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spk03: 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.
spk00: 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?
spk01: 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?
spk07: Thanks, Lois, and good morning, everyone. Let's move directly to reviewing the second quarter results in more detail. Before turning to the slides, let me just quickly summarize our consolidated results. In the second quarter, we had EBITDA of $10 million. The net loss for the quarter was $18.8 million, or 67 cents per diluted share, compared to net income of $64.4 million, or $2.24 per diluted share, in the second quarter of 2020. When they exclude the impact of vessel impairment charges and merger and integration-related costs, the net loss narrows to $14.3 million, or $0.51 per diluted share. Now, if I could ask you to turn to slide 11. I'll first discuss the results of our business segments, beginning with the crude tanker segment. TCEs, or time chart equivalents for the crude tanker segment, were $31 million for the quarter compared to $106 million in the second quarter of last year. The decrease primarily resulted from the impact of lower average budget rates in each of the VLCC, Suezmax, AfriMax, and Panamax sectors. Turning to the product carrier segment, TCE revenues were $14 million for the quarter compared to $29 million in the second quarter of last year. This was also due to lower period-over-period average daily lender rates earned by our LR2, LR1, and MR fleets. Overall, as reflected in the chart top left, consolidated TCE revenues for INSW for the second quarter of 2021 were $45 million compared to $135 million in the second 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 second quarter. Looking at the chart on the top right of the page, adjusted EBITDA was $10 million a quarter compared to adjusted EBITDA of $96 million in the second quarter of 2020. Again, 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 into June 30, 2020 were $237 million and 2021, sorry, with $237 million and $70 million respectively compared to $438 million and $267 million for the prior year LTM period. Now turning to slide 12, I'd like to highlight our track record in returning capital to shareholders since the beginning of 2020. We have returned over $70 million to shareholders in the form of special and quarterly dividends as well as share buybacks. As you can see from the pie chart, we paid over $10 million in regular quarterly dividends. We purchased nearly 5% of our outstanding shares worth $30 million and paid a $31.5 million or $1.12 per share special dividend to INSW shareholders immediately prior to closing the merger. Based on our pre-merger market cap, this represents an approximately 8% return in 2020 and a further 8% in 2021 year to date. Creating enduring shareholder value remains a priority for us, and we are committed to continuing to pay a quarterly dividend and opportunistically utilizing our $50 million share repurchase program authorization to unlock further value post-merger. Now, turning to slide 13, we provide a second quarter review and third quarter earnings update. For a look at results in Q3 thus far, we've booked 61% of our available Q3 spot days for VLCCs at an average of approximately $10,800 per day. 45% of our available SUASMEX spot days at an average of $6,500 per day. 50% of available AFIMAX LR2 spot days at an average of $11,600 per day. And 51% of our Panamax spot days at approximately $10,100 per day. On the product side, we booked 42% of our third quarter MR spot days at approximately $9,600 per day and 26% of our handy size spot days at $4,000 per day. Now, if we could turn to slide 14. The cash cost TCE breakeven for the 12 months end of June 30, 2020 are illustrated on this slide. International Seaway's overall breakeven rate was $20,000 per day over the last 12 months. These amounts are the all-in daily rates our owned vessels must earn to cover vessel operating costs, dry docking costs, cash G&A expense, and debt service costs, which means scheduled principal amortization as well as interest expense. On this slide, we've also shown break-evens excluding principal amortization. In this case, the cash break-evens in the 12 months was $15,200 per day. Now, the far right-hand side of the bar chart shows the estimated all-in daily breakeven rates for the larger INSW fleet, inclusive of Diamond S vessels, which I will refer to as the combined fleet. Over the next 12 months, the cash breakeven for the combined fleet is $17,700 per day, as you can see in the box on the right-hand side. At this time, I'd like to provide some cost guidance for the combined company for your modeling purposes. For the remainder of 2021, we expect regular daily op-ex, which includes all running costs, insurance, management fees, and other similar related expenses for various classes to be as follows. For VLCCs, $8,800 per day. For SUISMAX, $7,600 per day. AFRMAX, $8,200. Panamax, $7,900. And for MRs, $7,200 per day. And finally, for HandySci, $7,400 per day. in each case excluding any impacts attributable to COVID-19. For details on projected dry dock capex and off-hire days by quarter, again, on a combined company basis, you can refer to slide 20 in the appendix for an update. Continuing with cost guidance for the combined company, for the remainder of 2021, we