International Seaways, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the International Seaway's first quarter 2021 earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker today, Mr. James Small, General Counsel. Please go ahead.

Thank you. Good morning, everyone, and welcome to International Seaway's earnings release conference call for the first quarter of 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 parties' 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&A expenses. Estimated bookings and TCE rates in the first quarter, second quarter of 2021 or 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. Forelooking 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 COAs actual results to differ from expectations include those described in its quarterly report on Form 10-Q for the first quarter of 2021, our 2020 annual report on Form 10-K, our recently filed registration statement on Form S-4, and then other filings that we have made or in the future may 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 Seaway's earnings call to discuss our first quarter 2021 results. The first quarter was transformational for International Seaway. 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 of international seaways in Diamond S doubles our net asset value and triples the size of our fleet to 100 vessels. We are creating the second largest U.S.-listed tanker company by vessel count and the third largest by dead weight. We expect to solidify our power alley in the large crude sector focused on Vs and Suez maxes. 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 million and revenue synergies of $9 million. We will increase our equity market capitalization and our liquidity which we anticipate will provide an opportunity for a re-rating 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 31.5 million special dividends to be paid to shareholders immediately prior to completing the merger. We reaffirm our commitment to paying the quarterly dividends and opportunistically executing on our $50 million 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 2023. 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 10-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 2025 EDI 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. New building 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 million, or 48 cents per share. In a weakened rate environment where oil inventory destocking adversely impacted tanker demand, we generated an adjusted EBITDA of $11 million. It's important to note that as of the end of the quarter, we had ample total liquidity of $212 million, including $172 million in cash. On slide five, we discussed our disciplined and accretive capital allocation track record. This chart highlights our success investing over $900 million to renew our fleet at the low points 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 2018 for $434 million, and two Suez Maxis and one VLCC acquired in 2017 for a combined $169 million, have materially appreciated in value since their acquisition on an age-adjusted basis. Most importantly, these nine shifts contributed a cumulative $225 million 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 new buildings at a cyclical low point as well. And as I just mentioned, new building 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 5.7 million 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 97.7 million barrels per day this year. Consistent with this recovery in demand, the EIA expects global oil inventories will fall by 1.8 million barrels per day in the first half of 2021. We believe that this continued 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 improvements in the tanker market. Our positive view of the long-term outlook for crude and product tanker demand is one of the major reasons that we are so excited for our merger with Diamond S. On slide seven, we examined development in the clean product market. Due to the COVID-19 slowdown in global demand during the first half of 2020, Refinery outages globally approached almost $12 million 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 U.S. Gulf refinery utilization rate only yesterday popped over 90%. This is a very strong indicator. This allows for increased diesel oil exports from the U.S. Gulf, and we're also seeing increases in gasoline demand in the United States, where we're very close to 9 million 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 books remains at historic lows. This is reflected in the 31 VLCC orders in 2019 same amount in 2020, and 27 ordered 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 17 and a half years old, and 8% are 20 or older, representing the majority of the VLCC order book. Another nine of these will reach 20 years old in 2021. As these 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 would now like to turn it over to Jeff to give the financial review. Jeff?

