International Seaways, Inc., one of the largest tanker companies worldwide providing energy transportation services for crude oil and petroleum products, today reported results for the second quarter of 2022.
HIGHLIGHTS & RECENT DEVELOPMENTS
• Net income for the second quarter was $69.0 million, or $1.38 per diluted share, compared to a net loss of $18.8 million, or $0.67 per diluted share, in the second quarter of 2021. Net income for the second quarter of 2022 excluding one-time items (described below) was $71.5 million, or $1.43 per diluted share.
• Adjusted EBITDA(A) for second quarter was approximately $111.7 million.
• Cash(B) was $231.7 million as of June 30, 2022; total liquidity was $451.7 million, including $220.0 million of undrawn revolver capacity.
• Balance Sheet Enhancements
o Executed sale for $140 million in net cash proceeds from the Company’s 50% interest in an FSO joint venture.
o Consolidated senior secured debt into a new single facility with an aggregate capacity of $750 million, composed of a $530 million term loan and a $220 million revolving credit facility. The facility has sustainability-linked features, which today compose of 58% of the Company’s total debt portfolio.
o Repaid $70 million total outstanding under the revolving credit facility. The Company has $220 million of undrawn capacity.
o Repaid the total $25 million outstanding balance of the 8.5% senior notes due June 2023 on August 5, 2022.
o Refinanced two MRs through sale and leaseback arrangement with Japanese leasing companies, which resulted in net proceeds of approximately $15 million.
o Returns to Shareholders:
o Doubled the regular quarterly cash dividend to $0.12 per share, which was paid in June 2022, representing the tenth consecutive quarter of quarterly dividends
o Returned to shareholders a cumulative $103.4 million since the start of 2020.
o Extended share buyback program to the end of 2023 and increased authorization to $60 million
• Fleet Optimization Program:
o Sold all four remaining Handysize vessels, built in 2006, which generated net proceeds of approximately $30 million in aggregate, after debt repayment. Also sold a 2008-built MR vessel, resulting in net proceeds of approximately $10 million, after debt repayment and savings on upcoming third special survey and ballast water treatment installation costs estimated at approximately $3 million.
o Sold for recycling its two remaining Panamax vessels with an average age of 19 years to capitalize on historically high recycle values. Net proceeds from the unencumbered vessels were about $14 million. All recycling was conducted in accordance with the Hong Kong Convention.
During the second quarter, we demonstrated Seaways’ significant operating leverage and earnings power,” said Lois K. Zabrocky, International Seaways’ President and CEO. “We capitalized on oil markets that were the strongest we’ve seen since before the pandemic based on strong demand, supply constraints and depleted inventories as the world grapples with energy security. Refined product oil demand, particularly gasoline and middle distillates has outpaced supply even as refinery utilization is well above pre-pandemic levels.”
Ms. Zabrocky added, “After a little more than a year since our transformational merger that tripled our fleet size and diversified our tanker portfolio with the addition of over 40 product carriers, Seaways is well positioned for the strong underlying fundamentals that we expect to firm the tanker markets over the next few years. We expect continued growing demand, limited fleet growth and higher utilization from the longer distances between oil supply sources and demand destinations. Amidst the strengthening market, we took decisive steps in the second quarter to further advance Seaways’ industry position, while unlocking value for shareholders, enhancing our financial strength, and capitalizing on our increased scale. Doubling our quarterly dividend to $0.12 per share is an important milestone and reflects our prioritization of enhancing returns to shareholders, which have totaled over $100 million since the beginning of 2020.”
Jeff Pribor, the Company’s CFO stated, “During the quarter we successfully unlocked the value of the FSO joint venture, receiving approximately $140 million in cash, closed on a new credit facility that extended our maturities and repaid our revolver to be fully undrawn at $220 million of capacity. As a result of these initiatives and our cash flow generation, we grew our total liquidity at quarter’s end to over $450 million and improved our net loan to value to 37%. With our substantial liquidity and $60 million outstanding on our share repurchase authorization, we remain focused on building upon our track record of returning capital to shareholders while taking advantage of accretive opportunities to create enduring value.”
