International Seaways, Inc.

leading U.S.-based tanker owners, both with a long-term focus on customer relationships, both with deep cultures of achieving stringent safety standards and strong governance. We are well on our way to delivering compelling strategic and financial benefits to all of our stakeholders. We solidified our power alley in the large crude sector with 28 combined Vs and Suez Maxis. And we created a new power alley with over 50 product carriers. Our increased scale, capability, and operating leverage have significantly strengthened our ability to take advantage of the recovery and crude and product tanker demand for the benefit of shareholders. In the month of October, Even as we just are beginning the rate recovery in the tanker sector, on vessel values, our fleet value rose by $50 million, equating to a dollar per share. This just illustrates the upside potential of our asset base. Our integration is progressing as planned, and the teams have come together well. We remain on track for achieving annual cost synergies of $23 million and revenue synergies of $9 million. We expect to achieve this within 2022 by sticking to our plan and our lean and scalable model. Turning to the next bullet, we have maintained a strong balance sheet Our diverse capital structure is a pillar of our success and our progress in this critical area differentiates Seaway. Our loan-to-value is a solid 46% and our access to capital is strong. We recently entered into a $375 million facility of long-term financing at attractive terms, and as we head into the emerging tanker market recovery, Jeff will discuss our financing in more detail later on the call. I would like to highlight that with our current total liquidity of roughly $300 million, we are well positioned to operate effectively in all tanker markets and to take advantage of attractive opportunities as they arise. In the next bullet, we highlight our return of capital to shareholders. This remains a central part of our disciplined approach to capital allocation. Combining the $31.5 million, or $1.12 per share, special dividend that we paid in the third quarter, as well as our regular quarterly dividend, we have now returned a total of $73 million to shareholders since 2020. Our $50 million share repurchase authorization remains in place to further act opportunistically for shareholders. Turning to our third quarter results, our net loss was $29.4 million, or 63 cents per share, excluding merger-related costs and gains on vessel sales. In a sustained weak rate environment, during the quarter, we generated an adjusted EBITDA of $8 million. At the quarter's end, we had $133 million in cash and $173 million in total liquidity. And as I noted earlier, current liquidity is approximately $300 million. Moving to the final bullet, we outline our ongoing fleet optimization program, which is focused on monetizing older non-core ships. Year to date, we have sold or agreed to sell 14 ships with an average age of 17 years at attractive prices, reflecting the higher steel values that underlie ship values today. In addition to generating expected net proceeds of $83 million after repayment of $57 million of debt. We will also preserve approximately $12 million of cash saved on dry docking and ballast water treatment system installations that will now be avoided. The ships we have sold for recycling were sold in compliance with the Hong Kong Convention. Combined with enhancing our balance sheet, the additional liquidity provides further capital allocation flexibility for international seaways. Details on the sale may be found in the appendix. Turning to slide five, we update the oil supply and demand balance. Oil production continues to increase. U.S. hurricane-related shutdown have recovered and come back online. And OPEC Plus is gradually and systematically ramping up their output. With 7.3 billion vaccinations administered globally, up from just 4 billion a quarter ago, we are seeing stronger economic growth resuming in the world. And third quarter oil demand has improved to an estimated 97.8 million barrels per day. This is up from 95.2 million barrels per day in the second quarter, and it's almost 6 million barrels per day up year over year of much needed demand recovery. The IEA has upwardly revised its 2022 expectations of oil demand. They now forecast an increased demand of 3.3 million barrels per day in 2022 over 2021. In the chart on the right-hand side of the slide, consistent with the recovery in demand, oil inventories have rapidly declined in the world and are now below the 2016 to 2020 averages. These stock draws are needed to set the stage for the tanker market recovery and are very encouraging markers. Combined with the OPEC Plus relaxing output cuts and each month the surge in demand for oil as global economies reopen and start to grow, air travel rebounds and vaccinations are administered globally, we are optimistic that all of these signals together are a strengthening for our rate environment. On slide nine, we look at ship supply. The overall tanker order book continues to be low, with tanker supply curves projecting fleet decline in the medium term. Shown in the top right chart, elevated There have been very few new buildings placed and no new buildings on the VLCC front since June. Ordering has been tempered by the combined uncertainty around propulsion ship type, higher steel input costs, and increased new building prices. Recycling has the potential to limit fleet growth based on the aging VLCC fleet. And we have now seen 14 vessels have gone to the recycling market on the VLCC fleet. So we started the year very low, and the pace has picked up in the last couple of months. 17% of the existing VLCC fleet is now at least 17 1⁄2 years old, and 8% is at least 20 years old. Then contrast this to the 9.5% VLCC order book. As ships age and reach their ballast water treatment system deadlines, substantial capital investment is required to keep them trading. Based on these dynamics, recycling activity has been building in the market, particularly given the current low spot rate environment and the record steel prices. I now want to turn the call over to Jeff to give us our financial review. Jeff?