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 $10.7 million. Net loss for the first quarter was $13.4 million, or 48 cents per diluted share. compared to net income of $33 million or $1.13 per diluted share in the first quarter of 2020. Now please turn to slide 10. I'll first discuss the results of our business segments beginning with the crude tanker segment. Time charter equivalent or TCEs for the crude tanker segment were $36 million for the quarter compared to $89 million in the first quarter of last year. The decrease primarily resulted from the impact of lower average blended rates in the VLCC, SUISMAX, AFRMAX, and PANAMAX sectors. Turning to the product carrier segment, TCE revenues were $9 million per quarter compared to $31 million in the first quarter of last year. This was 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 ducts, and a decrease in MR revenue days due to the re-delivery of four time-shared MRs to their owners between March 2020 and July 2020. Overall, as reflected in the chart top left, consolidated TCE revenues for the first quarter of 2021 were $45 million compared to $120 million in the first quarter of 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 million for the quarter compared to adjusted EBITDA of $74 million in the first quarter of 2020. 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 12 months on a year-over-year basis. Consolidated TCE revenues and adjusted EBITDA for the last 12 months ended March 31, 2021, were 327 million and 157 million, respectively, compared to 356 million and 192 million for the prior year LTM period. Now, turning to slide 11, we provide a first quarter review and a second quarter 2021 earnings update. For a look at results due to thus far, with 63% of our Q2 spot dates for VLCCs, They've been done on an average of approximately $15,200 per day. 75% of our available SUASMAC spot days and an average of $16,000 per day. 37% of our available LR2 spot days and an average of $11,100 per day. And 49% of our available Panamax spot days and 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. Cash cost TCE breakevens for the 12 months added March 31st, 2021 are illustrated on this slide. International Seaway's overall breakeven rate was $21,000 per day over the last 12 months. These rates are the all-in daily rates our own vessels must earn to cover vessel operating costs, dry docking costs, cash G&A expense, debt service costs, which means scheduled principal amortization as well as interest expense. After taking into consideration distributions from our FSOJV and the fixed time trial revenue, the overall break-even rate for the last 12 months dropped to $17,500 a day. We've also now on this slide shown break-evens excluding principal amortization for reference. In this case, the overall fleet-wide break-even fell to $15,000 a day. On the far right-hand side of the page, the bar chart shows the all-in daily break-even costs for the next 12 months. Taking into consideration contracted revenue from the SSO and our time charters, the overall break-even rate is $18,900 per day. At this time, I'd like to give cost guidance of the year for your modeling purposes. Please note this does not take into account expected cost synergies following the anticipated close of the merger. 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, $8,900 per day. For SUISMACs, $8,000 per day. For AFRMACs, $8,200 per day. For Panamax, $7,900. And for MRs, $7,600 per day. In each case, excluding any impacts attributable to COVID-19. Further, we expect dried off and stock and capex expenses to be $24.9 million and $38.4 million this year. For details on that, you can look at 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 $24.8 million, which compares to an actual cash interest expense of $30.8 million in 2020. For the year, we expect cash G&A to be in the region of 25.9 million. And finally, we expect about 20.8 million in equity income from JVs, 65.7 million for depreciation and amortization, which is about $9 million 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 million. During the quarter, adjusted EBITDA was $10.7 million. Equity income from JVs was a decrease of $5 million, and the cash distributions from JVs was $3 million. We expended $12 million on dry docking and CapEx. Cash interest and scheduled principal payments under debt was $21 million. And finally, taking into account the $2 million quarterly dividend and a negative impact of working capital and certain other charges of $14 million, The net result was that we ended the quarter with approximately $172 million of cash and a $40 million undrawn revolver yielding total liquidity of $212 million. Now, please turn to slide 14. I'd just like to briefly touch on our balance sheet. As of March 31st, we had $1.6 billion of assets compared to $450 million of long-term debt. In addition, we have a $40 million revolving credit facility that remained undrawn as of March 31st. 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 months adjusted EBITDA was a strong $157 million, and therefore our net debt to EBITDA for the last 12 months was 2.23 times. That concludes my remarks, so I'd like to turn the call back over to you.

Thank you very much, Jeff. As I summarized, 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 million and revenue synergies of $9 million. 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 a $1.10 special dividend to international Seaway 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 million 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 2023. In addition to the seven-year time charters providing strong stable cash flows and added upside, these highly efficient duffels 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 tanker 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.

Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Randy Gibbons from Jefferies. Your line is open.

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

Very good. Good morning, Randy.

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, it doesn't seem to be a material negative as you have now, I guess, much less obsolescence risk when it comes to IMO 2030. So how do you feel about your fleet, possible fleet renewal in terms of maybe some sales candidates and additional modern acquisitions?

Okay, Randy. So just kind of taking that and starting to address it first with fleet age, Since International Seaways became independent four and a half years ago, Derek Salone and his team have sold over 21 older vessels, and they've done extremely well. We've continued to modernize the fleet. 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 second-hand values 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 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 would say that at the moment, I think international seaways, we will, you know, are focused on concluding our merger. building our new buildings, and that's going to put us in really good shape.

Well, if I could just add one comment. Randy, I think we're really happy with what I would call the portfolio of ages we have in our fleet. You know, it's a really nice mix of the shell new buildings, other modern vessels, sort of, you know, 8- to 10-year vessels, 13-, 14-year-old age vessels. It really is the fleet we wanted to put together, you know, for this point in the cycle.

Okay, makes sense. And then I guess lastly, you know, 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 NAS 50% ownership, or just kind of keep your current 50% as is?

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 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 there's significant value potentially to be unlocked on those FSOs.

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

Thank you, Randy.

Thanks. Your next question comes from the line of Omar Nocta from Clarkson's Plateau. Your line is open.

