International Seaways - Q2 2024

Transcript

Operator (participant)

Good morning, everyone, and welcome to the International Seaways Second Quarter 2024 Results Conference Call. My name is Carla, and I will be coordinating your call today. During the presentation, you will have the opportunity to ask questions by pressing Star followed by One on your telephone keypad, and if you change your mind, please press Star followed by Two. I will now hand you over to your host, James Small, CAO and General Counsel, to begin. James, please go ahead.

James Small (Chief Administrative Officer and General Counsel)

Thank you. Good morning, everyone, and welcome to International Seaways' earnings call for the second quarter of 2024. Before we begin, I would like to start off by advising everyone with us on the call today of the following: During this call and in the accompanying presentation, management may make forward-looking statements regarding the company or the industry in which it operates.

Those statements may address, without limitation, the following topics: outlooks for the crude and product tanker markets and changes in trading patterns, forecasts of world and regional economic activity and of the demand for and production of oil and petroleum products, the effects of ongoing and threatened conflicts around the globe, the company's strategy and business prospects, expectations regarding revenues and expenses, including vessel charter hire and G&A expenses, estimated future bookings, TCE rates, and capital expenditures, projected scheduled dry dock and off-hire days, purchases and sales of vessels and construction of new-build vessels, the company's consideration of strategic alternatives, anticipated and recent financing transactions and plans to issue dividends, the company's relationships with its stakeholders, the company's ability to achieve its financing and other objectives, and other economic, political, and regulatory developments globally.

Any such forward-looking statements take into account assumptions made by management based on various 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, which could cause actual results to differ materially from those implied or expressed by the statements. Factors, risks, and uncertainties that could cause International Seaways' actual results to differ from expectations include those described in our annual report on Form 10-K for 2023, our quarterly report on Form 10-Q for the second quarter of 2024, and in other filings that we have made or in the future may make with the U.S. Securities and Exchange Commission. Now, let me turn the call over to our President and Chief Executive Officer, Ms.

Lois Zabrocky. Lois?

Lois Zabrocky (CEO)

Thank you very much, James. Good morning, everyone. Thank you for joining International Seaways' earnings call for the second quarter of 2024. On slide four of the presentation, which you can find in our Investor Relations section of our website, results for the second quarter represent our eighth consecutive quarter of Adjusted Net Income over $100 million. Net income was $145 million, or $2.91 per share. Excluding the gains on vessel sales and other one-off items, Adjusted Net Income for the second quarter was $118 million, or $2.37 per diluted share, and Adjusted EBITDA was $167 million. On the lower left section of the slide, we were busy with fleet renewals in the second quarter, taking delivery of six Eco MRs while selling three aged 15 years or more. This lowered our average MR age by one year. One of the three vessel sales closed in mid-July.

We funded the acquisition of the Eco MRs with the proceeds from vessel sales, along with a $50 million revolver draw and the issuance of 624,000 shares in cash on hand. On the upper right-hand side of the slide, we continue to benefit from our balance sheet. At the end of the second quarter, we had $682 million in total liquidity, which included $506 million of undrawn revolver. We increased our revolver capacity by nearly consolidated our term loans and converted them into a revolving credit facility. We now save about $80 million per year in mandatory repayments, which also raises our free cash flow generation and lowers our spot break-even rate to under $13,400 per day. As a result of these accomplishments, we continue to share our upside with our shareholders.

Today, we declared a combined dividend of $1.50 per share, representing 64% of Adjusted Net Income, and, as shown in the lower right-hand chart, another quarter of a double-digit yield for our shareholders. Over the last 12 months, Seaways' dividend yield has been 12% of our average market cap. We continue to prioritize our balanced capital allocation, positioning the company for the future with opportunistic fleet renewals and enhancing our balance sheet while sharing in our upcycle with a double-digit dividend yield to our shareholders. Slide 5. We've updated our bullets on tanker demand drivers with subtle green up arrows next to the bullets representing positive for tankers, the black dash representing a neutral impact, and a red down arrow meaning the topic is not good for tanker demand. Pulling highlights. We expect oil demand to continue to grow at a rate above its 30-year average growth.

