies and customers. Based on our diversified fleet and crude and products power alleys, we are poised to benefit from positive long term industry fundamentals.
We will benefit as global oil demand recovers, as inventory destocking completes and as OPEC plus production increases as per their plan. Based upon the accretive nature of our merger, we expect costs and revenue synergies of $30,000,000.32000000 dollars to be fully realized in 2022. Complementing our sizable operating platform, we have maintained our balance sheet strength following the close of the merger, positioning Seaways to capitalize on attractive opportunities for our shareholders in the diverse rate environment. As part of our strategic focus, we'll continue to remain true to preserving our financial strength, which has served us well at this point in the cycle and to execute an accretive and balanced capital allocation strategy. We will prioritize returning capital to shareholders as highlighted by our recent merger related $31,500,000 dividend, representing $1.12 per share, our regular quarterly dividends as well as our outstanding $50,000,000 share repurchase authorization.
To reiterate, we've returned over $70,000,000 to shareholders in the form of special and quarterly dividend and share buybacks since the beginning of 2020. Finally, creating enduring shareholder value remains of utmost importance to Seaways. Based on our industry leadership, increased upside to the crude and product tanker market recovery over both the near and longer term as well as the larger market capitalization, we believe we have the potential to have our equity re rated and to close the NAV gap. Thank you very much, and we will now open it to questions.
Speaker 0
Thank you. We will now begin the question and answer session. And the first question will come from Omar Nokta with Clarksons. Please go ahead.
Speaker 4
Thank you. Lois. Hi, Jeff. Good morning, and congratulations on unofficially closing the Diamond S deal last month.
Speaker 5
Thank you very much.
Speaker 4
Yes. I just had a question. Obviously, you mentioned getting to the 100 vessel mark, which is obviously gives you critical mass and significant footprint. You are selling some older ships, which is something you telegraphed, so it's not a surprise. But I do wanted to ask maybe just about the Panamaxes in particular.
You sold four of those, and that takes away a big chunk of your fleet capacity in that segment. I know those vessels have been involved in the South America niche trade. And so just wondering kind of about those. Are those to be replaced? Or is that trade changing in the future, you think?
Speaker 2
No, no. Definitely, Omar, those vessels, unfortunately, will turn 20 in early twenty twenty two. And it's not part of our strategy to operate the tankers past the twenty year mark. And what we have done is sold some of those for green recycling or consistent with the Hong Kong convention. And we're taking advantage of what are really strong recycling prices right now.
And then indeed, our trading in Panamax International is really a critical niche component where we earn a premium in trade and we will be supplementing in Panamax International. In fact, we have just recently chartered in a vessel for a couple of years. So we will look in that Panamax pool to sort of bulk back up our presence there. And the sale of the Panamax is simply strategic because those vessels were going to turn 20 years old and then tactical because we wanted to take advantage of where the very strong recycling prices are today.
Speaker 4
Got it. That's pretty clear. And that's a good point. We have seen scrap prices increase significantly this year. And just sort of on the maybe the question regarding overall, you're looking at potentially other noncore assets to sell.
Any color you can give on what you would deem as noncore at the moment? Any specifics you can share?
Speaker 2
Well, Omar, we always say that we have a constant calculation going on the vessels in all of our fleet on their discounted cash flow versus where their prices are in the market. And so we will continue to look to prune as just a part of our ongoing strategy, the vessels that are older and where we can take advantage of capital preservation.
Speaker 4
Okay. Got it. And Lois, maybe just one final follow-up. I wanted to ask just about the 12 ships you've agreed to sell. You're going to be bringing in 125,000,000, and netting over, I guess, close to about 75,000,000 after debt repayment.
Mhmm. Obviously, nice to get that cash cushion. But generally speaking, the $1.25 seems a little low relative to at least what I had assessed the vessel that. Is there anything you can share there on that? Or am I just being too aggressive on the valuation?
Speaker 2
What I would say is that we're happy with the prices that we've achieved, Omar. And as you go through the fleet list and sort of detail it out, some of these vessels are older heritage seaweed ships that do not have mortgages on them, such as the Tanabe. And some of these Panamaxes, as I mentioned, are being sold for recycle. So you may have had a different secondhand value on those ships. And but as I said, those prices are the secondhand recycle prices are very strong.