Thanks, Lois, and good morning, everyone. Let's move directly to reviewing the third quarter results in some more detail. Before turning to the slide, let me just summarize our consolidated results. In the third quarter, we had adjusted EBITDA of $8 million. Net loss for the third quarter was $68 million, or $1.44 per diluted share, compared to net income of $14 million, or $0.50 per diluted share, in the third quarter of 2020. When excluding the impact of the disposal of vessels, including impairments, and merger-related chargers, net loss was $29 million, or $0.63 per diluted share. Now, if you could turn to slide eight. This slide summarizes the results of our business segments for Q3 2021 versus Q3 2020 at the top of the page and on a last 12 months basis on the bottom. The decrease in Q3 and last 12 months revenue and EBITDA primarily results from the impact of lower average blended rates in both the crude oil and product sectors. Now, turning to slide nine, we provide a third quarter review and fourth quarter 2021 earnings update. For a look at results in Q4 thus far, we've booked 59% of our available Q4 spot days for VLCCs at an average of approximately $16,100 per day, 58% of our available SUAS Max spot days at an average of $13,900 per day, 47% of our available AFRA Max LR2 spot days at an average of $11,100 per day, and 45% of our available Panamax spot days in an average of approximately $16,800 per day. On the product side, we booked 46% of our fourth quarter MR spot days in an average of approximately $9,400 per day and 42% of our handy size spot days at $7,300 per day. These fourth quarter rates are encouraging and consistent with our view of market fundamentals as we've seen a rebound in almost every asset class since the latter part of Q3. Now, if you turn to slide 10, the estimated cash cost TCE breakevens for the forward 12 months beginning in October 2021 are illustrated on this slide. International Seaway's overall breakeven rate is estimated to be $18,100 per day over the next 12 months. As always, 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, and debt service costs, which means scheduled principal amortization as well as interest expense. On this slide, we've also shown break-evens which exclude principal amortization. In this case, the cash break-even for the next 12 months is estimated to be $12,200 per day. At this time, as I normally do, I'd like to reaffirm our cost guidance for the year for modeling purposes. For the fourth quarter, we expect regular daily OPEX, which includes all running costs, insurance, management fees, and other similarly related expenses for our various classes to be as follows. For VLCCs, $8,800 per day. For SUISMAX, $7,600 per day. For APLIMAX, $8,200. For PANAMAX, $7,900. For MRs, $7,200, and for Handimax, $7,400 per day. For details on projected dry dock, CapEx, and off-hire days by quarter, you can refer to slide 17 in the appendix for an update. Continuing with cost guidance, fourth quarter cash interest expense is expected to be about $12 million per quarter, and cash G&A is expected to be about $9 million. As previously stated, full cost synergies are expected to be achieved in 2022. And finally, we expect about $6 million in fourth quarter equity income from our FSOJV and $29 million for quarterly depreciation and amortization. Now, if we could turn to slide 11 for our cash bridge. Moving from left to right, we began the third quarter with total cash and liquidity of $174 million. During the quarter, our adjusted EBITDA was $8 million. Equity income from JVs decreased cash by $6 million, and cash distributions from JVs were $3 million from the FSO JVs. We expended $15 million on dry docking and CapEx, and $14 million on a second installment as part of our agreement to build three dual-fuel LG VLCCs. Next, we acquired $44 million in cash related to the Diamond Ass shipping transactions, net of merger and integration-related costs. We received 62 million in proceeds from vessel sales. The cash, interest, and scheduled principal payments on our debt were $56 million. We also gained $20 million from the issuance of the credit facility. And finally, taking into account the $31.5 million special dividend issued in July prior to the merger and the $3 million regular quarterly dividend in September, as well as a negative effect of working capital and other charges in the quarter of $13 million. The net result