International Seaways, Inc.

Hello and welcome to today's International Seaways Second Quarter 2022 results. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I would now like to hand over to James Small, General Counsel. The floor is yours. Please go ahead.

Thank you, Elliot. Good morning, everyone, and welcome to International Seaways earnings call for the second quarter of 2022. 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 and changes in training 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 conflict between Russia and Ukraine. The company's strategy. Anticipated cost savings and other synergies and benefits from our merger with Diamond S. The effect of the ongoing coronavirus pandemic. Our business prospects. Expectations regarding revenues and expenses, including vessel, charter hire, and G&A expenses. estimated bookings, TCE rates, and or capital expenditures in the third quarter of 2022, the remainder of 2022, or any other period, projected scheduled dry dock and off-hire days, purchases and sales of vessels, construction of new-build vessels, and other investments, the company's consideration of strategic alternatives, anticipated and recent financing transactions and any plans to issue dividends, the company's relationships with its stakeholders, the company's ability to achieve its financing and other objectives, and other economic, political, and regulatory developments globally. Any such forward-looking statements take into account various assumptions made by management based on a number of factors, including management's experience and perception of historical trends, current conditions, expected and future developments, and other factors that management believes are appropriate to consider in the circumstances. Forward-looking statements are subject to risks, uncertainties, and assumptions many of which are beyond the company's control, that could cause actual results to differ materially from those implied or expressed by the statements. Factors, risks, and uncertainties that could cause International Seaway's actual results to differ from expectations include those described in our quarterly reports on Form 10Q for the first and second quarter of 2022, our 2021 annual report on Form 10K, and in other filings that we have made or in the future may make with the U.S. Securities and Exchange Commission. Now let me turn the call over to our President and Chief Executive Officer, Ms. Lois LeBrock. Lois?

