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spk01: Hello, everyone, and welcome to the International Seaways Third Quarter 2023 Results Conference call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to turn the conference over to our host, James Small, General Counsel and Chief Administrative Officer. Please go ahead.
spk05: Thank you, Candice. Good morning, everyone, and welcome to the International CYS Earnings Call for the third quarter of 2023. Before we start, I'd like to begin by advising everyone with us on the call to say 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 of the crude and product tanker markets, 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 ongoing conflicts around the globe, the company's strategy, our business prospects, expectations regarding revenues and expenses, including vessel, charter hire, and G&A expenses, estimated bookings, TCE rates, and or capital expenditures during the fourth quarter of 2023, during 2024, or in any other period, projected scheduled dry dock and off-fire 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 a certain sense. 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 include those described in our annual report on Form 10-K for 2022, our quarterly reports on Form 10-Q for the first three quarters of 2023, 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?
spk02: Thank you very much, James. Good morning, everyone. Thank you for joining International Seaway's earnings call for the third quarter of 2023. Following slide four of the presentation, which you can find on the investor relations section of our website, International Seaway's net income for the third quarter was almost $100 million, roughly $2 per diluted share. bringing our cumulative earnings over the last 12 months to over $640 million. Adjusted EBITDA was $151 million for the quarter and over $800 million in the last 12 months. Based on our strong results in the third quarter and the spot pictures well above our break-even level thus far in the fourth quarter, we declare a combined dividend of $1.25 per share. Following this dividend payment in December, actual last 12 months returns to shareholders will include a cumulative $6.29 per share in combined dividends as well as $14 million in buybacks equating to over $320 million, a 16 plus percent yield on our average market cap during this period. We continue to enhance our balance sheet with our balanced capital allocation approach. Total liquidity at the end of the quarter was over $580 million, comprised of $215 million in cash and an undrawn revolver capacity of over $365 million. We added $160 million of revolver capacity after executing this new credit facility during the quarter. This facility features a 20-year amortization profile a margin of 190 basis points over SOPR, and a five and a half year term, all of which are critical key outcomes for Seaway. We drew about $50 million on the revolver during the quarter, which has been repaid. The final results on our major senior credit facility allowed us to repay $100 million. We now have a total undrawn revolving capacity of over $400 million and 30 unencumbered ships. Our fortress balance sheet highlights the success of our balanced capital allocation strategy over time We have acquired assets. These assets are on the books for $2 billion, where the value of the fleet today is nearly $3.3 billion. Our net loan to value is 19%. Our cash break even for the next 12 months is under $15,000 per day. This is an exceptionally low level. and a key differentiator for international fee rates. This includes about $3,700 per day of our fixed contracted revenue that in aggregate amounts to over $344 million through to Charter X3. It excludes any profit-sharing element on applicable time charters. This low break-even level paves the way for enhanced free cash flow during 2024. We have exercised two optional LR1 new building contracts. We now have four LR1 new buildings with delivery scheduled beginning in the second half of 2025 through to the first quarter of 2026. These four ships are designed to be scrubber fitted, and they are certified as dual fuel ready. The aggregate price is $231 million for the four vessels. Upon delivery, these ships will trade in our niche Panamax International Joint Venture, which has earned over $64,000 per day on average in the last 12 months. Turning to slide five, we've updated our standard set of bullets on tanker demand drivers with the subtle green up arrow next to the bullet represented as positive for tankers and the black dash representing neutral impact and a red down arrow meaning the factor is not positive for tanker demand. Pulling some highlights, oil demand increased in 2023 on average about 2 million barrels per day over 2022 and is projected to increase another million and a half barrels per day in 