A good portion of this growth is regionally in Asia, which has grown slower than expected at the beginning of the year, while oil supply growth is largely in areas not capped by OPEC+. Tanker demand, particularly the Vs, are better off when the cartel's production also grows. It's a heavy election year worldwide, and results could indirectly impact our tanker demand. While Seaways has benefited by geopolitical events that have caused disruptions to both crude and product tanker trade, it is important to recognize that these events have not defined tanker earnings, but merely bolstered a fundamentally strong market. The graphs at the bottom of the slide show that the growth in oil demand and seaborne transportation of crude oil and refined products looks to remain healthy over the next few years.

On slide six, strong tanker markets naturally would dictate more ordering, and the order book has grown to about 11% of the total fleet. However, ships on order, as we show at the bottom left-hand of the page, are not enough to replace a fleet that is aging significantly. The average age of the tanker fleet today is over 13 years old and is likely to get older with so few newbuilding deliveries. Generally, older ships have less efficiency and less utilization. With a greater percentage of the fleet in this vintage, the industry needs more ships to cover the increasing seaborne demand. Different from other cycles, the longer lead times in our order book could limit the new orders today, especially when factoring in pending environmental regulations.

Overall, this sets the stage for a continued strong upcycle over the next few years, and Seaways will capitalize on these market conditions. You can count on us to utilize our balanced capital allocation approach to renew our fleet and adapt to industry conditions with a strong balance sheet while returning to shareholders. I'll now turn it over to our CFO, Jeff Pribor, to provide the financial review. Jeff?

Jeffrey Pribor (CFO)

Thank you, Lois, and good morning, everyone. On slide eight, net income for the second quarter was $145 million, or $2.91 per diluted share. This includes gains on vessel sales and a provision for the settlement of our UK multi-employer pension funds. Excluding these impacts, our net income was $118 million. On the upper right chart, adjusted EBITDA for the second quarter of 2024 was $167 million. We've provided a reconciliation from reported earnings to adjusted earnings in the appendix. Our expense guidance for the second quarter fell largely within the range of expectations, but I'd like to highlight certain aspects within our ecosystem. At the time of our last earnings conference call, we guided toward 359 days of off-hire planned dry dockings and repairs. As outlined in the appendix, our actual off-hire time was 559 days.

About half of the 200-day difference relates to dockings that we moved forward into the second quarter ahead of most of these vessels delivering into time charter early in the third quarter. Another 60 days of additional off-hire time relates to repair work, which was generally one-off in nature to maintain safe and reliable operations. The remaining 40 days relate to some additional positioning and adapting of our vessels to support U.S. West Coast trading for our customers. Our lightering business continues to prosper, with nearly $14 million in revenue in the quarter. Combined with about $3 million in vessel expenses, $4 million in charter hire, and $1 million of G&A, the lightering business contributed about $6 million in EBITDA in the second quarter and brought its year-to-date EBITDA contribution to just about $13 million.

Turning to our cash bridge on slide nine, we began the quarter with total liquidity of $626 million, comprised of $250 million in cash and $411 million in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we first add $167 million in Adjusted EBITDA for the second quarter, less $24 million in debt service, less our dry docking capital expenditures of $16 million, and then add working capital benefits largely due to the collection of receivables of approximately $28 million. We therefore achieved our definition of Free Cash Flow of $154 million for the second quarter. This represents an annualized cash flow yield of about 20% on today's share price. The remaining bars on the cash bridge reflect our capital allocation for the quarter.

We spent $175 million to acquire six Eco MRs, which is net of $35 million in share value issued to the sellers in the form of 624,000 shares. We also sold two vessels during the quarter for $48 million and borrowed $50 million on our new $500 million revolving credit facility and funding for the MRs. In connection with the closing of the revolving credit facility, we increased our capacity by $150 million, which was subsequently reduced to under $100 million after drawing for the MR purchase. Also, we extinguished our ING term loan for $20 million. Lastly, we paid $1.75 per share, or $87 million in dividends during the quarter. These components led to ending liquidity of $682 million, comprised of $176 million in cash and short-term investments, and $506 million in undrawn revolving capacity.