expect cash interest expense will be about $11 million per quarter. For the remainder of the year, we expect cash G&A to be in the region of $11 million per quarter as well. This reflects previous guidance for both INSW and Diamond S now combined, less a factor for transitioning in approximately 25% of expected G&A synergies from the merger. As previously stated, full-cost synergies are expected to be achieved in 2022. And finally, we expect about $6 million in quarterly equity income and $31 million is the figure for quarterly depreciation and amortization. Now, if we could turn to slide 15 for a cash bridge moving from left to right. International seaways began the second quarter with total cash and liquidity of $212 million. During the quarter, our adjusted EBITDA was $10 million. Equity income from JVs decreased by $5 million, and the cash distributions from the FSO JVs were positive $1 million. We expended $13 million on dry docking and capex. and $14 million on the first installment as part of our agreement to build the three dual-field LNG VLCCs. We received $4 million in deposits on two vessel sales that are to be littered to buyers in the third quarter of 2021, and cash and interest scheduled principal payments on our debt were $21 million. Finally, taking into account the $2 million quarterly dividend and the positive impact of working capital on other charges of $2 million, the net result within the end of the quarter with approximately $134 million of cash and $40 million of undrawn revolver, yielding total liquidity of $174 million. As of today, as Lois mentioned, total liquidity stands at approximately $200 million. Now turning to slide 16, I'd like to briefly talk about our balance sheet. As of June 30th, International Seaway's pre-merger had $1.5 billion of assets compared to $445 million of long-term debt, In addition, we had $40 million of revolving credit that remained undrawn as of that date and still remains undrawn. As you can see on the right-hand side of the slide, our net debt to total cap at that date was 28%, while our net loan value to our conventional fleet was 37%. Now, if we move to slide 17, we provide pro forma combined company debt as of June 30th, accounting for the merger. The total debt balance was approximately $1.2 billion, and as Lois mentioned, post-murder, we continue to maintain low net leverage ratios with net debt to capital of 33% and net loan to asset value of 45%. The debt facilities listed on this slide reflect our highly competitive cost of capital, including weighted average interest costs of just 2.72% in our quarterly amortization schedule as well, and note that 56% of the debt at this point, is fixed or hedged. In addition, I would point out the vast majority of the debt maturity dates are no earlier than 2024. And finally, I'd like to highlight that we continue to have very strong relationships with a leading group of diverse global banks. We very much appreciate the ongoing support of this group, which now includes 12 major shipping banks. Lois, that concludes my remarks. I'd like to turn the call back to you for your closing comments.
spk01: Thank you so much, Jeff. On slide 18, I want to conclude our call by detailing the strategic vision of the new international seaway. We're focused on capitalizing on our position as a tanker sector leader, executing on our discipline and balanced capital allocation strategy, and taking further steps to maximize shareholder value. With enhanced scale and capability, combined with a best-in-class ESG track record and focus, we're ideally suited to continue achieving the highest operational standards and to meet the evolving needs of leading energy companies and customers. Based on our diversified fleet and crude and products power alleys, we are poised to benefit from positive long-term industry fundamentals, We will benefit as global oil demand recovers, as inventory destocking completes, and as OPEC Plus production increases as per their plan. Based upon the accretive nature of our merger, we expect cost and revenue synergies of $32 million to be fully real in 2022. Complementing our sizable operating platform, we have maintained our balance sheet strength following the close of the merger, positioning CUAs to capitalize on attractive opportunities for our shareholders in the diverse rate environment. As part of our strategic focus, we'll continue to remain true to preserving our financial strength, which has served us well at this point in the cycle. and to execute an accretive and balanced capital allocation strategy. We will prioritize returning capital to shareholders, as highlighted by our recent merger-related $31.5 million dividend, representing $1.12 per share, our regular quarterly dividends, as well as our outstanding $50 million share repurchase authorization. To reiterate, We've returned over $70 million to shareholders in the form of special and quarterly dividends and share buybacks since the beginning of 2020. Finally, creating enduring shareholder value remains of utmost importance to Seaway. Based on our industry leadership, increased upside to the crude and product tanker market recovery over both the near and longer term as well as a larger market capitalization, we believe we have the potential to have our equity re-rated and to close the NAV gap. Thank you very much, and we will now open it to questions.
