International Seaways, Inc.

Ladies and gentlemen, good morning. Thank you for your patience and thank you for attending today's International Seaway's third quarter 2022 earnings call. My name is Amber and I will be your moderator for today's call. Lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad at any time. It is now my pleasure to hand the conference over to our host, James Small, General Counsel with International Seaways. James, please proceed.

Thank you, Amber. Good morning, everyone, and welcome to International Seaways' earnings call for the third 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. outlets for the crude and product tanker markets and changes in 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 conflict between Russia and Ukraine, the company's strategy, anticipated cost savings and synergies and benefits from our merger with Diamond S, the effects 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 fourth quarter of 2022, in 2023, or in 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 in 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, which 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 our quarterly reports on Form 10-Q for the first, second, and third quarter of 2022, in our 2021 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. Now, let me turn the call over to our President and Chief Executive Officer, Ms. Lois Zabrocki. Lois?

Thank you very much, James. Good morning, everyone. Thank you for joining C-Way's earnings call to discuss our third quarter results. During the third quarter, we generated our highest ever quarterly income. This marks our second consecutive record quarter. Crude tanker earnings rose to follow suit with the product carriers from the second quarter. With oil demand increasing more than 1 million barrels per day in the quarter, combined with the prioritization of energy security, tanker demand and utilization are high. International Seaways is capturing these strong rates. Our commitment to growing the company, maintaining a healthy balance sheet, and returning cash to shareholders is serving C-Ways well. We have built our overall liquidity and now with strong cash flow generation, we are returning more to shareholders. We have announced a special dividend of $1 per share in addition to our regular quarterly dividend of 12 cents per share. On slide four, we summarize our third quarter highlights and recent developments. In the third quarter, we generated net income of $113.4 million, or $2.28 per share, and earned adjusted EBITDA of 157.1 million as our diversified fleet operated at profitable levels across all asset classes. As you can see in the chart on the lower left of the slide, Our year-to-date adjusted EBITDA in 2022 of $295 million has eclipsed all prior full-year EBITDA at Seaway. We are taking advantage of the strong markets, the strongest in the last 10 years. Based on our fourth quarter bookings to date, we expect to generate even stronger earnings in the fourth quarter. We maintain our strong balance sheet, supporting our diversified capital structure and our financial flexibility, both of which are hallmarks of Seaway's success. We ended the quarter with total liquidity at over $475 million, including $255 million of cash and $220 million in revolver capacity. Using today's values, Our net loan to value is a very low 29%. We repurchased approximately 687,000 shares during the third quarter for $20 million at an average price of $29, well below our current price. We also paid our regular quarterly dividends of 12 cents per share, which we doubled earlier this year. This marks our 11th consecutive quarter of regular dividends. We have declared regular dividends for this quarter. And as a result of our strong cashflow generation, as mentioned a moment ago, we're pleased to have declared a special dividend of $1 per share. This represents the second consecutive year where we paid a special dividend of a dollar or more per share. Overall, CUAs will return about $90 million in cash to shareholders in 2022 alone, increasing the total return to shareholders to $185 million since the start of 2020. We continue to build upon our track record of returning value to shareholders as part of our balanced capital allocation strategy. At this point in the cycle, with our large fleet, healthy rates, and our strong balance sheet, we intend to continue delivering returns to shareholders. Turning to slide five, we examine one of the most prominent topics in tanker demand today, the sanctioning of seaborne Russian barrels of crude and product into the EU. This will create a structural shift in trade routes with cargoes exported from Russia. On the left-hand graph, We pulled data from Kepler on Russian crude exports to Europe. About 2.5 to 3 million barrels per day of Russian crude were exported to Europe prior to the invasion of Ukraine. Today, around 1 million seaborne barrels continue to flow into the EU. As of December 5th, Russian seaborne crude will be displaced from the EU. Europe has been pulling incremental barrels in from the AG, West Africa, and the Americas. These voyages add about 20 plus days of length compared to importing from Russia. We would also note here that Europe is increasing their overall crude imports as part of a switch from natural gas to oil. We believe the world will switch in the fourth quarter to 600,000 to 700,000 barrels per day of additional oil consumption due to the switching from natural gas. Overall, we expect there will be further displacement of Russian crude back out of the EU as sanctions take effect. While a majority of Russian crude has moved toward Asia, it's too early to see if all of these displaced barrels will head east, but the overall trade is moving to more inefficient patterns and soaking up a lot of tonnage particularly in the middle class of crude vessels, AfriMax and SuezMax, which have been quite strong in the