💙 🔷 Not impressed by Big Tech in Q3? Explore these Blue Chip Bargains insteadExplore for free

Earnings call: International Seaways Posts Strong Q2 Results Amid Fleet Optimizations

Published 2024-08-07, 03:38 p/m
© Reuters.
INSW
-

International Seaways, Inc. (NYSE: NYSE:INSW) has reported robust financial results for the second quarter of 2024, featuring an adjusted net income of $118 million or $2.37 per diluted share. The company has successfully increased its financial flexibility by expanding its revolver capacity to $506 million and lowering its daily breakeven rate.

The company's balanced approach to capital allocation and focus on shareholder returns are evident in the declared dividend of $1.50 per share, which constitutes 64% of the adjusted net income. Looking ahead, International Seaways anticipates a strong tanker market driven by increasing oil demand and an aging global fleet.

Key Takeaways

  • Adjusted net income of $118 million or $2.37 per diluted share.
  • Adjusted EBITDA stood at $167 million.
  • Sold three aged vessels and purchased six eco MR vessels.
  • Increased revolver capacity to $506 million, with a spot breakeven rate now below $13,400 per day.
  • Declared a dividend of $1.50 per share, representing 64% of adjusted net income.
  • Anticipates a robust tanker market due to growing oil demand and aging fleet.
  • Aims to enhance balance sheet and return value to shareholders through a balanced capital allocation strategy.

Company Outlook

  • International Seaways expects significant free cash flow generation in Q3.
  • The company has a strong liquidity position, nearing $700 million.
  • No plans to diversify into different market segments, focusing on crude and product markets.
  • Expects the impact of the Dangote refinery on the Atlantic Basin to become clearer over time.

Bearish Highlights

  • Transportation expenses may see inflationary pressures from crew shifts and dry dock availability.
  • Currently experiencing softer tanker rates but anticipate an upcoming rise.

Bullish Highlights

  • Over the past 7 years, the company has achieved nearly 500% total shareholder return and a 23% compounded annual return.
  • Maintains a young fleet and invests in various tanker classes for growth.
  • Aims to lock in long-term charters at rates above long-term averages.

Misses

  • Margins had decreased but have shown slight improvement recently.

Q&A Highlights

  • The company has added two more MRs to its fleet on a time charter basis.
  • Roughly 20% of the fleet is on time charter, with a strategy to secure long-term charters at favorable rates.
  • Continues to sell older vessels and acquire modern assets for better spot market performance.
  • CEO is thankful for strong shareholder returns and optimistic about the upcoming quarter.

International Seaways has positioned itself to navigate the dynamic shipping industry landscape effectively. With a focus on maintaining a young and efficient fleet, optimizing financial structures, and capitalizing on market opportunities, the company is poised to continue delivering value to its shareholders. The tanker market's projected strength, combined with the company's strategic maneuvers, suggests a positive outlook for International Seaways as it sails ahead.

InvestingPro Insights

International Seaways, Inc. (NYSE: INSW) has demonstrated a commitment to shareholder returns, which is reflected in its high shareholder yield and consistent dividend growth over the past four years. The company's approach to capital allocation is further underscored by its significant dividend payout, which stands at a yield of 11.22% as of the last dividend ex-date on June 12, 2024. This dedication to rewarding shareholders aligns with the company's robust financial performance, including a strong adjusted net income and EBITDA reported for the second quarter of 2024.

InvestingPro Tips for International Seaways highlight that the stock has experienced a notable decline over the past week, yet it typically exhibits low price volatility and sometimes moves counter to market trends. This could indicate a potential entry point for investors seeking stability and income generation, especially considering that analysts predict profitability for the company this year. For more insights and tips on International Seaways, readers can explore additional content on https://www.investing.com/pro/INSW, which provides a comprehensive list of 11 InvestingPro Tips.

InvestingPro Data metrics further reveal that International Seaways maintains a solid financial standing, with a market capitalization of $2.4 billion and a low price-to-earnings (P/E) ratio of 4.53, adjusted to 4.71 for the last twelve months as of Q1 2024. The company's revenue has seen a slight increase of 0.83% over the same period, while the gross profit margin stands at an impressive 70.04%, indicating efficient operations and strong profitability.