spk03: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. And the first question will come from Omar Nocta with Clarkson's. Please go ahead.
spk09: Thank you. Hi, Lois. Hi, Jeff. Good morning, and congratulations on officially closing the Diamond S deal last month.
spk01: Thank you very much.
spk09: Yeah, I just had a question. Obviously, you mentioned getting to the 100-vessel mark, which obviously gives you critical mass and a significant footprint. You are selling some older ships, which is something you telegraphed, so it's not a surprise. But I do want to ask maybe just about the Panamaxes in particular. You sold four of those, and that takes away a big chunk of your fleet capacity in that segment. I know those vessels have been involved in the South America niche trade. And so just wondering kind of about those. Are those to be replaced, or is that trade changing in the future?
spk01: No, no, definitely, Omar. Those vessels, unfortunately, will turn 20 in early 2022. And it's not part of our strategy to operate the tankers past the 20-year mark. And what we have done is sold some of those for green recycling or consistent with the Hong Kong Convention. And we're taking advantage of what are really strong recycling prices right now. And then, you know, indeed, our trading in Panamax International is really a critical niche component where we earn a premium in trade, and we will be supplementing in Panamax International. In fact, we have just recently chartered in a vessel for, you know, a couple of years. So we will look in that Panamax pool to – you know, sort of bulk back up our presence there. And the sale of the Panamax is simply strategic because those vessels were going to turn 20 years old, and then tactical because we wanted to take advantage of where the very strong recycling prices are today.
spk09: Got it. Thanks, Lois. It's pretty clear. And that's a good point. You know, we have seen scrap prices increase significantly this year. Just sort of on maybe the question regarding overall, you're looking at potentially other non-core assets to sell. Any color you can give on what you would deem as non-core at the moment? Any specifics you can share?
spk01: Well, Omar, we always say that we have a constant calculation going on the vessels in all of our fleet on their discounted cash flow. you know, versus where their prices are in the market. And so, you know, we will continue to look to prune as just a part of our ongoing strategy the vessels that are older and where we can take advantage of capital preservation.
spk09: Okay, got it. And, Lois, maybe just one final follow-up. I wanted to ask just about the 12 ships you've agreed to sell. You're going to be bringing in $125 million and netting over, I guess, close to about $75 million after debt repayment. Obviously, nice to get that cash cushion, but generally speaking, the $125 seems a little low relative to at least what I had assessed the vessels at. Is there anything you can share there on that, or am I just being too aggressive on the valuations?
spk01: You know, what I would say is that we're happy with the prices that we've achieved, Omar. And, you know, as you go through the fleet list and sort of detail it out, you know, some of these vessels are older Heritage Seaway ships that do not have mortgages on them, such as the Tanabe. And, you know, you know, some of these Panamaxes, as I mentioned, are being sold for recycled. So you may have had a different secondhand value on those ships. And, you know, but as I said, those prices are, you know, the secondhand recycle prices are very strong. And the secondhand values have held up, really, even though the spot market has not. So the we feel that we're quite happy with the prices that we're achieving across the fleet. And in particular, I think the factoid that we shared where we'll be saving on dry docks and ballast water. So some of the vessels that we're saving are imminently dry dock due and do not have ballast water treatment systems on board. So we're saving that expense and that off-hire expense as well as those uh capital outlay and some of those prices reflect that okay that makes sense thank you for that i appreciate the color overall i'll turn it over thank you so much omar thanks and the next question will be from randy gibbons with jeffries please go ahead howdy lois and jeff how's it going hey how are you randy we're good
spk06: Good. Congrats on the merger. Consolidation is certainly a hot topic in the industry. So glad to see INSW actually making something happen here. So I guess looking at the benefits of the merger, you mentioned the $23 million in cost synergies will be in 2022. Just curious if those cost savings ramp over time or kind of the timing of it and where exactly should we look for the cost savings to flow through the income statement?