2024. Scheduled growth in oil supply is about a million and a half barrels per day over the next two years, each of the two years. mostly coming from the West, in the United States, Guyana, and Brazil. A relevant question for the tanker space is when will OPEC decide to turn some of the pumps back on and increase production? We believe this will bring positive sentiment and lift average time charter equivalents. On the flip side, During the duration with OPEC keeping production at bay, we are drawing inventories in the fourth quarter based upon present demand levels, which we believe benefits a longer-term horizon on tankers. As the chart on the lower right shows, current levels of commercial inventories are well below their 15-year highs. Previously, Key events caused big builds and draws such as COVID in 2020 and 2021. It took us time to draw these inventories down. We looked at the five-year average all the way from 2010 since it predates events and have included the average of 2019 and 2022 separately. as these two periods match better with oil demand. The bottom line is that inventories are historically low, especially when combining commercial and strategic reserves. Before moving on from this slide, there are a number of outstanding geopolitical events that are sadly affecting our current tanker environment. Over the last few years, over the last few months, the price cap imposed on the Russian oil had been effectively priced out due to rising crude oil costs from OPEC plus production cuts. We have seen an impact on the tanker market as many ships in the Great Fleet migrate into the commercial fleet. An upside over time is that we see the loosening of sanctions on 800,000 barrels per day of Venezuelan crude oil. Moving to slide six, the supply side continues to be compelling. This component is very strong for tanker fundamentals. On the lower left-hand chart, we break down the order book by each vessel class relative to the total fleet. More specifically, potential candidates in the next few years that will be at the very least removed from intensive commercial trading, which we categorize as becoming somewhat marginalized around 20 years of age or older. In aligning the dark bars on the graph, vessels on order do not meet the need to replace these distinct leads. On the lower right-hand chart, The limited replacement of the fleet over the next few years is expected to increase the average fleet age to levels that we have not seen in 30 years. 15% of the tanker fleet today is over 18 years. And by 2027, we anticipate that figure to double to 30%. And the average age of the fleet, if this were the case, would be about 15 years old. We believe that in order to meet growing demand in the next few years, that ship over 15 years old will need to stay in service beyond the next few years as we transition to a multi-fuel future. The candidate pool for recycling will then be very high. Overall, we expect a great run for tankers over the next few years, Regional imbalances of oil should continue to increase the need for tankers as the growth in oil production is coming from the West and largely the growth in oil demand is driven by emerging markets in the East. At KeyWay, we will continue to capture the strength of the tanker market today and tomorrow. With our balanced capital allocation approach, we continue to utilize all possible levers that builds upon our track record of returning to shareholders, maintaining a healthy balance sheet, and growing the company. I'm now going to turn it over to our CFO, Jeff Pribor, to provide our financial review. Jeff?
spk09: Thanks, Lois, and good morning, everyone. Looking at slide eight on the upper left, net income for the second quarter was $98 million, or $1.99 for diluted share. On the upper right, you can see adjusted EBITDA for the third quarter of 2023 was 151 million. In the appendix, we provided a reconciliation from reported to adjusted earnings. While our expense guidance for the third quarter mostly fell within the range of expectations, I'd just like to point out a few items of note within our income statement. Vessel expenses were a bit higher than expected, with the largest variance due to some repairs and maintenance on one BLCC and some increased spend for crew training on the new dual-fuel BLCCs. G and A expenses were also higher due to increased costs for legal and regulatory matters. On the revenue side, our lightening business had another strong quarter. earning about $11 million in revenue. With $2 million in vessel expenses, $3 million in charter hire, and $1 million of G&A, the layering business contributed about $5 million in EBITDA in the third quarter and has contributed $15 million in EBITDA year to date. Turning to our cash bridge on slide nine. We began the quarter with total liquidity of $493 million. composed of $236 million