SECOND QUARTER 2022 RESULTS
Net income for the second quarter of 2022 was $69.0 million, or $1.38 per diluted share, compared to a net loss of $18.8 million, or $0.67 per diluted share, for the second quarter of 2021. The reported net income for the second quarter of 2022 includes the impact of one-time items, consisting of the gain on disposal of vessels, net of impairments, loss on sale of investments in affiliated companies, debt modification expenses and write-off of deferred financing costs, which aggregated to $2.4 million. Excluding these items, net income for the second quarter of 2022 was $71.5 million, or $1.43 per diluted share. The increase in the second quarter of 2022 reflects substantially higher TCE revenues and a significant increase in revenue days as a result of the merger that were partially offset by higher operating expenses (vessel expenses, depreciation and amortization, general and administrative expenses) and interest expense, reflecting the merger that closed in the third quarter of 2021.
Consolidated TCE revenues(C) for the second quarter were $185.5 million, compared to $44.7 million for the second quarter of 2021. This increase in TCE revenue reflects an increase of over 3,800 revenue days of the significantly larger post-merger fleet. Shipping revenues for the second quarter were $188.2 million, compared to $46.3 million for the second quarter of 2021.
Adjusted EBITDA(A) for the second quarter was $111.7 million, compared to $9.8 million for the second quarter of 2021.
Crude Tankers
TCE revenues for the Crude Tankers segment were $59.5 million for the second quarter, compared to $31.1 million for the second quarter of 2021. This increase was primarily attributable to an increase in spot rates as the average spot earnings of the VLCC, Suezmax and Aframax sectors were $16,400, $23,700 and $34,100 per day, respectively, compared with $13,700, $18,500 and $8,600 per day, respectively, during the second quarter of 2021. Additionally, there was an increase of approximately 475 revenue days as a result of changes in fleet composition resulting from the merger and our fleet optimization program. Shipping revenues for the Crude Tankers segment were $62.1 million for the second quarter of 2022, compared to $32.5 million for the second quarter of 2021.
Product Carriers
TCE revenues for the Product Carriers segment were $126.1 million for the second quarter, compared to $13.6 million for the second quarter of 2021. This significant increase is attributable substantially higher spot rates with average spot earnings for the LR1 and MR sectors of $25,900 and $30,400 per day, respectively, in the second quarter of 2022 compared with $15,300 and $10,600 per day, respectively, in the second quarter of 2021. Additionally, an increase of about 3,400 revenue days as a result of the merger contributed to higher revenues. Shipping revenues for the Product Carriers segment were $126.1 million for the second quarter, compared to $13.8 million for the second quarter of 2021.
FIRST HALF 2022 RESULTS
Net income for the first half of 2022 was $56.0 million, or $1.12 per diluted share, compared to a net loss of $32.1 million, or $1.15 per diluted share, for the first half of 2021.
Consolidated TCE revenues for the first half of 2022 were $283.5 million, compared to $89.9 million for the first half of 2021. Shipping revenues for the first half of 2022 were $289.7 million, compared to $93.1 million for the first half of 2021.
Adjusted EBITDA for the first half of 2022 was $137.7 million, compared to $20.5 million for the first half of 2021.
Crude Tankers
TCE revenues for the Crude Tankers segment were $95.9 million for the first half of 2022, compared to $67.0 million for the first half of 2021. Shipping revenues for the Crude Tankers segment were $101.7 million for the first half of 2022, compared to $70.1 million for the first half of 2021.
Product Carriers
TCE revenues for the Product Carriers segment were $187.6 million for the first half of 2022 compared to $22.8 million for the first half of 2021. Shipping revenues for the Product Carriers segment were $188.0 million for the first half of 2022, compared to $23.0 million for the first half of 2021.
SALE OF FSO JOINT VENTURE
In June 2022, the Company sold its 50% stake in two floating storage and offshore (“FSO”) vessels to its joint venture partner. The Company received proceeds, net of adjustments for working capital and expenses, of $140 million.