Moving now to slide 10, we have a strong financial position detailed by the balance sheet on the left-hand side of the page. Cash and liquidity remained strong at $682 million. Vessels on the books at cost are approximately $2 billion versus current market values of over $3.7 billion. With $720 million in gross debt at June 30th, this equates to a net loan to value of right around 14%. Our debt at June 30th was 78% headed toward fixed rates, leading to an all-in weighted average interest rate of about 625 basis points, or less than 100 basis points above today's SOFR. In the table on the bottom right-hand side of the slide, our debt balances as of June 30th reflect the amend and extend of the $750 million facility, which we now call the $500 million RCF.

As Lois mentioned before, this facility has no mandatory debt remaining, generating a savings of about $80 million per year. This also increases our free cash flow generation by the same $80 million per year since mandatory repayments are included as part of debt service calculating free cash flow. We continue to enhance our balance sheet to create the financial flexibility necessary to both facilitate growth and provide returns to shareholders. We have $506 million in undrawn revolvers. Our nearest maturity in the portfolio isn't until the next decade. We continue to lower our break-even costs and be sharing the upside with double-digit returns to shareholders. On the last slide that I'll cover, slide 11 reflects our forward-looking guidance and book-to-date TCE aligned with our spot cash break-even rate. Starting with TCE fixtures for the third quarter of 2024, we can see some seasonality returning to the tanker markets.

While I will remind you that actual TCE we report at our next earnings call may be different, as of today, we have a blended average spot TCE of about $37,300 per day fleet-wide so far for this quarter. On the right-hand side of the slide, you can see our forward spot break-even rate now under $13,400 per day, composed of a fleet-wide break-even of about $16,000 per day, less the effect of nearly $2,800 per day in time charter revenues. As a result, based on our spot TCE book-to-date and our spot break-evens, it looks like Seaways can generate significant free cash flows during the third quarter. On the bottom left-hand side of the chart, we provide some updated guidance for our expenses in the third quarter, as well as our estimates for 2024.

We also included in the appendix our quarterly expected off-hire for the rest of the year, which is significantly lower than previously guided due to changes in our dry dock schedule and the CapEx schedule for 2024. I don't plan to read each item line by line, but encourage you to use these for modeling purposes. That concludes my remarks, and I'd now like to turn the call back to Lois for a closing comment.

Lois Zabrocky (CEO)

Thank you very much, Jeff. On slide 12, we have provided you with Seaways' investment highlights. Summarizing briefly, over the last seven years, International Seaways has built a track record of returning to shareholders, maintaining a healthy balance sheet, and growing the company. Our total shareholder return is nearly 500% since our inception, representing a 23% compounded annual return. Over the last 12 months, our combined dividends of $5.82 per share represent a 12% yield on our average share price over that time. We continue to make strides to keep our fleet age below the global tanker average in what we see as a sweet spot for tanker investments and return. We've invested in a range of tanker classes, casting a wider net for growth opportunities and supplementing our scale in each class by operating in leading pools. We keep our balance sheet fortified for any down cycle.

We have over $500 million in undrawn credit capacity to support our growth. Our net debt is 14% of the fleet's current value, and we have 34 tankers that are unencumbered. Lastly, our spot tankers need only earn $13,400 per day to break even in the next 12 months. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders. Thank you. And with that said, Operator, we'd like to open the lines up for questions.

Operator (participant)

We will now begin the question-and-answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad now. If you've changed your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. We will now make a quick pause here for the questions to be registered. Our first question comes from Ben Nolan from Stifel. Your line is now open.

Ben Nolan (Managing Director)

Yeah, I appreciate it. Thank you, guys. I wanted to go back to the dry docking days, if I could. Jeff, you'd mentioned that you pulled some of those forward for ahead-of-time charters. But still in aggregate, the number went down by more than 100 days for the year. Just curious, is some of that being pushed into next year, or is it just less than you thought last quarter?