in cash, $257 million in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we first add $151 million in adjusted EBITDA in the second quarter, less $54 million in debt service, composed of scheduled debt repayments and cash interest expense, less our dry dock and capital expenditures of about $15 million in the quarter, and a working capital benefit of about $22 million This comprises our definition of free cash flow of about $104 million for the third quarter. The remaining bars moving to the right on the cash bridge show our capital allocation for the quarter. Incremental deleveraging reflects a net prepayment of $54 million in connection with executing our new revolving credit facility, or RCF, as I'll call it for short. $104 million was we paid on our $750 million facility to transfer collateral vessels, and $50 million was drawn on the new facility. With $160 million in overall capacity, we also added $110 million in undrawn RCF capacity, as shown in the dotted line cash bridge. Also in the quarter, we paid $61 million in combined regular and supplemental dividends of $1.42 per share in September. These components then led us to ending liquidity of over $581 million, as you see on the far right, with $214 million in cash and short-term investments and $367 million in undrawn revolving assets. Moving now to slide 10, we have a strong financial position as detailed by the balance sheet you see on the left-hand side of the slide. Here are some key items. Cash remains strong at $214 million. Vessels on the books at cost are approximately 2 billion relative to the current market values of over 3 billion. And with about $855 million gross debt at September 30th, you can see that we brought net loan-to-value below 20% to just about 19%, also illustrated in the bottom right-hand chart on the page. In the upper right-hand table, our pro forma debt balances as of November 1 reflect our recent debt repayments of $71 million, comprised of $21 million on the $750 million facility and $50 million pay down on the new RCF, which also increased our revolver capacity to 417. The new RCF, which we executed during the third quarter, was oversubscribed even as we increased the size of the overall facility. Because 85% of our debt portfolio is hedged or fixed, our weighted average all-in interest rate using current bank borrowing rates is about 6%, which is effectively a margin of just 50 basis points above today's benchmark SOFR rates. As we mentioned in our press release this morning, we expect to continue on this trajectory of a balanced capital allocation approach. We've already repaid $770 million of debt in this quarter. We've also announced our combined dividend of $1.25 per share, consisting of a regular dividend of $0.12 per share and a $1.13 self-level dividend, which represents approximately 60% of net income in Q3. These payments will be made in the fourth quarter as we continue to build our track record of executing our capital allocation strategy. As Lois mentioned earlier, including this combined dividend, our total dividend yield for calendar 2023 would be approximately 16% based on average market cap year-to-date. On the last slide that I'll cover, slide 11, reflects our forward-looking guidance and booked-to-date time starter equivalent, or TCE, aligned with our cash break-even levels. Starting with TCE pictures for the fourth quarter of 2023, Remind you, as I always do, that the actual TCE on our next earnings call may be different than what you're seeing here, but we have a blended average of about $34,000 a day so far this quarter with the details provided on the upper left. On the right side of the slide, you can see our cash break events, which we've displayed for the next 12 months, reflective of the delivery of the last vessel in our currently-building program of the dual-fuel field CCs. and related payments on principal and interest, as well as the new fixed revenues before any profit share on our increased long term time charges. Overall, we've reduced our break evens by $3,700 per day. Let me just say that again. Lowered them by $3,000 a day from the third quarter of last year. When you compare this to the break even to our fixtures today, compare this break even to our fixtures achieved today in the quarter certainly looks like International seaways have generated substantial cash flows during the fourth quarter again. On the bottom left-hand chart for the modelers out there, we provided some updated guidance for expenses in the fourth quarter and our estimates for 2024. We also included in the appendix our quarterly expected off-hire and CAPEX schedule for 2023 and 2024. I don't intend to read each item line by line, but encourage you to use these for modeling purposes. That concludes my remarks, so I'd now like to turn the call back to Lois for her closing comments. Lois?