spk01: So, Randy, you know, of course, some of these costs are fairly quickly to be realized. For example, the cost of being a publicly traded company, you know, immediately fall away. For example, you know, having two seated boards, having two insurance, you know, D&O policies, having two external auditors, having two rent, you know, So those types of structural costs, and that's where you will look for those, will fall away more quickly. On additional costs, you know, we have a very structured integration plan, and, you know, we will be realizing additional savings over time. And from the revenue perspective, the vessels that we have taken over and we are – shifting the vessels from capital to manage commercial pools on the product carriers such as Norient and CPTA, which is our ultra-gas pool, and on the Suez Maxis to Penfield. And so those revenue synergies, we believe, will start to accrue immediately.
spk06: Perfect. Okay. And then looking kind of industry-wide, You operate clearly both crude and product tankers. There's been a debate on to kind of the strength of both in terms of outlook. So I guess which subsector do you expect to improve first and which is likely to outperform the other? Let's call it in 2022.
spk01: So, Randy, you know, as we speak, I would simply, you know, look at where the market is today. And the MR sector, in particular in the Far East, has strengthened over the last week. And then that is flowing through even LRs and LR2s and now into the western basin. And, you know, by strengthening, you know, everything is relative. You know, we're still talking, you know, low double-digit time charter equivalent returns. However, you can see the product carrier fundamentals being more closely balanced at the moment than on the crude side. But we expect the crude side, you know, China's adjusting right now from what we observed, you know, they really have a COVID zero tolerance policy. So they're locking down with this Delta variant. So that's affecting things. But we, you know, China has been out. in the lead in recovery of demand post-COVID or, you know, we're not through it yet, but very resilient. So we do expect the crude side to also, you know, strengthen in 2022. Sure.
spk06: Good deal. Well, that's it for me. Thanks so much.
spk07: Thank you, Randy. Thanks, Randy.
spk03: And the next question will be from Ben Nolan with Stiefel. Please go ahead.
spk04: All right. Thank you. Good morning, Lois, Jeff. So I've got a couple. I want to start with something that you were talking about at the end there. Well, long and short of it is you're selling older assets that free up liquidity. Asset values have appreciated. You've done share. I think you did 30 million of share repurchases last year. How do you think about closing the value, proactively closing the value gap using share of purchases, or do you kind of need to just bat down the hatches and wait for things to get a little bit better first?
spk01: So how are you, Ben? And I'll take my first stab, and then I'll give it to Jeff. So, you know, I do think that it is imperative that, you know, we watch very closely the development in the spot market recovery. The rates that have been experienced, you know, due to lower demand have been and continue to be you know, below cash breakeven levels. So that is priority number one. And then beyond that, you know, clearly, you know, we do still have a $50 million repurchase program. And I'll turn it over to Jeff to kind of talk about balancing things.
spk07: Yeah, you know, it's amazing, but it's really only been six quarters since we began to return cash to shareholders in a meaningful way with the the redo of our balance sheet where we put in more flexible debt that allowed for that and instituted the fixed dividend, quarterly dividend that we mentioned on the call. And so I think the answer to your question is what we're going to do, both what we're going to do and how that's going to help re-rate the stock is just keep doing it. It's just quarter over quarter we have to be patient and continue to execute you know, with numbers like, you know, last year, 8% total, however you want to call it, return to shareholders, shareholder yield, something like that. Those are those high single digit numbers. You know, if you look at other industries, I think those are good benchmarks, right? So we're, we're at 8% so far this year and we've got some more time to go. So yeah, like Lois said, we'll be balancing, you know, of course with an eye to it's a crummy market to say the least. Uh, but, uh, you know, how can we do some more of that and just continue to do it quarter by quarter, And I think that, you know, over time, you know, that capital allocation track record, you know, is what earns a better valuation. And the only other factor I'll say is that we've been kind of busy with this, to say the least, with preparing for the merger, which is now done. I'll put that in air quotes because, as everyone on Lois and the whole rest of the team know, The day of the closing is not done. I mean, it's legally closed, but there's so much work to do. And it's great welcoming all the new Seaways team members, as Ola's also said. But there's a whole lot of work been going on and continuing to go on. But I think as we get it to the end of summer here, we're going to just tell the story. So we just need to talk to investors and say, hey, look, this is now the largest diversified publicly traded tanker company that there is. Period. We've got around 100 ships. We've got over $2 billion of assets and a growing track record, six quarters and going, of actively returning cash to shareholders. So miracles don't happen overnight, but we'll just be patient and keep walking the walk, and then we'll talk the talk about walking the walk. So I hope that's going to do it over time, Ben.