Jeffrey Pribor (CFO)

Well, yeah, so for this quarter, hi, Ben. So for this quarter, I think the point is off-hire was 200 days more than we had provided in the last quarterly conference call report. So of that, yeah, if you look at the Q4 year, we are up now with our guidance for the full year. So some of it affects the year, but some of it is just timing between quarters. And that's the main point we wanted to make, is that that's not something you could have seen before we put out the information today. So I wanted in my remarks to make clear that part of the off-hire is just timing and a little bit of positioning of vessels or preparing vessels.

Ben Nolan (Managing Director)

It was just sort of opportunistic. Oh, sorry. It was just opportunistic.

Derek Solon (Chief Commercial Officer)

Yeah, absolutely.

Ben Nolan (Managing Director)

Yeah. All right. Okay. All right.

Lois Zabrocky (CEO)

Ben, one of the things.

Ben Nolan (Managing Director)

Oh, go ahead.

Lois Zabrocky (CEO)

I was just going to supplement what Jeff was saying. One of the things we're focusing on those Aframax is getting them into and positioned for that West Coast trade. Those in particular were a couple of vessels that we were preparing with that extra dry docking.

Ben Nolan (Managing Director)

Gotcha. Sorry, Lois, you said the Aframax was there?

Lois Zabrocky (CEO)

Yes. We are positioned now with that pool that we've put together with Ultranav and have those vessels out there. We will try to take advantage of that TMX trade as that develops.

Ben Nolan (Managing Director)

Gotcha. That actually leads to my second question. It seems like the Aframaxes, in particular, have been below sort of market levels. And I appreciate that they're a little bit older maybe than average. But was part of that and is part of that even in the third quarter simply a function of the shifting around of the fleet and maybe some of that dry docking? And going forward, we should expect those to be a little bit more similar to the market rates, would you think?

Derek Solon (Chief Commercial Officer)

Hey, Ben, it's Derek Solon. I'll take that one if I can. You kind of answered the question for us. That's exactly right. So we've taken advantage of our JV partners where we, even before this Aframax pool, we've had two pools with Ultra of Chile that specialize on the West Coast of the Americas with Panamax International and CPTA. So as TMX was coming to fruition, we made the call to start Aframax International so we could take advantage of, one, hopefully the TMX trade, but two, just the relationships that have been built over years with those joint venture pools. What that meant, though, for the first half of the year is advancing dry docks, doing a little bit more work to be ready for the West Coast trade.

And the real pain point was dry docks in the East that we had to then get the ships to the West Coast of the Americas. So that was a lot of positioning training to get this new pool off the ground.

Ben Nolan (Managing Director)

Got it. Okay. That's very helpful. I appreciate that. And then lastly, for me, if I could, just bigger picture, we talk about the aging fleet and there's the dark fleet and all of this kind of thing. Although it seems like there's been a little bit more cracking down on that. Do you think there's much of a chance that we begin to see some of these older assets actually leaving trade and being scrapped even in a high market, or is it probably just market-related other than maybe ones and twos? Just curious if you think that we're beginning to get to maybe a tipping point with respect to the age of the assets and the broader fleet.

Lois Zabrocky (CEO)

Ben, it's definitely something that we watch constantly. And when we look at the supply side and take the Vs where you have either none or one delivery in single digits next year. So you're looking at very little new buildings coming in the market. I kind of expect, believe it or not, for the in two years, today, the total tanker fleet in the world is over 13 years. I think in two years, it's going to be over 15 years. And then we're only in the mid-innings, we believe, in this very structurally strong cycle. And unless those owners can't trade at all, I don't expect them to leave the fleet. But then eventually, that will come home to roost.

Ben Nolan (Managing Director)

Okay.

Jeffrey Pribor (CFO)

And another point is, Ben, another point is that the older vessels just have a lower utilization in and of itself because of their age. So while it's not scrapping, older vessels have less utilization. So the fleet shrinks naturally.