spk02: All right. Thanks so much, Jeff. On slide 13, we provide you with Seaway's investment highlights, which I summarize briefly. International Seaway has built a consistent track record of returning to shareholders, maintaining a healthy balance sheet. All the while, growing our company. Our total shareholder return over this time is approaching 300%, surpassing many peers. Over the last 12 months, through regular quarterly dividends, supplemental dividends, and opportunistic share repurchases, we've returned $316 million in cash returns on earnings of $658 million. representing a nearly 17% yield. We've improved our balance sheet over the time with 75 vessels in the crude and product tanker market. We had $2 billion in assets on the books that are worth over $3 billion in the market today. We've prepaid $215 million in debt and unencumbered 30 ships. Our cash break-even level is at $15,000 per day. We're strategically positioned for a sustained, robust tanker market with a growing need for seaborne transportation created by regional imbalances. At Seaway, our highest focus is always upon safe, reliable transportation and an industry that will only become more transparent with evolving environmental regulations. We remain focused on being a leader in ESG. I want to thank everyone for joining us. And with that, operator, we'd like to open up the lines for questions.
spk01: Thank you, Lois. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to withdraw your question, please press star followed by two. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. So our first question comes from the line of Ben Nolan of Stifel. Your line is now open. Please go ahead.
spk04: Great, thank you. So, really good quarter. I have just a couple questions. First, just as I'm thinking about the fourth quarter, Once again, things like the LR1s look really good. However, the VLCC rates book to date were a little bit lower than what I was thinking, and I appreciate that several of them have time charter contracts on them. But can you maybe just talk through sort of how the dynamics for the Vs in the fourth quarter thus far?
spk02: Well, I guess I'd say, Ben, that, you know, rates have definitely picked up and the team at Tankers International is booking quite strong numbers, you know, for the remaining open days in the fourth quarter. So overall, we're pretty happy with what it looks like there on the beach.
spk04: Okay. So just timing kind of a thing, I guess.
spk09: Hey, Ben, the other thing is, look, our guidance is, you know, Look at the percentage. You know, it's actually a pretty low percentage of the fourth quarter, which is, you know, every company is going to be a little different, but based on accounting and the particular voyages they're experiencing, but, you know, there's a lot of quarter left based on what we reported.
spk04: Sure, yeah. Yeah, I appreciate that. And then I was going to ask, the MRs in particular did really well, which, you know, is... Maybe a little surprising to me, given that the average age is solidly in the teens at this point. I know you kind of continue to thin out that fleet a little bit, ones and twos here. But it sounds like most of those assets are unencumbered. The older ones are unencumbered at this point. Seems like you're still doing really well with them. and I know there's always a preference to have a little bit newer assets, but, you know, I mean, given the strength of the market here, how do you think about where you think the average useful life within international seaways of those assets are? I mean, do you think it's possible to sweat them out to 20 years or even longer, or is that just not part of the DNA for you guys?
spk02: Actually, you know, we totally do think that that's, you know, part of our strategic plan there. And if you really look at, you know, the product part of our fleet and you think about what demand has been and how it has increased the product at a higher ton-mile demand level than it has on the crude, and I think the crude will catch up, but the products are just really earning. So we feel like the MRs are just a complete strength for us. And, you know, we certainly see that they are trading very competitively in the market. We've maintained them very well and they have, you know, really strong potential.
spk04: Okay. And then last for me, and I know it's just something that you don't like to and probably can't talk to, but with respect to the strategic investor kind of you know, issues that have been going on over the last, I don't know, year and a half or so. Just curious if there's any incremental dialogue or if things are relatively quiet, uh, on that front.
spk02: You know, I guess what I would say is that, you know, we've been running and we'll continue to run the international seaway, you know, for all of our shareholders, all of our stakeholders, we've been posting extremely strong performance and, you know, um, very systematically engaging with our shareholders. And we feel really good about, you know, the returns that we've been able to deliver to all of our shareholders.
spk04: Right. Well, there's no question about that. So I appreciate it. Thank you.
spk02: Thank you. Thanks, Ben.
spk01: Thank you. Our next question comes from the line of Sharif Alma Garabi. of BTIQ. Your line is now open. Please go ahead.
spk10: Hey, good morning. Thanks for taking my question. So, during the quarter you fixed a 2008 built MR, then you sold another MR last month. And I think Ben's question touched on this, but looking at the fleet, there's still a handful of similar vessels, or more than a handful. So, I'm curious what kind of time charter opportunities you're seeing for these?
