International Seaways, Inc.

Good morning and welcome to the International Seaways Third Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to James Small, General Counsel. Please go ahead.

Thank you. Good morning, everyone, and welcome to International Seawaste Earnings Conference Call for the third quarter of 2020. Before we begin, I would like to start off by advising everyone on the call with us today of the following. During this call, management may make forward-looking statements regarding international seaways or the tanker industry, which may address, without limitation, the following topics. outlooks for the crude and product tanker markets, changing oil trading patterns, forecasts of world and regional economic activity, and of the demand for and production of crude oil and other petroleum products, the effects of the ongoing COVID-19 pandemic, the company's strategy, purchases and sales of vessels and other investments, anticipated financing transactions, expectations regarding oil revenues and expenses, including vessel charter hire and G&A expenses, estimated bookings and TCE rates in the fourth quarter of 2020 or other periods, estimated capital expenditures in 2020 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, which could cause actual results to differ materially from those implied or expressed by those statements. Factors, risks, and uncertainties that could cause international COAs' actual results to differ from expectations include those described in the company's annual report on Form 10-K and its quarterly reports on Form 10-Q and other filings the company has made or may in the future make with the U.S. 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, Ms. Lois Zabrocki. Lois?

Thank you very much, Gene. Good morning, everyone. Thank you for joining International Seaways Earnings Call to discuss our third quarter 2020 results. Before we turn to our slides, I want to take a minute and I want to thank our seafarers. We rely on our seafarers to ensure our safe, reliable, and efficient transportation of energy cargoes for our customers. Amidst this global pandemic, the ship's crews are doing a remarkable job adhering to the highest level of not only safety, but professional standards. We're grateful at Seaways and we're proud of the service of our seafarers. Our highest priority remains keeping our seafarers safe and getting them home to their families safely and on time. This continues to be a challenge with shifting national and local quarantine restrictions and now increasing COVID cases numbers worldwide. In this dynamic situation, we have taken important steps to repatriate our crews. such as deviating ships to more convenient ports for our seafarers, implementing extra measures to prevent the spread of the virus and keep it off our vessels, arranging for private charter flights when necessary. In these unchartered waters, we have made good strides in reducing the numbers of overdue crew, and we will continue to look for every opportunity to get these men and women back to their families. Now, going to our prepared remarks, if you'll turn to slide four, we take a look at our third quarter highlights and our recent accomplishments, starting with the first bullet. Following two consecutive quarters of record earnings as a public company, again, in the third quarter, we generated strong results in a weakening rate environment. Notably, the third quarter results reflect the strong performance of our sizable fleet of crude and product tankers, as well as the four favorable time charts executed earlier in this year at very strong rates. For the quarter, we earned a net income of $28 million, excluding one-time items related to asset sales and debt refinancing, or $0.98 per share. Our third quarter adjusted EBITDA was $55 million, This represents a year-over-year increase of $31 million. Turning to the second bullet, we highlight our strong period coverage and our favorable position to optimize revenue during the current period of oil inventory destocking. This week, we announced that our FSO joint ventures signed a 10-year contract extension for the FSO Asia and the FSO Africa with North Oil Company. We look forward to continuing to support the North Oil Company's operations in the Al Shaheen field, whose shareholders are Qatar Petroleum and Total. These 10-year extensions through 2032 lock in the commercial value contributed by our joint ventures. These high-specification custom-built FSOs allow International Seaway to both generate significant contracted revenues and lock in the value of these important assets. Based on our 50% ownership in the joint ventures, we expect to generate in excess of $322 million of contract revenues over the 10-year term of these extensions. In addition to the joint venture contract extensions, The four VLCC time charters that we signed earlier in the year averaged $63,700 per day during the fourth quarter and create further earning support and visibility during the current challenging rate environment. If you move to the third bullet, we continue to implement our disciplined and accretive capital allocation strategy. Following our success, significantly de-levering our balance sheet and strengthening our capital structure. Starting in the first quarter of 2020, we returned capital to shareholders in the form of both dividends and share buybacks. Since the beginning of the year, we've repurchased nearly 5% of our outstanding shares while paying 18 cents per share in quarterly dividends. We have further strengthened our balance sheet and our cash generation potential with our recent agreements to sell three older vessels, which are expected to deliver to buyers between November and January 2021, generating $62 million in cash for INSW. This, combined with our success extending the episode contract. Our board has authorized the increase of our share buyback program to $50 million. We intend to continue to act opportunistically for the benefit of shareholders and find our shares to provide attractive value. In terms of the dividend, following the payment of our regular quarterly dividend of 6 cents in September, our board has approved another regular quarterly 6 cents dividend to be paid in December. We also continued to de-lever We repaid the full $40 million outstanding under our transition term loan facility during the third quarter. This lowered interest expense by $1.7 million. Importantly, we have reduced our break-even rate going forward to approximately $17,500 per day, which takes into consideration the VLCC time charters that I mentioned earlier, as well as the contributions from our FSO joint venture and our debt repayment. Turning to the last bullet, we have continued to increase our financial strength. This bodes well for effectively operating through the tanker cycle and creating value for shareholders. With net loan to value at 39%, we continue to have one of the lowest leverage profiles among our tankers peers. And this excludes the value of the episodes. We ended the quarter with $194 million in total liquidity, including cash and our $40 million undrawn revolver. This is an increase of about $10 million from the prior quarter end. We have 11 unencumbered older vessels remaining after the sale of the three older vessels that were also unencumbered. Turning to slide five, we provide an update on oil supply and demand. The IEA has increased their demand forecast to 96 million barrels for the fourth quarter of 2020 and 99 million barrels by the end of 2021. With demand recovering and rising in the fourth quarter, the IEA anticipates a 4 million barrel per day stock draw throughout the quarter, helping to decrease the surplus inventories that have been built up during the second quarter. when the economic impacts of COVID-19 dramatically reduced the demand for oil, as you can see in the chart. We believe that stock drawdowns are needed to set the stage for a tanker market recovery. On the supply side, OPEC currently intends to produce an additional 2 million barrels per day during the first quarter of 2021, which we expect should increase tanker demand. OPEC discussions are ongoing. The IEA also expects diesel and gasoline demand to be at 98% of 2019 levels by the end of the year. Combining the inventory destocking process and OPEC's increased supply, these more normalized levels of demand are supportive of stronger rates. Turning to slide six, we provide an update on ship supply. The overall tanker order book has continued to decline to historical lows, as can be seen in the chart at the top right hand of the slide. Only 16 VLCCs have been confirmed ordered in 2020 to date. Although we understand a handful of additional orders are currently under discussion. This follows 2019, when only 31 BLCCs were ordered. We believe uncertainty regarding the market, as well as decarbonization regulations and suitable propulsion systems questions to meet decarbonization goals, continues to limit new ordering. Moving to the bottom half of the slide, we highlight the potential for vessel recycling. with over a quarter of the existing VLCC fleet. Now we're 15 years old, as shown in the chart at the bottom right of the slide. It's worth noting an additional 22 Vs will reach 20 years old during 2021. As we have stated consistently, once vessels reach 15 and 20 years of age, they are more expensive to operate with significant investments required to continue to trade. These ships will reach ballast water treatment deadlines, and even greater capital expenditure is required. Due to the strong rate environment earlier this year, in 2020 there have been no VLCCs recycled thus far. However, given the fleet continues to age, recycling is likely to increase, particularly given the low rate environment we are presently in. I'll now turn the call over to Jeff. And Jeff will provide additional details on our third quarter results. Jeff?