Ben Nolan (Managing Director)

Sure. That's a good point. All right. I appreciate it. Thank you, guys.

Lois Zabrocky (CEO)

Thank you, Ben.

Derek Solon (Chief Commercial Officer)

Thanks, Ben.

Operator (participant)

Our next question comes from Chris Robertson from Deutsche Bank.

Chris Robertson (Equity Research Analyst)

Hey, good morning, everybody. Thanks for taking my questions.

Lois Zabrocky (CEO)

Good morning.

Chris Robertson (Equity Research Analyst)

Jeff. Yeah, morning, Lois. Jeff, maybe this is a question for you, but just looking at the kind of the summer pullback here in rates and then as that relates to the share price, could you look towards the $50 million repurchase program here to take advantage of the, it seems like, an attractive discount to NAV? How are you thinking about, I guess, the trade-off between the quarterly dividend and potential repurchases here?

Jeffrey Pribor (CFO)

Yeah. Hi, Chris. So look, we think it's important to have a share repurchase program in place, and we not long ago refreshed the amount from our last repurchases. So we do have a solid $50 million in place. And as always, we will look at that opportunistically. But we stuck with the dividend. What we are striving for with that is a measure of transparency, consistency, and a really solid yield or return to shareholders. And I think we've shown that the transparency is based on always being at least 60% in net income, which is an easy statistic for people to wrap their minds around or look up in whatever source they want. And consistency for six straight quarters of it, I think that's a measure of consistency. And solid yield, Lois mentioned in her remarks. It's still double digits, 12% the last 12 months.

We think that's good capital allocation. But to answer your question, again, with the share repurchase program in place and our low leverage and a lot of liquidity, yeah, we will monitor the share price. That's certainly an option available to us going forward.

Chris Robertson (Equity Research Analyst)

Got it. All right. Thank you for that. My next question is just around the cash break-even here, which is at very low levels relative to history. Looking at your expectations for OpEx and the inflation going forward, do you think you can maintain the cash break-even where it is today? And what would be the main drivers, do you think, of upward pressure on that number from where we are today?

Lois Zabrocky (CEO)

Well, I would say basically when you talk about where we see, I think some of the inflation creep in is in transportation expenses and shipping crew availability at times of dry docks because the world is really busy. But we think that we can hold the line on that. In the appendix, we give you some expense guidance for the remainder of the year. We look to be able to hold that line.

Chris Robertson (Equity Research Analyst)

Got it. Sounds good, Lois. Thank you for that. I'll turn it over.

Derek Solon (Chief Commercial Officer)

Thanks, Chris.

Operator (participant)

Our next question comes from Omar Nokta from Jefferies.

Omar Nokta (Managing Director)

Thank you. Hey, guys. Good morning. A couple of questions from my side. Just wanted to ask, we were talking about the tanker market, and rates are clearly softer at the moment. Seasonally, it looks like both crude and product are lower than where they were in the first half. Just wanted to get your sense as we move through the final here, four or five months of the year, how do you see both crude and product faring? I guess one, perhaps an easy question is, do you see a rise in rates in the coming months in both segments? And then two, do you think there's one that's going to lead the other?

Lois Zabrocky (CEO)

You put a lot in there, Omar. How are you? It's Lois. So as we look at the year on crude and product, and definitely we've seen seasonality creep into our markets here in the third quarter. Nonetheless, while it doesn't look like there will likely be more than 2 million barrels a day of oil demand growth for the year, there certainly will be more than 1 million barrels per day and maybe around 1.5 million in oil demand growth. And that's the fundamentals of kind of where we start. The markets have been pretty consistent this year. And when we look at it, I mean, I would say crude may have a little more products. I mean, look at the Q3 numbers. You're looking at 35 a day for what has been booked on Aframax, right, that we put in our charts.

That's really quite strong. Then I'll have Derek jump in there on there still is an expectation in the second half for demand increases.