These financial metrics and strategic business decisions, such as fleet optimization and capital structure improvements, suggest that International Seaways is well-positioned to capitalize on the anticipated strong tanker market and continue delivering value to its shareholders.

Full transcript - International Seaways Inc (INSW) Q2 2024:

Operator: Good morning, everyone, and welcome to the International Seaways Second Quarter 2024 Results Conference Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions]. I will now hand you over to your host, James Small, CAO and General Counsel to begin. James, please go ahead.

James Small: Thank you. Good morning, everyone, and welcome to International Seaways earnings call for the second quarter of 2024. Before we begin, I would like to start off by advising everyone with us on the call today of the following. During this call and in the accompanying presentation, 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 trading patterns; forecasts of world and regional economic activity and of the demand for and production of oil and petroleum products; the effects of ongoing and threatened conflicts around the globe; the company's strategy and business prospects; expectations regarding revenues and expenses, including vessel, charter hire and G&A expenses; estimated future bookings, TCE rates and capital expenditures; projected scheduled drydock and off-hire days; purchases and sales of vessels and construction of new build vessels; the company's consideration of strategic alternatives; anticipated and recent financing transactions that 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 assumptions made by management based on various 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 Seaways' actual results to differ from expectations include those described in our Annual Report on Form 10-K for 2023, our quarterly report on Form 10-Q for the second quarter of 2024 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 Zabrocky. Lois?

Lois Zabrocky: Thank you very much, James. Good morning, everyone. Thank you for joining International Seaways' earnings call for the second quarter of 2024. On Slide 4 of the presentation, which you can find in our Investor Relations section of our website, results for the second quarter represent our eighth consecutive quarter of adjusted net income over $100 million. Net income was 145 million or $2.91 per share, excluding the gains on vessel sales and other one-off items, and adjusted net income for the second quarter was $118 million or $2.37 per diluted share and adjusted EBITDA was $167 million. On the lower left section of the slide, we were busy with fleet renewals in the second quarter, taking delivery of six eco MR while selling three aged 15 years or more. This lowered our average MR age by one year. One of the three vessel sales closed in mid-July. We funded the acquisition of the eco MR with the proceeds from vessel sales, along with a $50 million revolver draw and the issuance of 624,000 shares in cash on hand. On the upper right-hand side of the slide, we continue to benefit from our balance sheet. At the end of the second quarter, we had $682 million in total liquidity, which included 506 million of undrawn revolver. We increased our revolver capacity by nearly [indiscernible] consolidated our term loan and converted them into a revolving credit facility. We now save about $80 million per year in mandatory repayments which also raises our free cash flow generation and lowers our spot breakeven rate to under $13,400 per day. As a result of these accomplishments, we continue to share our upside with our shareholders. Today, we declared a combined dividend of $1.50 per share, representing 64% of adjusted net income. And as shown in the lower right-hand chart, another quarter of a double digit yield for our shareholders. Over the last 12 months, Seaways dividend yield has been 12% of our average market cap. We continue to prioritize our balanced capital allocation, positioning the company for the future with opportunistic fleet renewal and enhancing our balance sheet while sharing in our upcycle with a double digit dividend yield to our shareholders. Slide 5, we've updated our bullets on tanker demand drivers with subtle green up arrows next to the bullets represented in positive for tankers, the black dash representing a neutral impact and a red down arrow meaning the topic is not good for tanker demand. Pulling highlights. We expect oil demand to continue to grow at a rate above its 30-year average growth. A good portion of this growth is regionally in Asia, which has grown slower than expected at the beginning of the year. While oil supply growth is largely in areas not capped by OPEC+, tanker demand, particularly the V are better off when the cartels production also grows. It's a heavy election year worldwide and results could indirectly impact our tanker demand. While Seaways has benefited by geopolitical events that have caused disruptions to both crude and product tanker trade, it is important to recognize that these events have not defined tanker earnings but merely bolstered a fundamentally strong market. The graph at the bottom of the slide show that the growth in oil demand and seaborne transportation of crude oil and refined products looks to remain healthy over the next few years. On Slide 6, strong tanker market naturally would dictate more ordering and the order book has grown to about 11% of the total fleet. However, ships on order, as we show at the bottom left hand of the page, are not enough to replace a fleet that is aging significantly. The average age of the tanker fleet today is over 13 years old and is likely to get older with so few newbuilding deliveries. Generally, older ships have less efficiency and less utilization. With a greater percentage of the fleet in this vintage, the industry needs more shifts to cover the increase in seaborne demand. Different from other cycles, the longer lead time in our order book can limit the new orders today, especially when factoring in pending environmental regulations. Overall, this sets the stage for a continued strong up cycle over the next few years and Seaways will capitalize on these market conditions. You can count on us to utilize our balanced capital allocation approach through New York fleet and adapt to industry conditions with a strong balance sheet while returning to shareholders. I'll now turn it over to our CFO, Jeff Pribor, to provide the financial review. Jeff?