And the secondhand values have held up really even though the spot market has not. So we feel that we're quite happy with the prices that we're achieving across the fleet. And in particular, I think the factoid that we shared where we'll be saving on dry docks and ballast water. So some of the vessels that we're saving are imminently dry dock due and do not have ballast water treatment systems on board. So we're saving that expense and that off hire as well as those capital outlay.
And some of those prices reflect that.
Speaker 4
Okay. That makes sense. Well, thank you for that. I appreciate the color overall. I'll turn it over.
Speaker 2
Thank you so much, Omar.
Speaker 3
Thanks.
Speaker 0
And the next question will be from Randy Giveans with Jefferies. Please go ahead.
Speaker 6
Howdy, Lois and Jeff. How's it going?
Speaker 2
Hey, how are you, Randy? We're good.
Speaker 6
Good. Congrats on the merger. Consolidation is certainly a hot topic in the industry. So glad to see INSW actually making something happen here. So I guess looking at the benefits of the merger, you mentioned the $23,000,000 in cost synergies will be in 2022.
Just curious if those cost savings ramp over time or kind of the timing of it? And where exactly should we look for the cost savings to flow through the income statement?
Speaker 2
So Ria, course, some of these costs are fairly quickly to be realized. For example, the cost of being a publicly traded company immediately fall away. For example, having two seated boards, having two insurance D and O policies, having two external auditors, having two rent facilities. So those types of structural costs, and that's where you will look for those, will fall away more quickly. Additional costs, we have a very structured integration plan, and we will be realizing additional savings over time.
And from the revenue perspective, the vessels that we have taken over and we are shifting the vessels from capital to managed commercial pools on the product carriers such as Noriant and CPTA, which is our ultra gas pool and on the Suezmaxes to Penfield. And so those revenue synergies, we believe, will start to accrue immediately.
Speaker 6
Perfect. Okay. And then looking kind of industry wide, you operate clearly both crude and product tankers. There's been a debate on to kind of the strength of both in terms of outlook. So I guess, which subsector do you expect to improve first?
And which is likely to outperform the other, let's call it, in 2022?
Speaker 2
So Randy, as we speak, I would simply look at where the market is today. And the MR sector, in particular in the Far East, has strengthened over the last week. And then that is flowing through even LRs and LR2s and now into the Western Basin. And by strengthening, everything is relative. We're still talking low double digit time charter equivalent returns.
However, you can see the product carrier fundamentals being more closely balanced at the moment than on the crude side. But we expect the crude side as China is adjusting right now from what we observed. They really have a COVID zero tolerance policy. So they're locking down with this delta variant. So that's affecting things.
But we China has been out in the lead in recovery of demand post COVID or we're not through it yet, but very resilient. So we do expect the crude side to also strengthen in 2022.
Speaker 6
Good deal. That's it for me. Thanks so much.
Speaker 2
Thank you, Randy.
Speaker 3
Thanks, Randy.
Speaker 0
And the next question will be from Ben Nolan with Stifel. Please go ahead.
Speaker 7
All right. Thank you. Good morning, Lois, Jeff. So I've got a couple. I want to start with something that you were talking about at the end there.
Well, and short of it is, you're selling older assets that free up liquidity, asset values have appreciated. You've done share I think you did $30,000,000 of share repurchases last year. How do you think about closing the value proactively closing the value gap using share repurchases? Or do you kind of need to just batten down the hatches and wait for things to get a little bit better first?
Speaker 2
So how are you, Ben? And I'll take my first stab, and then I'll give it to Jeff. So I do think that it is imperative that we watch very closely the developments in the spot market recovery then. The rates that have been experienced due to lower demand have been and continue to be below cash breakeven level. So that is priority number one.
And then beyond that, clearly, we do still have a $50,000,000 repurchase program. And I'll turn it over to Jeff to kind of talk about balancing things.
Speaker 3
Yes. It's amazing, but it's really only been six quarters since we began to return cash to shareholders in a meaningful way with the redo of our balance sheet where we put in more flexible debt that allowed for that instituted the fixed dividend quarterly dividend that we mentioned on the call. And so I think the answer to your question is we what we're going to do both what we're to do and how that's going to help rerate the stock is just keep doing it. It's just quarter over quarter, we had to be patient and continue to execute with numbers like last year, 8% total, however you want to call it, return to shareholders, shareholder yield, something like that. Those are those high single digit numbers, if you look at other industries, I think those are good benchmarks, right?