Derek Solon (Chief Commercial Officer)

Thanks, Omar. Thanks, Lois. I think you said it great, right? We've seen a return to seasonality that we haven't really seen since the sort of COVID recovery in the tanker markets and the Russian-Ukrainian invasion. So some seasonality is not necessarily a bad thing for the markets, right? We see a softer summer in June and July. But Omar, we've already seen increased OPEC+ crude exports for August, almost 2 million barrels a day more than, say, compared to July. So that sort of push of crude supply should help the crude markets a great deal into the fourth quarter. Couple that with some of the earlier comments on the order book, right? There's a V to deliver this year. There's 5 Vs to deliver next year. So do you see some upside in the winter months for the crude sector for sure?

Omar Nokta (Managing Director)

Got it. Thank you. That's helpful, Color. So 2 million barrels more here in August versus July should start to tighten the market. And I guess presumably then that means crude tankers will lead the charge potentially as we move forward.

Derek Solon (Chief Commercial Officer)

Well, if we look at the VLCCs, Omar, they've got sort of the most room to come up, right? I mean, the Aframaxes, your 38 Q1, 35 Q2, mid-30s for Q3 books so far. That's historically very, very strong for the Aframaxes. We don't see anything softening that per se. But I think the crude will have to lead sort of the increase because they've got the most room to go up.

Omar Nokta (Managing Director)

Yeah. Yeah. And good point, obviously. Mid-30s on the Aframax in a seasonal soft period is obviously not too shabby.

Derek Solon (Chief Commercial Officer)

It's got to be in tankers.

Omar Nokta (Managing Director)

Yeah. Just Lois, you just mentioned in the appendix. I just wanted to ask the guidance on, say, OpEx. I'm not sure if I'm looking at it the right way or calculating it correctly, but it feels like perhaps maybe the running costs on the ships are going to be maybe $500 a day lower, if not maybe $1,000. Does that sound right, at least in relation to, say, the first half? Do you think this is a new baseline, or should we just kind of think about the average for the full year as more indicative?

Lois Zabrocky (CEO)

You know what I would say, Omar, is that I think that in the second half, we're very stable overall. And then I'd like to have Tom come back and kind of maybe look at the first half, the second half. But basically, we look at pretty stable OpEx overall. And it isn't as if you're going to have nobody's taken a decrease, right? But we are looking at stable OpEx. So we'll come back just to bridge that to get into those numbers a little bit if that's okay with you.

Omar Nokta (Managing Director)

That's totally fair. I appreciate it. Thank you. I'll pass it over.

Lois Zabrocky (CEO)

Thank you, Omar.

Operator (participant)

Our next question comes from Sherif Elmaghrabi from BTIG.

Sherif Elmaghrabi (VP of Equity Research)

Hi, good morning. Thanks for taking my question. So in your prepared remark, you highlighted your liquidity position, which is approaching about $700 million by the end of August. That's a lot of dry powder. And looking beyond the next two years when yards look backed up, I'm wondering if you see long-term growth opportunities on the crude side, the product side, or if you would consider something entirely different. I think you've already covered share repurchases, but something different given where asset prices for both are.

Lois Zabrocky (CEO)

Thank you, Sherif. So I'll flip it to Jeff in a moment. What we would say is that we took delivery of 3 new Vs in 2023, dual fuel LNG on those. We are building 6 of these LR1s. And we've been selling MRs that are older and bringing in the more modern ones. So we don't feel like there's a have-to here. What we really like is having that balance sheet in beautiful shape where you do have that undrawn revolving credit facility there where if you do see an opportunity, we can take advantage of that. And we are in both crude and product. We are not planning to take a sharp right turn into another particular space at the moment. And then, Jeff, did you want to talk at all about our liquidity or?

Jeffrey Pribor (CFO)

Well, just to say that liquidity is optionality. So we're happy with the low levels of debt we've got at 14% net loan-to-value. You want some debt. A lot of the debt we have left is so-called high-quality debt that we wouldn't want to pay off. Plus, it provides a greater return on the equity. So what we've been able to do is establish a lot of liquidity through the undrawn revolver, as you've noticed, but also we have 34 unencumbered vessels. So that's another form of liquidity that provides optionality or whatever comes. But we're prepared for options when we see attractive transactions available to us.