spk04: Yeah, so a little bit sort of in that vein still, I guess. You sold 12 ships, I guess, right?
spk02: They're all older.
spk04: It looks like I was just running down a list, but it looks like there's 12 more that are 15 years old or older. Is it fair to assume that you're still high grading the fleet and as that you know, as those sales happen that the leverage falls and you're sort of increased, you have an increased level of flexibility to, you know, whatever, do things like share repurchases or have you kind of done what you needed to do?
spk01: No, I would say, you know, we will continue just as you say, and we'll take into account and balance everything. Like, you know, what is the pace of the recovery? And, You know, we're not in a have-to situation. These are, you know, opportunistic and purposeful moves that we're making. And, you know, we want to see what, you know, how quickly will that market come back. And then, you know, we expect both our earnings to go up and those secondhand values to go up. So, you know, we'll be careful and judicious, but, you know, indeed we will continue to trim the fleet going forward.
spk04: Okay. And then shifting gears for my last question here, I'm curious. We don't talk a lot about the lightering business. It's been this nice sort of asset light cash flow generator. I'm curious now that sort of we're hopefully closing in on the latter part of all this COVID stuff. How do you think about that business going forward? Are things fundamentally different in the Gulf Coast? Or, you know, how does that fit strategically in with what you're doing? And, you know, what are the long-term prospects there?
spk01: You know, Ben, I think that the lidaring fits quite strategically with a fleet, you know, a spot fleet of our size. And it brings us very close to the customers. It's a high-touch business. It's service-intensive. And so it really allows you to deepen the relationship. You know, the trading patterns, you know, have been affected by COVID just like everything else, right? So, you know, fewer barrels coming in, fewer barrels coming out of, you know, particularly the U.S. Gulf. But we have a pretty diversified base. So, You know, we see Panama as having strength. You know, we're lightening on the U.S. West Coast and the Bahamas. So, you know, we think that it fits well with us. And in particular, you know, we saw a strong month in June where, you know, you start to see these underlying volumes of oil have increased a lot, even though we haven't seen a spot resurgence in rates. The volume of trade has increased.
spk03: and you know lightering will come along with that i don't know if you wanted to add anything jeff nope good recap cool all right i appreciate it thanks guys thank you thanks man and the next question comes from magnus fear with hc wainwright please go ahead yeah good morning lois uh good morning jeff uh just uh
spk08: I had a question on the liquidity. I mean, you have a strong balance sheet. You know, you've sold some assets and you have some more assets probably left to sell. With the merger, it looks like the amortization picks up. I guess there's about 30 million plus from the diamond side. You paid a dividend this quarter. What do you guys have left in the toolbox here to address, to extend the liquidity runway and to deal with some of the uncertainty with a delayed recovery, you know, and potential for this to run a couple more quarters?
spk01: Do you want to jump in there, Jeff?
spk08: Well, sure.
spk07: Yeah. First of all, we started in a really good place. And if I backed it up a couple of quarters, the fact that we started the year or ended last year with the positive COVID bump from floating storage and all the rest with well over $200 million of liquidity, it gave us the opportunity to execute on the Diamond S merger. So that while it's a stock deal, there were cash costs associated with it and approaching that with a good, really strong balance sheet and a lot of liquidity, super helpful. As we said now, we're at $200 million of liquidity plus even after the murder completed with most of those asset sales as we listed in the press release in the slide deck and the script still to be completed. We're really in a strong position. They don't need to do much else, but if there's Other things that, in terms of tools in the toolkit, you know, we have a number of unencumbered vessels from the INSW core facility, or what was the transition facility, sorry, I didn't say that correctly, that we paid off last year. So, you know, those are vessels that, you know, if we don't want to sell them, like some of those older Pentamex that are still not at the recycling date, so very valuable to us, you know, you can always look at putting leverage on those. So there's a number of tools that we have, but I think we feel really good about where we stand right now, even allowing for, if it turns out to be a couple more quarters of this rate environment. So I hope that answers your question, Magnus.