Thank you very much, James. Good morning, everyone. Thank you for joining International Seaway's second quarter earnings call to discuss our strong results. In the second quarter, we generated our highest quarterly net income since our spinoff nearly six years ago. We closed our merger with Diamond S just over a year ago. The 40 MRs gained in the merger earned incredibly well in the second quarter. And yet, they are posting TCEs that are 40% higher quarter over quarter for the book days in the third quarter. Refined product oil demand, specifically for gasoline and metal distillates, is despite rising refinery utilization. The sea waste fleet of 78 tankers is providing us with a strong foundation to capitalize on rising tanker rates as oil demand continues to recover from the negative impacts from COVID. On slide four, we summarize our second quarter highlights and our recent developments. For the second quarter, we generated net income of $71.5 million, $1.43 per share. excluding special items. Adjusted EBITDA was $112 million, led by the product carriers, with our MR revenues coming in at $15,000 per day above their breakeven levels. We have a sizable fleet and a substantial operating leverage, not only in the product, but also in the midsize crew. We expect to continue capitalizing on favorable market conditions during the remainder of the year and into 2023, including in the recovering VLCC space. With the exception of the Afromaxis, which are closely tracking the second quarter, rates booked in the third quarter on every sector are counter-seasonally outperforming the second quarter. Tanker fundamentals are anticipated to remain attractive, supported by growing demand limited fleet growth, and higher utilization from longer distances between oil supply growth in the West and demand growth coming from the East. Turning to the bottom left series of bullets, our fleet optimization program focused on monetizing our older non-core vessels. I would just like to highlight that we sold two Panamax vessels for recycling in the second quarter with an average age of 19 years old. We exited our non-core 2006-built handy fleet and sold one 14-year-old MR ahead of our third special survey and the commensurate ballast water treatment system installation and expense. The updated net proceeds reflect adjustment for positioning costs and the timing of delivery. We have sold 24 of our oldest vessels and least efficient vessels with an average age of 16 years. We've lowered our fleet age profile to below nine years old and generated aggregate net proceeds of approximately $165 million after all costs since July of last year. Asset values remain at the high end of the 10-year averages for our fleet. In July alone, Vessel values tracks our fleet appreciation at nearly $200 million or $4 per share. We will maintain our fleet discipline, including opportunistically looking to shed older tonnage to maximize returns. On the top right hand of the slide, we highlight balance sheet gains made in the quarter. We ended the quarter with a total liquidity of over $450 million. This includes $232 million of cash and a $220 million revolver capacity. Using recent values, our net loan to fleet value is extremely healthy, 34%, one of the lowest amongst the peer group. Our increasing liquidity is a direct result of actions taken during the quarter aimed at unlocking value for shareholders while enhancing our financial strength. This included successfully selling Seaway's 50% stake and our FSOs for $140 million in cash proceeds. After a process that lasted several months evaluating all of our options to monetize the joint venture, to streamline our tanker fleet We were pleased with the favorable outcome of this disposal. We captured the implied value inherent in the fixed-rate contract on the FSOs. We closed on a new credit facility that saves us $60 million in mandatory repayments in 2022. We then delevered by $95 million, making a $70 million payment on our revolver And we followed that with the $25 million redemption of our 8.5% baby bonds in August. We have continually lowered our cost of capital. This is consistent with our strong track record over the past five years. Jeff will speak more about these specific steps and actions in his portion of the call. Returning capital is a major component of Seaway's strategy. In 2021, we returned $57.6 million, or 9% of our market cap, amidst the most challenging tanker market conditions we have seen in decades. We are proud to build upon our consistent track record of returning capital to shareholders. During the quarter, we doubled our quarterly dividend to 12 cents per share. Over the last 10 quarters, we have returned over $100 million to shareholders in our regular quarterly dividend, $47 million in buybacks, and a special dividend of $32 million in connection with the conclusion of the Diamond S merger. Today, we've announced another boost in our program with the board's authorization to upsize our share repurchase program to $60 million and extend the expiration of the program to the end of 2023. We intend to use this program as one of our options to return capital to our shareholders over time. Our balanced capital allocation approach, number one, consistently returns to shareholders. Number two, allows for opportunistic fleet growth and renewal at the low point in the cycle. such as the Diamond S merger and the ordering of our three new building VLCCs. And number three, maintaining a strong balance sheet with a diversified debt portfolio that makes principal payments each quarter. Slide five, we update the current tanker rate environment relative to last year and the range of the earnings over the last 10 years. The larger chart on the left really exemplifies the significant strength on display in the MR rates since the start of the second quarter. And as mentioned, they continue to climb in the third quarter. This class of ship has not seen these types of rates since the super cycle in the mid-2000s. As energy security becomes a priority and Russia continues actions in Ukraine. We are seeing Atlantic Basin product demand soaking up tonnage with products sourced from the United States, the Middle East, India, creating long haul voyages for our vessels. Clarkson projects 2022 products ton mile demand growth to clock in at just about 10%. This is happening while South America is recovering from the COVID crisis, and demand there has been increasing in Argentina, Chile, and Colombia. With China slowly but surely coming out of its lockdowns, they have been drawing down on the inventories this summer in June and July. They are now starting to ramp up their refinery runs. Seaborne Transportation is enjoying strength in products, and building on a nascent recovery on the crude. AFRAS and Suez Max earnings are nearing their 10-year highs, while our scrub-defeated VLCCs are building to levels approaching break-even. Overall, this slide illustrates our operating leverage. Turning to slide six, we addressed underlying tanker demand drivers during a time when the situation in Russia and Ukraine continues to create volatility in energy markets. Oil demand is expected to be about 101 million barrels toward the end of 2022 and further increase in 2023 to approximately 102 million barrels per day. The IEA actually puts growth at 2 million barrels per day in 2023. Of course, slowing GDP could certainly curtail oil demand growth. However, oil production growth, particularly in the West, led by the Americas, Norway, Guyana, is supportive of long-haul trade east and is a positive for tanker markets. As evidenced by the bottom left chart, refining margins remain robust, indicating healthy demand pulling refined products leading to higher crude throughput and higher clean exports. We anticipate long-term changes to oil movements and trade patterns during this time related to Russia's invasion of Ukraine, and we continue to see cargoes moving longer distances. In the bottom right chart, OECD inventories have been reduced to their lowest levels in a decade, providing less than 60 days of forward demand cover. SPR U.S. barrels continue to be released and exported as the world scrambles for crude. Combined with the need for further replenishment, this is supportive of seaborne trade and demand for tankers. Next, on slide seven, the main drivers of tanker supply remain positive for tanker earnings. At 5%, the overall tanker order book continues at the lowest replacement level that we have seen in modern record keeping. The key net fleet growth has been just 1% since June of 2021. Over the last 10 years, the average age of the tanker fleet has increased to 12 years from the previous average of nine. The bottom left chart illustrates the increasing incentives to recycle older tonnage based upon continued high recycling values but meaningful volumes have yet to materialize in 2022. we have paired tanker new building deliveries against vessels turning 20 years old in the chart on the bottom right hand side and you can clearly see delivery deliveries are dwindling a number of factors continue to limit fleet growth. New building slots for tankers from reputable shipyards are well into 2025, as yards remain filled with contracts for other shipping sectors. Second, new orders have been tempered by uncertainty around future environmental regulations. And thirdly, new building prices are near all-time highs, limiting tanker owners from ordering. We also continue to monitor the Russian-controlled fleet, which have been sanctioned by many of governments in the West and may reduce fleet capacity by 30 APR, 20 MRs, and many from other ship classes and sectors. We don't believe that we have seen the full impact of these vessels or them being out of commercial trading, and it may take some time before the full implications on trading routes and tanker capacity are realized. I'm going to now turn the call over to Jeff Pribor, our CFO, to provide the second quarter financial review. Jeff?