Jeff Pribor: Thank you, Lois, and good morning, everyone. On Slide 8, net income for the second quarter was $145 million or $2.91 per diluted share. This includes gains on vessel sales and a provision for the settlement of our UK multi-employer pension funds. Excluding these impacts, our net income was $118 million. On the upper right chart, adjusted EBITDA for the second quarter of 2024 was $167 million. We have provided a reconciliation from reported earnings to adjusted earnings in the appendix. Our expense guidance for the second quarter fell largely within the range of expectations, but I'd like to highlight certain aspects within our ecosystem. At the time of our last earnings conference call, we guided towards 359 days of off-hire and dry docking repairs. As outlined in the appendix, our actual off-hire time was 559 days. About half of the 200-day difference relates to documents that we move forward into the second quarter ahead of most of these vessels delivering into time charters early in the third quarter. Another 60 days of additional off-hire time relates to repair work, which is generally one of the nature to maintain safe and reliable operations. The remaining 40 days relate to some additional positioning and adapting of our vessels or U.S. West Coast trading for our customers. Our Wyoming business continues to prosper with nearly $14 million of revenue in the quarter, combined with about $3 million in vessel expenses, $4 million in charter hire and $1 million of G&A. The Wyoming business contributed about $6 million in EBITDA in the second quarter and brought its year-to-date EBITDA contribution to just about $13 million. Turning to our cash bridge on Slide 9, we began the quarter with total equity of $626 million proposed of $250 million in cash and $411 million in undrawn revolving capacity. Following on the chart from left to right on the cash bridge, we first had $167 million in adjusted EBITDA in the second quarter, plus $24 million in debt service, plus our drydock and capital expenditures of $15 million and then add working capital benefits largely due to the collection of receivables of approximately $28 million. We therefore achieved our definition of free cash flow of $154 million for the second quarter. This represents an annualized cash flow yield of about 20% on today's share price. The remaining bars in the cash bridge reflect our capital allocation. We spent $175 million to acquire 6 eco MRs, which is net of $35 million of share value issued to the sellers in the form of 624,000 shares. We also sold two vessels during the quarter for $48 million and borrowed $50 million our new $500 million of revolving credit facility and funding for the MRs. In connection with the closing of the revolving credit facility, we increased our capacity by $150 million which was subsequently reduced to $100 million after drawing for the MR person. And also we extinguished our ING term loan for $20 million. Lastly, we paid $1.75 per share or $87 million dividends during the quarter. These components led to ending liquidity of $682 million comprised of $176 million in cash and short-term investments and $506 million in revolving credit capacity. Moving now to Slide 10, we have a strong financial position detailed by the balance sheet on the left-hand side of the page. Cash and liquidity remained strong at $680 million. Vessels on the books at cost are approximately $2 billion versus current market values of over $3.7 billion. And with $720 million of gross debt at June 30, this equates to a net loan to value of right around 14%. Our debt at June 30 was 78% hedged to our fixed rates, leading to an all-in weighted average interest rate about 625 basis points or less than 100 basis points above today's so. In the table on the bottom right-hand side of the slide, our debt balances as of June 30 reflect the amend and extend a $750 million facility, which we now follow a $500 million RCF. As Lois mentioned before, this facility has no mandatory debt, generating a savings of about $80 million per year. It also increases our free cash flow generation by the same $80 million per year in mandatory repayments are included as part of the service calculating free cash. We continue to enhance our balance sheet to create the financial flexibility necessary to both facilitate growth and provide returns to shareholders. We have $506 million in undrawn revolvers. Our nearest maturity in the portfolio isn't until the next decade. We continue to lower our breakeven costs and we share in the upside with double-digit returns to shareholders. On the last slide that I'll cover. Slide 11 reflects our forward-looking guidance that book to date TCE lie with our spot cash breakeven rate. Starting with TCE fixtures for the third quarter of 2024. We can see some seasonality returning to the tanker markets. While I will remind you that actual TCE we report in our next earnings call may be different. As of today, we have a blended average spot TCE of about $37,300 per day, meanwhile so far for this quarter. On the right-hand side of the slide, you can see our forward spot breakeven rate is now under $13,400 per day, proposed of a split wide breakeven of about $16,000 per day less the effect of nearly $2,800 per day time charter revenues. As a result, based on our spot TCU book to date and our spot breakeven, it looks like Seaways generates significant free cash flow during the third quarter. On the bottom left-hand side of the chart, we provide some updated guidance for our expenses in the third quarter as well as our estimates for 2024. We also include in the appendix of quarterly expected off-hire for the rest of the year, significant lower than previously guided due to changes in our drydock schedule and the CapEx schedule for 2024. I don't plan to read in each side line by line, but encourage you to use these for modeling purposes. That concludes my remarks, and I'd now like to turn the call back to Lois for closing comments.