spk02: uh 13 to 15 year old mrs and and given where asset prices are how do you balance that with the chance to recycle that capital elsewhere well i'll uh i'll flip it to derek our chief commercial officer in a second and i'll just say that you know again i mean we're really feeling this strength in this mr uh fleet that we you know are lucky enough to have at international seaways, and we've been executing time charters. We very carefully prune when we think it's opportunistic, and we have a very strong base to operate from. And then, Derek, do you want to chime in with any additional comments there?
spk06: Sure. Thanks, Lois. Shiri, thanks for the question. I think you've kind of teed it up for us on the answer. we're going to continue our prudent asset allocation, especially in the MR sector. Because the rates have been so good on the MR side, we see increasing opportunities for charters. What we're looking for is multi-year charters for some of the shifts around the 2008-2009 vintage. Like you said, for us, we've prudently pruned the fleet in terms of selling them slowly, but to your question and to Ben's question, we want to keep the exposure in that MR side because the rates have been so good for us and for our shareholders.
spk10: All right, thank you. And then turning to the LNG new bills, the LR1s, will those be able to run on LNG as soon as they hit the water or is there some additional capex required to get them running on LNG And then more broadly, just in terms of bunkering, how extensive do you expect ports' LNG fueling capability to be by 2026, considering LR1, for example, can call a more diverse set of ports than, say, the LCC?
spk02: So I guess I would start with, you know, we have at Seaways already on the water three fully dual-fuel ports. LNG vessels, you know, VLCCs that are using LNG on a common basis, and it is definitely for sure that they have a lower need for multiple bunkering ports, and that is going very well for us. The three LR1s are certified for, classified for dual fuel suitability to turn them to being fully capable for LNG. And we contemplate that in our future. Bill, our Chief Technical Officer, Bill, why don't you jump in a little bit and just share a little bit more on that?
spk08: Sure, Lo. Thanks. Yeah, those four LR1s will not be able to run an LNG from day one, but will require a CapEx down the road, as we see the fuel markets, the regulatory standards, the customer expectations all evolve over the next five plus years or so.
spk10: Okay. That's helpful. I appreciate you guys taking my question.
spk00: Thank you.
spk01: Our next question comes from the line of Christopher Robertson of Deutsche Bank. Your line is now open. Please go ahead.
spk07: Thank you, operator. Good morning, Lois and Jeff. Thanks for taking my questions today. Just turning to the current demand landscape, you know, we of course see the continued 10-mile demand expansion related to the dislocation of the Russian trade. But wondering if you could touch on anything else maybe less known in the market that's impacting effective supply, including any congestion issues, bottlenecking. I guess in other words, are there any short-lived or temporary factors impacting rates currently that could unwind in the next few months?
spk02: Well, it's interesting. Short-term factors, I don't know how short-term, we're definitely seeing an impact with the reduced draft at the Panama Canal, and that's a true bottleneck out there in the market. I do think that will persist for a few months here, and it does impact the tanker trade because you're getting a lot of congestion there, and that does drive a little bit of a longer ton-mile situation. I would say that's something of a temporary factor. I mean, definitely Q4 from everything that we see, inventories are drying, and this is a really strong demand signal, which we appreciate on the tanker side.
spk07: Yeah, definitely. That makes sense. Turning to a little bit more esoteric question here on the balance sheet, Jeff, could you talk about the $75 million of short-term investments that sit there in terms of what those are, the duration, kind of how liquid are those investments, and when they might be converted to cash?
spk09: Yeah. Hey, Chris. It's just our cash management, what we've been doing is instead of just overnight money market funds, which are yielding quite well, but we laddered out some of the investments into time deposits with typically our facility banks, you know, our relationship banks. And per gap, if you go out a little bit, it just doesn't get to be listed as cash. It comes out as a short-term investment, but it's a CD, you know. and our longest is six months. So it looks and quacks a lot like cash, but it's listed as a short-term investment. So I think you can certainly see it as cash. Yeah, go ahead, sir.