Hi, thank you. Hi, Lois. Hi, Jeff.

Hey, Omar.

Hi there. I sort of have just a general question about, and this is maybe a bit bigger picture, but sort of like 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 the 100 ships you'll have following the proposed merger with Diamond Desk. We're getting to a place where ships are becoming much more differentiated, more so, I think, than, say, in the past. You've got eco versus non-eco, 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 how they operate going forward, and particularly, you know, for Tankers International? Any thoughts on that?

You know, Omar, that's a great point. You know, Tankers International has been around for over 20 years, and International Seaway Zones 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 it has to be a very close relationship between the owners and the pool itself. because as we need to capture more data on vessel performance, we have to enhance how the ships are performing for the companies. 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 owners in the pool and the commercial and the technical teams. And you're going to have to see that in order for pools to thrive in the future.

Yeah, that makes sense, Lois. And I think it's – how do you think the potential for, say, a carbon tax to play into this? We've got the EU is discussing it. The U.S. is increasingly coming on board with that idea. And I guess it sort of seems that you'll have the pool making decisions on maximizing rates and earnings potentials. And then the owner might be seeing an outsized carbon tax bill. 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 like 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 operators and the owner.

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 populated by really sharp commercial people, and we're starting to see carbon monitoring desks within the pools themselves, and, you know, because all of us as owners realize that we need to, you know, be paying close attention and be part of the solution here moving forward. So, Um, I think that you're hitting on what will be the biggest growth area in, um, you know, in trading probably in the future, which is going to be carbon tax and how critical it is for all of us as owners to, um, be part of that conversation as this develops.

Yeah, no, definitely very interesting to see how things, uh, develop on that front. Um, You know, just maybe one follow-up, just maybe to Randy's question about the FSOs. It's been this ongoing discussion. I feel like every quarter it comes up. Is there a way maybe that the JV is leaning when it comes to monetizing it? Is it outright selling the shifts, or do you think securitizing them with, you know, securitizing the cash flow with some sort of debt facility? Any way you're leaning so far? Yeah.

Well, you know, it's funny, Omar, because it does seem like a long time, but we actually just concluded these two JVs for an additional 10 years to 2032 in the fourth quarter. So it's a fairly recent achievement. And I would say that we are still evaluating, you know, all different opportunities, and we're going to work together with our partners to make sure that we maximize 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.

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

Thank you.

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

Yeah, good morning, Lewis and Jeff. A couple of questions here. First, I'm going to slide 11. Thanks for... You know, it looks like you're able to capitalize on the spread between low-sulfur and high-sulfur. Can you talk a little bit? I mean, this is the first quarter I've seen that breakout. Can you talk a little bit about the challenges over the last year since the IMO 2020 came into regulation and what you expect going forward there as far as if there are any challenges that you can address?

You know, Magnus, I would say that, you know, one challenge is 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 and the conventional fuel were more narrow. However, presently, and it has been, you know, maybe now for about four or five months, Maybe that's overstating slightly. We've been at about $100 per ton. So as you can see, the differential is something like $5,000 to $6,000 per day between the scrubber-fitted Ds and the non-scrubber-fitted Ds. So that critical outperformance is just when we need it most at this moment in the cycle. And then, Bill, maybe I would ask you, our head of operations, Bill Nugent, You know, from a fuel perspective, I mean, the fuel has been available, the heavy sulfur and the low sulfur fuel has been available. Have we seen quality issues or have we been able to overcome these largely to date?

Hello, Magnus. Thank you, Lois. 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's actually been quite stable and quite okay. On the very low sulfur side, on the IMO 2020 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.

Thank you, Bill.

And can I just jump in with one, Magnus, before you move on, just because this is for help for everybody and planning purposes, that scrubber days in Q2, that's just going to be 27 days. Sorry, non-scrubber days in Q2, just 27. So I wanted to get that out there. Or 24, I apologize. That's the correct number.

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

You know, we constantly monitor it. 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 increased significantly over and the spread tends to widen as you see the prices move up. So at the moment, I think we'll let it ride, but we do monitor it.

All right, 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 of 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, the As far as activity level, it seems like the U.S. crude exports are still pretty robust, and I guess we've addressed a lot of the pipeline capacity issues.