Lois Zabrocky: Thank you very much, Jeff. On Slide 12, we have provided you with Seaways investment highlights, summarizing briefly. Over the last 7 years, International Seaways has built a track record of returning to shareholders, maintaining a healthy balance sheet and growing the company. Our total shareholder return is nearly 500% since our inception, representing a 23% compounded annual return. Over the last 12 months, our combined dividend of $5.82 per share represents a 12% yield on our average share price over that time. We continue to make strides to keep our fleet age below the global tanker average in what we see as a sweet spot for tanker investments and returns. We've invested in a range of tanker classes casting a wider net for growth opportunities and supplementing our scale in each class by operating in leading pools. We keep our balance sheet fortifying for any down cycle. We have over $500 million in undrawn credit capacity to support our growth. Our net debt is 14% of the week's current value and we have 34 tankers that are unencumbered. Lastly, our spot tanker we only earned $13,400 per day to break even in the next 12 months. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders. Thank you. And with that said, operator, we'd like to open the lines up for questions.

Operator: [Operator Instructions]. Our first question comes from Ben Nolan from Stifel.

Ben Nolan: I appreciate it. So I wanted to go back to the dry-docking days, if I could. Jeff, you had mentioned that you pulled some of those forward for ahead of time charters. But still in aggregate, the number went down by more than 100 days for the year. Just curious if -- is some of that being pushed into next year? Or is it just less than you thought last quarter?

Jeff Pribor: Well, yes, so for this quarter, I think the point is off-hire was 200 days more than we had provided in the last quarterly conference call before. So of that, yes, if you look at the full year, we are up now with our guidance for the full year. So some of it is -- affects the year, but some of it is just timing between quarters, and that's the main point we want to make is that's not something you could have seen before we put out the information today. So I wanted in my remarks to make clear that part of the off-hire is just timing and a little bit of positioning of vessels comparing that.

Ben Nolan: And it was just sort of opportunistic -- sorry it was just opportunistic. Yes. Okay. All right. .

Lois Zabrocky: One of the things -- I was just going on supplemental -- one of the things we are focusing on those Aframaxes is, getting them into and position for that West Coast trade and those in particular were a couple of vessels that we were preparing with an extra dry docking.

Ben Nolan: Got you. Sorry, Lois, you said the Aframax is there?

Lois Zabrocky: Yes. We are positioned now with that tool that we've put together with Ultra Chile and have those stuffs out there, and we will try to take advantage of that TMX (TSX:X) trade as that develops.

Ben Nolan: Got you. And that actually leads to my second question. It seems like the Aframaxes in particular, have been below sort of market levels. And I appreciate that they're a little bit older maybe than average, but it was part of that and as part of that even in the third quarter, simply a function of the shifting around of the fleet and maybe some of that dry docking. And going forward, we should expect those to be a little bit more similar to market rates, would you think?

