International Seaways, Inc.

Good morning and welcome to the International SEAways second quarter 2021 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 Seaway's Earnings Release Conference call for the second 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, Anticipated cost savings and other synergies and benefits from our merger with Diamondash Shipping. Any plans to issue dividends. Our 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 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 in 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 first and second quarter of 2021, our 2020 annual report on Form 10-K, 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 DeBrock. Lois?

Thank you very much, James. Good morning, everyone. Thank you for joining International Seawaste Earnings Call to discuss our second quarter 2021 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 achievement 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 million and revenue synergies of 9 million. 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 re-rating 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 $14.3 million, 51 cents per share. excluding vessel impairment charges. Importantly, please note, as of the end of the quarter, we had a total liquidity of $174 million. This includes $134 million of cash. This cash is serving us well throughout the challenging rate environment. As of today, we have approximately $200 million in total liquidity. fleet optimization. We have been actively selling older ships at attractive prices. These prices reflect the resilient second-hand market. We expect net proceeds of $75 million after repayment of $50 million in debt. We have preserved a combined $34 million in 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 million to our shareholders. This includes $10.1 million of regular dividends, $30 million in share repurchases, and $31.5 million 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 alley in large crude sector, focused on Vs and Suez Maxis, while we created a new power alley of strength in the product sectors. 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 Seaways customers and our shareholders. To illustrate the combined entities' earnings power ability, the combined company of 100 vessels in 2020 would have earned time charter equivalent revenue greater than $800 million with an EBITDA of $420 million. Please turn to slide six. We're smoothly progressing on building our three dual-fuel LNG VLCCs. Daewoo is on target for delivery in early 2023. These state-of-the-art vessels will adhere to future environmental regulations throughout their life, being 20% more efficient than a modern eco VLCC and 40% more efficient than a 10-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 2020, we're very proud to be implementing sustainability initiatives in our fleet in the maritime sector. The $96 million 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 million per ship. With these DLCCs 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, T-Waste have invested over $900 million to renew our fleet at the low point in the tanker cycle. And acquiring Diamond S for $361 million in stock is no different, including at the bottom of a current tank recycle. 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 million in operating income during 2020 alone. Our shell new building, 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 million, or 89 cents 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 million 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 2.1 million barrels per day of increase implemented from May through July. Right now in the world, 4.4 billion vaccination shots have been administered globally. We're currently at a pace in the world of administering over 42 million COVID shots per day. This has enabled a stronger economic growth, and oil demand jumped by 3.2 million barrels per day in June. The IEA projected July demand to be up by 5.4 million barrels per day year over year, and they forecast 2022 demand to increase by 3 million 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 million barrels over the last year, and they are now at 2019 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 orders in 2021. Uncertainty in the market, decarbonization regulations, higher new building costs, all have suppressed and tempered new building orders on tankers. Looking at recycling potential, there are numerous candidates based on the aging global fleet. When we take a look on the right-hand side of the slide, 17% of the existing B fleet is at least 17 and a half 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 their 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 Pribor our CFO, who will give us the financial review. Jeff?