spk08: Yeah, I mean, any thoughts on consolidating some of that debt, maybe to extend the amortization? or, you know, increase the revolver? I mean, with the increased size of the company?
spk07: I just put this, I mean, yes. I mean, I would put it this way. We will look at, it was really good that we didn't need to do anything around the balance sheet in order to close the transaction. You know, as Lois and I both have been saying, you know, it's a lot going on. And if we had had to do a lot of balance sheet gymnastics, that just would have made it that much more complicated. So we're really grateful that You know, with the bank group that we have, significant overlap with the legacy Diamond S bank group, you know, really was seamless. Now, that said, there's absolutely, you know, you've got a pretty robust amortization, which we gave you there on the chart of like $47 million a quarter. We know near-term maturities, but sure, there's probably some low-hanging fruit there in terms of smoothing out that or pushing out that or evaluating optimization of the balance sheets. So no urgency to it, but yeah, we always look at things we can do to optimize the balance sheet. So we'll do that.
spk08: Great. Well, thank you. Thank you.
spk03: The next question will be from Greg Lewis with BTIG. Please go ahead.
spk05: Hey, thank you, and good morning, everybody. Lois, I kind of wanted to dive and talk a little bit more about what Omar was talking about in terms of the fleet. I guess I'll ask, in terms of as we were selling some of the vessels, not for the retirement, but just kind of, hey, they're no longer fitting our profile. We picked them up from that Diamond S acquisition. Right. What was the type of appetite in the market? And really what I'm wondering is, you know, I think a lot of us are looking at ship prices for secondhand vessels going higher. And, you know, whether it's, you know, how you're talking about rates or we look in the rate market, you know, rates haven't been doing that well for a while. So just kind of trying to understand, we're seeing that upward asset price inflation without that rate follow through and really in this environment. Are there multiple buyers of assets? I mean, as you saw that, was there a lot of interest or was that kind of like a one-off where somebody was willing to kind of plant their flag to take some tonnage?
spk01: Yes, right, combinations. of, you know, individual asset sales and, you know, some in a group. And, you know, that secondhand market has, it's not extraordinarily deep. You know, it will be deeper when you see that the rates have recovered, but it has really held in there. And that, you know, that's definitely a reflection of, you know, new building prices still having gone up and kind of holding up you know, the new piece of the market, and then the recycle price is holding up the, you know, the other side of the market. So there is interest from multiple buyers on each one of the ships that we have, you know, transacted MOAs on.
spk05: Okay, great. And then just I'm sure this is a question that you'll be getting probably until you do another one. You successfully won those three dual fuel LNG VLCC contracts. Could you talk a little bit about the state of that market? Every day it seems like somebody's talking about ESG and the migration towards maybe LNG or some other type of alternative fuel. Is there ongoing tenders right now for dual fuel LNG contracted tonnage
spk01: You know, there are still, you know, a couple of open inquiries, you know, very bespoke and specific, right? So, again, that's not an incredibly deep market. You know, definitely, you know, the most that you've seen has really been, you know, Afromaxis and VLCTs. I do believe we will continue to see inquiry for dual-fuel vehicles. You know, certainly, you know, you look at the LPG market, you know, they're building vessels that burn LPG, right? So, you know, you're seeing some product carrier new buildings be methanol burning, right? So, you know, this is for us a, you know, obviously we're following everything, watching everything, and keeping up with all of the innovation that's going on because this is going to be something we talk about every call for, the foreseeable future.
spk05: Yeah. Okay. All right. Thank you very much, everybody. Thank you. Thanks, Greg.
spk03: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Lois Zabrocki for any closing remarks.
spk01: I just really want to thank everyone for joining C-Ways on our second quarter 2021 earnings call. And we really look forward to tanker market recovery and being able to close our price to our net asset value gap going into end of 2021 and into 2022. So thank you very much.
spk03: And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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