Derek Solon: Ben, it's Derek Solon. I'll take that one, if I can. You kind of answered the question for us. That's exactly right. So we've taking advantage of our JV partners where we -- even before this Aframax pool, we've had two pools with Ultra Chile that specialize on the West Coast of the Americas with Panamax International and CPTA. So as TMX was coming to fruition, we've made the call to start Aframax International, so we could take advantage of. One, hopefully, the TMX trade, but two, just the relationships that have been built over years with those joint venture pools. What that meant though for the first half of the year is advancing dry docks, doing a little bit more work to be ready for the West Coast trade. And the real pain point was dry-docks in the East that we had to then get the ships to the West Coast of the Americas. So that was a lot of positioning training to get this new pool off the ground.

Ben Nolan: Got it. Okay. That's very helpful. I appreciate that. And then lastly for me, if I could. Just bigger picture, we talk about the aging fleet, and there's the dark fleet and all of this kind of thing, although it seems like there's been a little bit more cracking down on that. Do you think there's much of a chance that we begin to see some of these older assets actually leaving trade and being scrapped even in a high market? Or is it probably just market related other than maybe one and two’s. Just curious if you think that we're beginning to get to maybe a tipping point with respect to the age of the assets and the broader fleet.

Lois Zabrocky: Ben, it's definitely something that we watch constantly. And when we look at the supply side and take the fees where you have even none or one delivery in single digits next year. So you're looking at very little new buildings coming in the market. I kind of expect, believe it or not, for the -- in two years, today, the total tanker fleets in the world over 13 years, I think in two years, it's going to be over 15 years. And then we're only in the mid-innings, we believe in this very structurally strong cycle. And unless those owners can't trade at all, I don't expect them to leave the fleet, but then eventually that will come home to root.

Jeff Pribor: Ben, another point is the older vessel system have a lower utilization in and of itself because of their age. So while it's not scrapping older vessels or have less utilization. So the fleet shrinks naturally.

Ben Nolan: Sure. That's a good point. All right. I appreciate it. Thank you, guys.

Operator: Our next question comes from Chris Robertson from Deutsche Bank (ETR:DBKGn).

Chris Robertson: Hey, good morning, everybody and thanks for taking my questions.

Lois Zabrocky: Good morning.

Chris Robertson: Jeff, yeah, morning, Lois. Jeff maybe this is a question for you. But just looking at the summer pullback here in rates? And then as that relates to the share price, could you look towards the $50 million repurchase program here to take advantage of the -- it seems like an attractive discount to NAV. How are you thinking about, I guess, the trade-off between the quarterly dividend and potential repurchases here?

Jeff Pribor: Hi Chris, so look, we think it's important to have a share repurchase program in place, and we not long refresh the amount from our last repurchases. So we do have a solid $50 million in place. And as always, we will look at that opportunistically. But we stuck with the dividend. What we're striving for with that is a measure of transparency, consistency and a really solid yield a return to shareholders. And I think -- we've shown that the transparency is based on always being at least 50% of net income, which is an easy statistic for people to wrap their minds rather or look up in whatever source they want and consistency for straight quarters of it. That's a measure of consistency and solid yield always mentioned in her remarks said it's still double digits 12% in the last 12 months. So we think that's good capital allocation, but with our -- to answer your question again with the share repurchase program in place and our low leverage and a lot of liquidity, yes, we will monitor the share price and that's certainly an option available to us going forward.

Christopher Robertson: Got it. All right. Thank you for that. My next question is just around the cash breakeven here which is at very low levels relative to history. Looking at your expectations for OpEx and the inflation going forward, do you think you can maintain the cash breakeven where it is today and what would be the main drivers do you think of upward pressure on that number from where we are today?

Lois Zabrocky: Well, I would say basically when you talk about where we see I think, some of the inflation creep in in transportation expenses, shifting crew, some availability at times of dry docks where -- because the world is really busy and -- but we think that we can hold the line on that. And the -- in the appendix, we give you some expense guidance and for the remainder of the year and we look to be able to hold that line. .

Christopher Robertson: Got it. It sounds good Lois. Thank you for that. I will turn it over.

Operator: Our next question comes from Omar Nokta from Jefferies.