spk07: Definitely. Yeah, just wondering if, I guess, is that the continued strategy to kind of ladder those over time while the interest rates are attractive?
spk09: Well, sure. I mean, I think, you know, you've heard what was described. We have a balance of cash and revolver. We think that that's a good mix for security and optionality. But it's nice, you know, getting, you know, above 5%, you know, on our other market funds. And then when you stand out a little bit with CDs, you know, we're lately, you know, moving at another 50 basis points or thereabouts. We actually have a lot of our cash is earning more than substantial part of the debt that we have that's either fixed or swapped. So, you know, that's kind of a nice situation to be in. So, we're sort of happy with that extra interest income we're making these days, and the Treasury Department's working hard on that, and we'll keep sweating those assets like we do the ships, you know.
spk07: Yeah, that makes sense. Last question for me is just turning back to the four LR1s. Can you talk a bit about the cadence related to the installment payments for those four vessels?
spk02: Yeah, I'll take that just to start, Jeff, and, you know, what I would say is that the installment payments are attractively weighted to the backside of the vessel's construction cycle toward their delivery. I don't know if you want to say anything more than that, Jeff?
spk09: You know, maybe we'll find a way to explain that, but it's very typical back-end loaded, where it's not too much upfront, I'd say. We probably only have the first two will require deposits maybe in the coming quarter. So for near-term modeling, I think I'd go with that. And then we'll get the rest of the back-end loaded, and we'll, to the extent we can with confidentiality, we'll get more information out of that. But pretty typical, you know, new build schedule, but of the back-end loaded variety, I'd say.
spk07: Got it. All right. Appreciate it. Thank you.
spk01: Thank you.
spk07: Thank you. Thanks, Chris.
spk01: Thanks. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. I would now like to open the line for Omar Nocta of Jefferies. Your line is now open. Please go ahead.
spk11: Thank you. Hi, Lois and Jeff. And Derek, I did want to I had a couple questions, but then maybe perhaps just a quick follow-up to the last one from Chris about the LR1s. I did notice, at least the way it reads on the balance sheet, that perhaps there wasn't a deposit made on those two initial LR1s that were ordered last quarter. Is that right, or were those sort of accounted for differently?
spk02: No, no, you're correct, Omar. It's a very clever pickup there. You know, we have received the refund guarantees, and those are fully in place. And, of course, that is the time at which, you know, you make your down payment. So that will be made in the fourth quarter.
spk11: Okay, got it. Thanks, Lois. And then... Just sort of maybe talking about the capital returns, you've obviously generated a good amount of cash flow consistently now for the past several quarters. You've been paying out supplemental dividends. And Jeff, in your comments, you talked about how the ratio is basically 60% of quarterly earnings. That looks to be a bit higher than, say, 40 to maybe 50 in the past few quarters. I know, obviously, it's a board decision, but just in general, as we kind of think about future payouts, you know, obviously subject to strong numbers coming from international seaways. But in general, is 60% like a new threshold we should think about when we consider what the potential supplemental dividends will be like in strong upcoming quarters?
spk02: Go ahead, Jeff.
spk09: Thanks, Lois. Hi, Omar. Yeah, I would just review our history to answer your question of your history, we over the last four quarters really wanted to balance incrementally the leveraging versus the scheduled amortization on the one hand to lower our costs and lower our break even and give out a good dividend yield. And it typically is examined or analyzed or as you have by way of payout ratio, but as Lois and I both point out in our remarks, it's added up to $6.29 pro forma for the last dividend for the calendar year. So it's been a good yield. But also towards answering your question, with the debt paydowns that we described from the last quarter's new facility and the payments already in Q4, and kind of where we are with a lot of this really what I call high-quality debt that's at rates that are either fixed or swapped at lower than we're earning on our interest on our cash. It makes sense that we're sort of able to pay a little more in terms of payout ratio this quarter. And, you know, I think that that's kind of a situation or a healthy situation that we'll remain in. We've got a good amortization, a good, healthy amount of amortization still there in our, scheduled in our debt. So it'll be naturally reducing quite a bit during the course of 2024. So, you know, if the tanker market continues in the good place that it is, I think you should expect uh, dividend payouts to continue, uh, like, like we, uh, are doing them now. Cause I hope that's responsive.