second, third, and continued into the fourth quarter, thus supporting higher tanker demand. On the right-hand side of the page, product exports from Russia are still moving into Europe, which we do not expect to continue once the EU sanctions on products takes effect on February 5th of 2023. This could present further upside to the product tanker market. We believe the tonnage to move these barrels is largely in place with the Russian fleet, yet we still see about 40 to 60 MR vessels will likely rotate from commercial markets to new Russian trade routes that are likely to take product exports to Turkey, Africa, and Latin America. In particular, These are early days, and we will see the trade movements as they evolve. Overall, this should have a similar impact on the product market as it has in crude, longer haul trades, absorbing more tonnage, and pushing earnings higher. Turning to slide six, we have highlighted some of the major drivers of tanker demand. Oil demand has averaged about 99 million barrels per day through the first three quarters of 2022. This is about 2 million barrels per day higher year on year. In the fourth quarter, we expect oil demand to close the year above 101 million barrels per day, driving the 2022 average to be just under 100 million barrels per day. The outlook for 2023 is for an additional 2 million barrels per day of oil demand increase to average around 102 million barrels per day for the year. Of course, as high inflation persists, recessionary concerns could adjust these estimates going forward. While the announced production cuts of OPEC Plus have put a focus on oil supply, research suggests OPEC Plus has a history of underperforming on the production targets, we believe with Saudi, the UAE, Kuwait, and Iraq leading the production cuts, this could result in close to 1 million barrels per day of reduction. This reduction would be offset by the increased oil production largely from the Americas, which is expected to increase by around 1.5 million barrels per day. Overall, we see a balanced market of supply and demand in the near term. This also means that inventory levels, which are already at the lowest levels in 10 years, are not likely to be replenished, and therefore, further market disruptions could create more demand for tankers. The Strategic Petroleum Reserve has been covering shortfalls across the globe for the last several quarters. But soon, these releases will cease, And eventually, we will need to replace the barrels and the SPR, which should further create tanker demand. In the lower left-hand side of the slide, you can see just how far OECD SPR has declined during 2022. The United States Strategic Patrolling Reserve has not been below 400 million barrels per day, 400 million barrels in total since 1984. If there is a decision to replace the nearly 200 million barrels that have been drawn down since the beginning of this year, we expect much of this will be imported, as much of the drawn inventories are medium sour blends not produced in the United States. This would provide further support for tanker demand. On the bottom right chart, seasonal global refinery turnaround could help seaborne trade. Refinery planned outages typically happen in March or April, and from September to early November. As you can see in the chart, global CDU outages in September were the lowest they have been in a while. We expect the planned and unplanned outages are likely to increase in early Q4, which draws on inventories and creates the need for imports on tankers. As a result of this combination of factors, we expect tanker demand to remain strong especially in the near term, as the Russian trade is a major market disruption for the oil trade. On slide 7, the main drivers on tanker supply remain positive for tanker earnings. The overall tanker order book continues to be low, is presently below 5%, and continues to record its lowest level ever relative to the size of the fleet. Net fleet growth is just 1.5% year over year. The average age of the global tanker fleet has increased to over 12 years on average. This is the highest it has been in about 20 years. This all means the fleet will continue to get older and more vessels over the age of 20 will be removed from the commercial trading fleet. Sanctioned oil trade is likely to take in the older tonnage as barrels from Iran and Venezuela may face some competition with Russian oil. The Dark Fleet stands at around 240 vessels, of which we have seen only about 10% switch thus far into the Russian trade. Should there be the removal of sanctions on any or all of these countries, we expect this would lead to higher recycling volumes. One of the facts that most supports the positive tanker supply dynamics is the limitations tanker companies have in replacing or adding to the fleet. In the lower left hand chart, you can see that new build contracting is the lowest by far in 20 plus years. And as seen in the lower right hand chart, new orders are likely to have delivery dates three years from now in late 25 or into 26, because the yards have filled capacity with orders for other shipping sectors. New building prices for conventionally fueled vessels are high, and with pending environmental regulations, it's difficult to rationalize building a ship that will not deliver until the middle of the decade with uncertainty about its economic useful life. Overall, tanker fundamentals remain positive over the short and medium term, barring any major economic upheaval. Seaways is well positioned to capture the strong rate environment with our diversified fleet of 78 tanker vessels in both crude and product. With our healthy balance sheet and our liquidity, we expect to continue our balanced capital allocation strategy, invest in the fleet opportunistically, reduce our debt levels, and return cash to shareholders. I'll now turn the call over to our CFO, Jeff Pribor, to provide the Q3 financial review. Jeff.