Sherif Elmaghrabi (VP of Equity Research)

Got it. Then drilling a little deeper on Omar's question about the market. Last week, Nigeria allowed the Dangote Refinery to buy crude directly from NNPC so it can ramp faster. I'm curious how you see that affecting crude versus product flows and any color on how that refinery has already impacted the Atlantic trade would be helpful.

Lois Zabrocky (CEO)

So Dangote is putting out some diesel. It's supposed to have a total of 600,000 barrels a day of capacity, which I do believe one day they will utilize. But I think we're looking more at around 100,000 barrels a day of where you're seeing some exports coming out. And a lot of that's been diesel. And you have seen an effect on the worldwide diesel margins, right, that have gone down and have now bounced back a little bit. So we've also seen in the market some of the imported Dangote crude, which they will continue to do. I think it'll be around 25%-ish that they plan to take from Nigeria. So I think that it's early days in Dangote, and that's an evolving situation. Derek, any more flavor on that?

Derek Solon (Chief Commercial Officer)

Not particularly. I mean, we had seen a good deal of imported crude into Dangote as the facility was getting up and running. How long we expect that to continue was always debatable, being Nigeria is an OPEC-producing exporting nation. So we're happy to see it when we have it. Don't expect that to drop off to zero anytime soon. And I think, Sherif, you've got the right question in terms of what that will do to clean product trades in the Atlantic Basin. And I think we still need a little bit of time to tell.

Sherif Elmaghrabi (VP of Equity Research)

Hey, that's great color. Thanks, everyone.

Lois Zabrocky (CEO)

Thank you.

Operator (participant)

As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. Our next question comes from Liam Burke from B. Riley.

Liam Burke (Managing Director)

Good morning, Lois. Good morning, Jeff.

Lois Zabrocky (CEO)

Good morning.

Liam Burke (Managing Director)

Lois, you added three more Aframaxes into the time charter market. Are you seeing increased step-up in demand from the shippers to secure tonnage on a longer-term basis?

Lois Zabrocky (CEO)

No, Liam. We've got a total of 15 vessels on time charter. And we try to look for something that's going to lock in more than you're in very strong spot markets, right? So we look for a multi-year period. And when Derek can lock it in above long-term averages, then we go ahead and do that. We have about 20% of the fleet on time charter right now. So we've got some strong customer relationships. And when they're looking to add in, then we'll do that. Right now, we're in a little bit of a steady state, I think. And if we see something, we'll go ahead and lock it in. Otherwise, you're in the summer, and it's even August. So I'm thinking everybody comes back in later in Q3 and gets to work on locking in their book.

Liam Burke (Managing Director)

Fair enough. Thank you. And on the Aframaxes, you still have a few older ones in the fleet. How are you balancing historically elevated rates with potentially divesting some of these older Aframaxes and lowering the age of the fleet?

Lois Zabrocky (CEO)

Yeah, Liam. So if you look at, we've been steadily we call it pruning, selling 4 or 5 a year. Now you saw us bring in some more modern assets. And then every one of these vessels that's in the spot market over the last year has brought in $7 million over its break-even level. So it's pretty stunning all around on the Aframaxes. So the earnings potential is very strong. We divest some of the older. We bring in more modern. We feel pretty steady on it.

Liam Burke (Managing Director)

Great. Thanks, Lois.

Lois Zabrocky (CEO)

Thank you, Liam.

Derek Solon (Chief Commercial Officer)

Thanks, Liam.

Operator (participant)

That was our final question. So I'll hand back over to the CEO, Lois Zabrocky, for any final remarks.

Lois Zabrocky (CEO)

We just want to thank everyone for joining us for our eighth quarter of really strong returns to shareholders. We're looking forward to getting back together next quarter. Thank you very much. Enjoy the summer.

Operator (participant)

That does conclude today's conference call. Thank you for joining. You may now disconnect from the call.