So we're at 8% so far this year, and we've got some more time to go. So yes, like Lois said, we'll be balancing, of course, with an eye to it's a crummy market, to say the least. But how can we do some more of that and just continue to do it quarter by quarter? And I think that over time, that capital allocation track record is what earns a better valuation. And the only other factor I would say is that we've been kind of busy with this, to say the least, with preparing for the merger, which is now done.
And I'll put that in air quotes because as everyone on Lois and the whole rest of the team know, the date of the closing is not done. I mean, it's legally closed, but there's so much work to do. And it's great welcoming all the new Seaways team members, as always also said. But there's a whole lot of work been going on and continuing to go on. So I think we're as we get it to the end of summer here, we're to just tell the story.
So we just need to talk to investors and say, hey, look, this is now the largest diversified publicly traded tanker company that there is, period. We've got around 100 ships. We've got over $2,000,000,000 of assets and a growing track record, six quarters and going of actively returning cash to shareholders. So miracles don't happen overnight, but we'll just be patient and keep doing walking the walk, and then we'll talk the talk about walking the walk. So I hope that's going to do it over time, Ben.
Speaker 7
Yes. So and a little bit sort of in that vein still, I guess, the you sold 12 ships, I guess, right? All older. It looks like the I was just doing just running down the list, but it looks like there's 12 more that are 15 years old or older. Is it fair to assume that you're still high grading the fleet?
And as as those sales happen, the leverage falls and you're sort of increased you have an increased level of flexibility to whatever do things like share repurchases? Or have you kind of done what you needed to do with that?
Speaker 2
No, would say we will continue just as you say. And we'll take into account and balance everything, like what is the pace of the recovery. And we're not in a have to situation. These are opportunistic and purposeful moves that we're making. And we want to see how quickly will that market come back.
And then we expect both our earnings to go up and those secondhand values to go up. So we'll be careful and judicious, but indeed we will continue to turn the fleet going forward.
Speaker 7
Okay. And then shifting gears for my last question here. I'm curious, we don't talk a lot about the lightering business. Been this nice sort of asset light cash flow generator. I'm curious now that sort of we're hopefully closing in on the latter part of all this COVID stuff.
How do you think about that business going forward? Are things fundamentally different in The Gulf Coast? Or how does that fit strategically and with what you're doing? What are the long term prospects there?
Speaker 2
Ben, I think that the lightering fits quite strategically with a fleet a spot fleet of our size, and it brings us very close to the customers. It's a high touch business. It's service intensive. And so it really allows you to deepen the relationships. The trading patterns have been affected by COVID just like everything else, right?
So fewer barrels coming in, fewer barrels coming out of particularly The U. S. Gulf. But we have a pretty diversified base. We see Panama as having strength.
We're lightering on The U. S. West Coast and The Bahamas. So we think that it fits well with us. And in particular, we saw a strong month in June, where you start to see these underlying volumes of oil have increased a lot.
Even though we haven't seen a spot resurgence in rates, the volume of trade has increased. And lightering will come along with that. I don't know if you wanted to add anything, Jeff.
Speaker 3
No. It's a good recap.
Speaker 7
All right. I appreciate it. Thanks, guys.
Speaker 2
Thank you. Thanks, Matt.
Speaker 0
And the next question comes from Magnus Fear with H. C. Wainwright. Please go ahead.
Speaker 5
Yes. Good morning, Lois. Good morning, Jeff. Just had a question on the liquidity. I mean you have a strong balance sheet.
You've sold some assets, you have some more assets probably left to sell. With the merger, it looks like the amortization picks up. I guess, there's about $30,000,000 plus from the Diamond side. You paid a dividend this quarter. What do you guys have left in the toolbox here to address to extend the liquidity runway to deal with some of the uncertainty with a delayed recovery and potential for this to run a couple more quarters?
Speaker 2
Do you want to jump in there, Jeff?
Speaker 3
Well, sure. Magnus, first of all, we started in a really good place. And if I backed it up a couple of quarters, the fact that we started the year or ended last year with the positive COVID bump from floating storage and all the rest with well over $200,000,000 of liquidity, it gave us the opportunity to execute on the Diamond S merger, right? So that while it's a stock deal, there were cash costs associated with it and approaching that with a good really strong balance sheet and a lot of liquidity is super helpful. As we said now, we're at $200,000,000 of liquidity plus even after the merger completed with most of those asset sales, as we've listed in the press release and the slide deck and the script, still to be completed, right?