spk11: Yeah, that's, that's very good. I was actually surprised you were willing to actually answer the question.
spk00: Come on Omar, you know what?
spk11: But yeah, yeah, no, no, that was very good. Very, very good and constructive. I mean, clearly the balance sheet is in much stronger shape and it just seems to continue to, to go in that direction. Uh, You know, maybe just one kind of final one just regarding the new building. You have the four LR1s now. You know, you have the niche trade in South America where those trade and are expected to trade. Do you have options for more? Is there potential more to add to that fleet beyond just the four new buildings, or is this it, you think?
spk02: Well, you know, Omar, I think what's really important for us was that we felt that, you know, with this really strong base of cargo and relationship that we've built over the years that we wanted to have these four as our foundational units. And then, you know, we consistently have had in charters and different ways within the pool to optimize results. And we'll continue to do that.
spk11: Got it. Well, thank you, Lois, and thanks, Jeff. I'll turn it over.
spk01: Thank you.
spk06: Thanks, everyone.
spk01: Thank you. Our final question comes from the line of Liam Burke of B. Reilly. Your line is now open. Please go ahead.
spk03: Thank you. Good morning, Lois, Jeff.
spk02: How are you, Liam?
spk03: Good. Thank you, Lois. But for the fourth quarter, your partial fixtures on the SUEZmax on a daily rate basis are outdistancing the VLCCs. You mentioned earlier that the VLCCs have moved up off of those partial fixtures, but are you seeing the same move with the SUEZmaxs, and are they continuing to outdistance the VLCC rates?
spk02: Yes. So, you know, what I would say is that, you know, you've seen the whole crew space pick up, you know, consistent with the last, you know, 18 months, you know, the middle part of the space, you know, the Panamax, the Afromaxis and the Suez Maxis, you know, that are kind of focused on delivering into Europe, shorter haul crews, you know, have really been superstars and that continues. So we've seen the Suez Maxis pick up. They're still very strong. And the whole crude space moved up after really the first secretality we saw this summer, you know, in a long time.
spk03: And Jeff, you highlighted the $3,000 per day per vessel decline in cash costs per vessel. How much of that is operating savings and how much of that is financial related in terms of lower principal payments, interest, et cetera?
spk09: Hi, Liam. It's mainly the latter. You know, I think we gave you guys that we're working hard to keep expenses, you know, in a good place, but the achievements in terms of lower break-evens are primarily from reducing interest costs and debt and also reducing amortization on debt when you lower the principal amount that's due, the amortization goes down as well. And the new revolving credit facility, shifting more to that from term, you know, it also does that. So it's primarily the balance sheet. But also the time chart, you know, as you can tell from the chart, it's where we're talking about break evens on spot vessels. So it's also benefited from the commercial department putting on incrementally more time charges. So it's those two factors.
spk03: Okay, great. Thank you, Lois. Thank you, Jeff.
spk01: Thank you.
spk06: Thank you.
spk01: Thank you. As there are no additional questions waiting at this time, I'd like to turn the conference call back over to Lois Zabrocki for closing remarks. Thank you, Candice.
spk02: I just want to thank everyone for joining International Seaway. And, you know, we're broadcasting here from Bahri. Dubai International Tanker Week, where we're seeing customers. And we really appreciate your interest in international seaways and wish everyone to stay well. Thank you very much.
spk01: Ladies and gentlemen, this concludes today's International Seaways Third Quarter 2023 results call. Have a great rest of your day. You may now disconnect your lines.
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