Omar Nokta: Thank you. Hi, guys. Good morning. A couple of questions from my side. Just wanted to ask we talk about the tanker market and rates are clearly softer at the moment. Seasonally, it looks like both crude and product are lower than where they were in the first half and just wanted to get your sense as we move to the final here 4 months or 5 months of the year how do you see both crude product paring, I guess one, perhaps easy question is do you see a rise in rates in the coming months in both segments. And then two, do you think there's one that's going to lead the other?

Lois Zabrocky: You put a lot in there, Omar. How are you? It's Lois. So as we look at the year in crude and products and definitely we've seen seasonality creep into our markets here in the third quarter. Nonetheless, while it doesn't look like there will likely be more than 2 million barrels a day of oil demand growth for the year. There is certainly will be more than 1 million barrels per day and maybe around 1.5 million in oil demand growth that's the fundamentals of kind of where we start. The markets have been pretty consistent this year when we look at it. I mean I would say crude may have a little more products. And you look at the Q3 numbers, you're looking at 35 a day for what has been booked on the MRs, right, that we put in our charts. So that's really quite strong and then I'll have Derek jump in there on -- there still is an expectation in the second half for demand increase.

Derek Solon: Thanks, Omar. Thanks, Lois. I think you said it great, right? We've seen a return to seasonality that we haven't really seen since sort of COVID recovery in the tanker markets and the Russian Ukrainian invasion. So some seasonality is not necessarily a bad thing for the markets, right? We see a softer summer in June and July, but Omar we've already seen increased OPEC plus crude exports for August almost 2 million barrels a day more than say compared to July. So that sort of push of crude supply should help the crude markets a great deal into the fourth quarter, couple that with some of the earlier comments on the order book. There's a V to deliver this year. There's five Vs to deliver this year. So do you see some upside in the winter months for the crude sector? For sure.

Omar Nokta: Got it. Thank you. That's helpful color. So a couple of million barrels more here in August versus July should start to tighten the market. And I guess, presumably then that means crude tankers will lead the charge potentially as we move forward?

Derek Solon: Well, they've got, if we look at the Vs, Omar, they've got sort of the most room to come up, right? I mean, the MRs, 38 Q1, 35 Q2, mid-30s for Q3 booked so far. That's historically very, very strong for the MRs. So we don't see anything softening that per se, but I think that the crude will have to lead sort of the increase because they've got the most room to go up.

Omar Nokta: Yes. A good point obviously mid-30s on the MRs and the seasonal soft period is obviously not too shabby?

Derek Solon: That's going to be...

Omar Nokta: Yes. Just Lois, you just mentioned in the appendix. I just wanted to ask the guidance on state OpEx, I'm not sure if I'm looking at it the right way or calculating it correctly, but it feels like perhaps maybe the running costs on the ships are going to be maybe $500 a day lower, if not maybe $1,000. Does that sound right? At least in relation to say, the first half. Do you think this is a new baseline or should we just kind of think about the average for the full year as more indicative?

Lois Zabrocky: What I would say, Omar, is that I think that in the second half we were very stable overall. And then I'd like to have Tom come back and kind of maybe look at the first half to second half. But basically we look at pretty stable OpEx overall and it is that we're going to have nobody has taken a decrease when we are looking at stable OpEx. So we'll come back just to bridge that with to get into those numbers a little bit, if that's okay with you.

Omar Nokta: Totally fair. I appreciate it. Thank you. I'll pass it over.

Lois Zabrocky: Thank you, Omar.

Operator: And our next question comes from Sherif Elmaghrabi from BTIG.

Sherif Elmaghrabi: Hi. Good morning. Thanks for taking my question. In your prepared remarks, you highlighted your liquidity position which is approaching about $700 million by the end of August. That's a lot of dry powder and looking beyond the next 2 years when yards look back up, I'm wondering if you see long-term growth opportunities on the crude side, the product side or if you would consider something entirely different. I think you've already covered share repurchases, but something different given where asset prices for both are?