So we're really in a strong position. So they don't need to do much else. But there's other things that in terms of tools and the toolkit, we have a number of unencumbered vessels from the INSW core facility or kind of what was a transition facility fleet, sorry, I didn't say that correctly, that we paid off last year. So those are vessels that if we don't want to sell them like some of those older Panamax that are still not at the recycling date, so very valuable to us, you can always look at putting leverage on those. So there's a number of tools that we have.
But I think we feel really good about where we stand right now, even allowing for if it turns out to be a couple more quarters of this rate environment. So I hope that answers your question, Magnus. Yes.
Speaker 5
I mean any thoughts on consolidating some of that debt maybe to extend amortization or increase the revolver, I mean, with the increased I size of the
Speaker 3
just put it this I mean, yes. I mean, I would put it this way. We will look at it was really good that we didn't need to do anything around the balance sheet in order to close the transaction. As Lois and I both have saying, it's a lot going on. And if we had had to do a lot of balance sheet gymnastics, that just would have made it that much more complicated.
So we're really grateful that with the bank group that we have, significant overlap with its former legacy Diamond S. Bank Group really was seamless. Now that said, there's absolutely you've got a pretty robust amortization, which we gave you there on the charts of like $47,000,000 a quarter. I mean no near term maturities, but sure, there's probably some low hanging fruit there in terms of smoothing out that or pushing out that or evaluating optimization of the balance sheet. So no urgency to it.
But yes, we always look at things we can do to optimize the balance sheet. So we'll do that.
Speaker 5
Great. Well, thanks. Thank you.
Speaker 2
You. The
Speaker 0
next question will be from Greg Lewis with BTIG. Please go ahead.
Speaker 8
Hey, thank you and good morning, everybody. Lois, I kind of wanted to dive and talk a little bit more about what Omar was talking about terms of the fleet. I guess I'll ask in terms of as we were selling some of the vessels, not for the retirement, but just kind of, hey, they're no longer fitting our profile. We picked them What up from the Diamond S was the type of appetite in the market? And really, what I'm wondering is, as I think a lot of us are looking at ship prices for secondhand vessels going higher and whether it's your how you're talking about rates or we look in the rate market.
Rates aren't rates haven't been doing that well for a while. So just kind of trying to understand, we're seeing that upward asset price inflation without that rate follow through. And really in this environment, are there multiple buyers of assets? I mean, as you saw that, was there a lot of interest? Or was that kind of like a one off where somebody was willing to kind of plant their flag to take some tonnage?
Speaker 2
Yes, right. Combination of individual asset sales and some in a group. And that secondhand market has it's not extraordinarily deep. It will be deeper when you see that the rates have recovered, but it has really held in there. And that's definitely a reflection of new building prices, steel having gone up and kind of holding up the new piece of the market and then the recycle price is holding up the other side of the market.
So there is interest from multiple buyers on each one of the ships that we have transacted MOAs on.
Speaker 8
Okay, great. And then just I'm sure this is a question that you'll be getting probably until you do another one. You successfully won those three dual fuel LNG VLCC contracts. I mean could you talk a little bit about the state of that market? I mean every day it seems like somebody is talking about ESG and the migration towards maybe LNG or some other type of alternative fuel.
What is is there ongoing tenders right now for dual fuel LNG contracted tonnage?
Speaker 2
There are still a couple of open inquiries, very bespoke and specific, right? So again, that is that's not an incredibly deep market. Definitely, the most that you've seen has really been Aframaxes and VLCTs. I do believe we will continue to see inquiry for dual fuel. Certainly, you look at the LPG market, they're building vessels that burn LPG, right?
So you're seeing some product carrier newbuildings be methanol burning, right? So this is, for us, a obviously, we're following everything, watching everything and keeping up with all of the innovation that's going on because this is going to be something we talk about every call for the foreseeable future.
Speaker 0
Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Lois Zabrocki for any closing remarks.
Speaker 2
I just really want to thank everyone for joining Seaways on our second quarter twenty twenty one earnings call. And we really look forward to tanker market recovery and being able to close our price to our net asset value gap going in through 2021 and into 2022. So thank you very much.
Speaker 0
And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.