So we closed 2020. I believe our EBITDA was over $4 million for lightering. However, we have seen lightering be COVID-affected. As you've seen, the U.S. demand numbers were down. I mean, this week, just yesterday, we see that the United States exported over 4 million barrels per day of crude in the last week. Now, that's the first time we've seen that in a very long time. In the United States, we're looking at GDP maybe 6.5% in 2021. High level of vaccination, penetration, and gasoline usage is, as I mentioned, almost 9 million barrels a day. It's up 2 million barrels a day from last year, but still down one from 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 lower exports in and out of the United States, it was COVID-affected as well.

Okay, great. Thank you.

Thank you.

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

Hi, thank you. And good morning again. Afternoon everybody. Um, I guess I just wanted to follow up on, on, on Magnus's question and welcome back to Agnes. Um, around the lightering, um, it seemed 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 a alternative investor. thinking about building VLCC export terminals. Any kind of update there in terms of as we think about that, you know, that push and pull on the lightering business? Have those projects moved forward or they have all kind of been kind of pushed to the right like everything else?

Yeah. A lot of those projects have been pushed to the right, Greg. You do see where Suez Maxis can now load and also go out and fill up a V. But a lot of those projects have been pushed to the side. It's interesting. We do a lot of lightering in Panama, very busy in the Bahamas. The West Coast was affected by COVID and imports, which is now starting to pick up. And, of course, the U.S. Gulf is the biggest hub for lightering. And there are, you know, projects that, you know, to deepen and widen. But each one is specific. And, you know, I have to follow up with you, Greg, to kind of get into, you know, the specific different projects. But a lot of them, you know, there were really too many that were on the boards. And then with COVID, a lot of those have gotten delayed.

Okay, great. And then I wanted to follow up on what Omar was discussing, but from a different angle. You know, clearly the transaction with Diamond S hasn't closed yet, but, I mean, you are going to be taking on, you know, a large pool of MRs and realizing that those were already managed. How is INSW thinking about the management and the opportunities for those vessels, just given that some of those MRs are a little bit older and might be facing issues? Is there any thought about the company kind of partnering with one older MR owner? How are we thinking about that, I guess, is probably my question there.

Yeah, well, and as I'm sure many of you are aware, you know, Diamond S MRs are commercially managed by Norient in April, and also another contingent of ships is commercially managed by Capital. And I think on both fronts, you know, you've seen them be able to increase, you know, their – you know, marketability or to stand pretty strong. I think Norient's been posting quite strong results. So, you know, 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're running 100 vessels, you know, maybe we won't have such a high percentage of bot exposure. And then we will opportunistically look at shales, you know, as you do all the time. So there's not one answer. 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 the best hands they can be. And then you look at opportunistically pruning the fleet moving forward.

Okay, great to hear. Thank you very much.

Thank you, Megan.

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

Yes, thank you. Good morning, Lois. Good morning, Jeff. Good morning. 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 return on capital discipline?

Jeff, why don't you jump in there?

Yeah. Hi, Liam. It fits right in. Very nicely. We've discussed this before. The combination of the low purchase price, which Lois mentioned in her remarks, really at the low point of the cycle, combined with a very well-thought-out collaborative contract with Shell that provides a base rate and a profit share It's going to work out well for both parties. I said it before and I'll say it again with that profit share, the way it works, which you can't go into detail, but we're expecting it to be a double-digit return type of contract. So it's going to be perfectly well with our capital allocation strategy.

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

That's a really good question. And I think that, you know, going forward, I mean, we will continue 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 going to take to innovate and decarbonize the propulsion moving forward. So I think that we will welcome these types of projects and we'll evaluate each one on the merits and the projected returns, Liam.

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

Thank you.

And again, that's star one if you would like to ask a question. Your next question comes from the line of John Conrad from GCaptain. Your line is open.

Hey, Lois and team. Congratulations on navigating a difficult year.

Thank you, John.

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

Well, that's an interesting question. I think that when you're in an inflationary environment, it's good to be in hard assets. I think that we're certainly away from seeing that flowing through. But when you have periods of strong GDP, and to be clear, 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 GDP. India had been looking at 12%, which is massive, and I'm sure that will be moderated now by COVID. But when you start to see strong GDP growth, oil consumption growth is a derivative of that. In other words, we're usually about oil consumption growth will grow at a little bit less than half of GDP growth. So You know, for the tanker market, where we're headed here with, you know, increased GDP growth in the world and in the backside of 2021 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 pretty significant.

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

Excellent. Thank you so much, guys. Thank you.

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

Well, thank you, everyone, for joining us for our first quarter wrap-up call and our earnings today. And, you know, 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.

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