Lois Zabrocky: Thank you, Sherif. So I'll flip it to Jeff in a moment. What we would say is that we took delivery of 3 new Bs in 2023, dual-fuel LNG on those. We are building six of these LR1s and we've been selling MRs are older and bringing in the more modern ones. So we don't feel like there's a half to here. What we really like is having that balance sheet in beautiful shape where you do have that undrawn revolving credit facility there where if you do see an opportunity, we can take advantage of that and we are in both crude and product. We don't -- we are not planning to take a sharp rate turn into another particular space at the moment. And then Jeff, did you want to talk at all about our liquidity or...

Jeff Pribor: Just to say that liquidity is optionality. So we're happy with the low levels of debt we've got at 14% net loan to value. We want some debt. A lot of that we have left is so-called high-quality debt that would want to pay off plus it provides a greater return on the equity. So what we've been able to do is establish a lot of liquidity through the undrawn revolver as you noticed but also we have 34 unencumbered vessels. So that's another form of liquidity that provides optionality or whatever comes. But we're prepared for options when we see attractive transactions available to us.

Sherif Elmaghrabi: Got it. And then drilling a little deeper on Omar's question about the market. Last week, Nigeria allowed the Dangote refinery to buy crude directly from NNPC, so it can ramp faster. And I'm curious how you see that affecting crude versus product flows? And any color on how that refinery has already impacted the Atlantic trade would be helpful.

Lois Zabrocky: So Dangote is putting out some diesel. It's supposed to have a total of 600,000 barrels a day of capacity, which I do believe 1 day they will utilize. But I think we're looking more at around 100,000 barrels a day of where you're seeing some exports coming out and a lot of that's been diesel and you have seen an effect on the worldwide diesel margins that has gone down and have now bounced back a little bit. So we've also seen in the market some of the imported Dangote crude, which they will continue to do. I think it will be around 25%-ish that they plan to take from Nigeria. So I think that it's early days in Dangote and that's an evolving situation. Derek, any more flavor on that?

Derek Solon: Not particularly. I mean we have seen good deal of imported crude in today goes the call was getting up and running, how long we expect that to continue as always debatable being that you're in OPEC producing exporting nations. So we were happy to see it when we have it. We don't expect that to drop off to zero anytime soon. And I think Sherif you've got the right question in terms of what that will do to clean product trades in the Atlantic Basin. And I think we still need a little bit of time to tell.

Sherif Elmaghrabi: Got it. That's great color. Thanks, everyone.

Lois Zabrocky: Thank you.

Operator: [Operator Instructions]. And our next question comes from Liam Burke from B. Riley.

Liam Burke: Good morning, Lois. Good morning, Jeff. Lois, you added two more MRs if there's a time charter market. Are you seeing increased step-up in demand for -- from the shippers for to secure tonnage on a longer-term basis?

Lois Zabrocky: No, Liam, we've got a total of 15 vessels on time charter and we look for something that's going to lock in more than -- you're in very strong spot markets. So we look for a multiyear period. And when there can lock it in above long-term averages then we go ahead and do that. We have about 20% of the fleet on time charter rating now. So we've got some strong customer relationships and when they're looking to add in then we'll do that. Right now, we're in a little bit of a steady state. I think and if we see something, we'll go ahead and lock it in. Otherwise, you're in the summer. And it's even August. So I'm thinking everybody comes back in -- later in Q3 and gets to work on locking in their book.

Liam Burke: Fair enough. Thank you. And on the MRs, you've got -- you still have a few older ones in the fleet. How are you balancing historically elevated rates with potentially domestic some of these older MRs and lowering the age of the fleet?

Lois Zabrocky: Yes, Liam. So if you look at it, we've been steadily -- we call it pruning, selling 4 or 5 a year. Now you saw us bring in some more modern assets and then every one of these vessels that's in the spot market over the last year has brought in $7 million over breakeven level. So it's pretty stunning all around on the MRs. So the earnings potential is very strong. We divest some of the older, we bring in more modern. We feel pretty steady on it.

Liam Burke: Great. Thanks, Lois.

Lois Zabrocky: Thank you, Liam.

Operator: And that was our final question. I will hand back over to the CEO, Lois Zabrocky, for any final remarks.

Lois Zabrocky: We just want to thank everyone for joining us for really an eighth quarter of really strong returns to shareholders and we're looking forward to getting back together next quarter. So thank you very much. Enjoy the summer.

Operator: That does conclude today's conference call. Thank you for joining. You may now disconnect from the call.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.