was that we ended the quarter with approximately $133 million of cash and a $40 million undrawn revolver, yielding total liquidity of $173 million. As Lois noted, as of today, total liquidity stands at approximately $300 million. Now, turning to slide 12, I'd like to briefly talk about our balance sheets. As of September 30th, we had $2.4 billion of assets, which is reflective of the recent merger. This compares to $1.5 billion of assets as of June 30th. As of the end of the quarter, we had $888 million of long-term debt. As you can see on the bottom of the slide, our net debt to total capital at the close of the quarter was 45%, while our net loan-to-value of our fleet was 45.7%. Turning to slide 13, we look at the pro forma combined company debt as of November, accounting for the merger and also recent financing activities. As we announced in October, we recently entered into lease financing arrangements with Ocean Yield ASA for the six VLCCs that previously collateralized our sign-assure credit facility. The net financing amount of $375 million represents 90% of the six VLCC's fair market value. The proceeds of this refinancing were used to prepay the $228 million outstanding loan balance under the Sinusure facility, and therefore increased our overall liquidity by approximately $150 million. I'd like to take this opportunity to say that we appreciate the strong support we've received from Sinusure, Export-Import Bank of China, Bank of China, and Citibank, who originally extended the project construction loans that we assumed in 2018 when we acquired these vessels. However, we are very pleased to enter into this attractively priced long-term debt facility to further diversify our capital structure with terms that harmonize well with those in our other corporate loans while also unlocking additional liquidity. As you can see, our total debt balance pro forma for our two most recent financings is approximately $1.24 billion, with $40 million currently undrawn on over all $225 million of revolving capacity. We expect to utilize some of the proceeds of the ocean yield financing to pay down revolvers, lowering interest while still maintaining higher liquidity. As we continue to maintain a healthy balance sheet, our debt reflects a highly competitive cost of capital in a long-term maturity profile, with the vast majority of debt due in 2024 or later. That concludes my remarks, and I'd like to turn the call back to Lois for her closing comments. Lois?

Thanks a lot, Jeff. The steps we've taken to enhance our scale, our capabilities, and our operating leverage have put us in a favorable position to unlock significant value for shareholders. We will take advantage of the tanker market recovery that is underway. The completion of our transformational and accretive merger has doubled our market cap, tripled our fleet size, and significantly strengthened our earnings power. Importantly, we have solidified our power alley in large crude, and we created one in the product sector. During the quarter, In addition to concluding our merger, we executed on key strategic priorities, maintaining significant balance sheet strength during this downturn. And we kept optimizing our fleet, which we will continue to do as we disposed of ships that were on average 17 years old at a time in the cycle where secondhand values were buoyed by underlying steel prices. We distributed $38 million in dividends to shareholders during the third quarter. This included the $1.12 per share special dividend as well as our regular quarterly dividend. This increased our total returns to shareholders since 2020 to $73 million. I want to pause for a minute as I do our conclusion and just acknowledge the silent and steady, reliable seafarers at International Seafarers. We're particularly proud to share that we reached the milestone of having 70% of our seafarers both at home and on board of 2,500 strong vaccinated. This is a number that we're working to increase every day. As we enter the fourth quarter, our prospects remain strong. We're encouraged by our fourth quarter bookings to date, which show improvement over the third quarter. We have significant liquidity of approximately $300 million and a high-quality fleet of product and crude tankers, and we are on track to achieve the synergy from our recent merger. That concludes my formal comments, and we'd like to turn it over to the operator to take questions.