SENIOR SECURED DEBT REFINANCING
In May 2022, the Company executed a new five-year senior secured credit facility (the “$750m Facility”) with an aggregate capacity of $750 million, composed of a term loan of $530 million and a revolving credit facility of $220 million. The proceeds from the $750m Facility, which included a draw on the revolving credit facility of $70 million, were used to repay three existing facilities aggregating approximately $575 million at the time of closing. The $750m Facility, which was nearly two times oversubscribed, achieved the Company’s goals to extend debt maturities, reduce the average margin and lower scheduled quarterly principal amortization.
Under the terms of the $750m Facility, interest bears at a rate of SOFR plus a margin of 240 basis points (“bps”), representing a savings of approximately 15 bps from the average of the prior facilities. Scheduled quarterly principal payments are $30.6 million, which saves the Company approximately $4 million per annum and the first repayment is due in November 2022, corresponding to additional cash savings of approximately $60 million in 2022.
The covenant structure of the $750m Facility is similar to the prior facilities with enhanced sustainability-linked features, which may impact the margin by five bps. The sustainability targets are measured in three categories: reductions in carbon emissions outlined in the Poseidon Principles, a target of $3 million for annual spending on energy efficiency improvements, decarbonization and other environmental related initiatives, and a safety target measured in Lost Time Incident Frequency performance against an average published by Intertanko.
SALE AND LEASEBACK TRANSACTIONS
During the second quarter of 2022, the Company entered eight-year lease financing arrangements for the sale and leaseback of two 2010-built MRs. The transactions generated net proceeds of $15.4 million net of debt repayment.
REDEMPTION OF 8.5% SENIOR NOTES
On August 5, 2022, the Company redeemed the $25 million aggregate principal outstanding of the 8.5% senior notes due June 2023.
VESSEL SALES AND RECYCLING
During the first half of 2022, the Company sold two Panamaxes, built between 2002 and 2004, which delivered to the buyers in April 2022 for recycling compliant with the Hong Kong Convention. The Company received proceeds of approximately $13.9 million of which $10.2 million was received prior to the end of the first quarter.
During the second quarter of 2022, the Company sold all four of its remaining Handysize vessels, generating proceeds, net of debt repayment, of approximately $30.0 million. The Company also sold a 2008-built MR in the second quarter, receiving proceeds, net of debt repayment, of approximately $10.0 million.
RETURNING CASH TO SHAREHOLDERS
During the second quarter, the Company increased its dividend from $0.06 per share to $0.12 per share. On June 29, 2022, the Company paid approximately $6.0 million in dividends.
The Company’s Board of Directors declared a regular quarterly dividend of $0.12 per share of common stock on August 4, 2022. The dividend will be paid on September 28, 2022 to shareholders with a record date at the close of business on September 14, 2022.
The Company’s Board of Directors authorized an upsize of the share repurchase program to $60 million from $33 million and extended the expiration of the program to the end of 2023.
Spot and Fixed TCE Rates Achieved and Revenue Days
The following tables provides a breakdown of TCE rates achieved for spot and fixed charters and the related revenue days for the three months ended June 30, 2022 and the comparable period of 2021. Revenue days in the quarter ended June 30, 2022 totaled 6,688 compared with 2,846 in the prior year quarter. A summary fleet list by vessel class can be found later in this press release. The information in these tables excludes commercial pool fees/commissions averaging approximately $643 and $641 per day for the three months ended June 30, 2022 and 2021, respectively.
Revenue days in the above tables exclude days related to full service lighterings and days for which recoveries were recorded under the Company’s loss of hire insurance policies.
During the 2022 and 2021 periods, each of the Company’s LR1s participated in the Panamax International Pool and transported crude oil cargoes exclusively.
Fleet Information
As of June 30, 2022, INSW’s fleet totaled 78 vessels, including three newbuilds and 75 operating vessels, of which 62 were owned and 16 were chartered in.
Reconciliation to Non-GAAP Financial Information
The Company believes that, in addition to conventional measures prepared in accordance with GAAP, the following non-GAAP measures may provide certain investors with additional information that will better enable them to evaluate the Company’s performance. Accordingly, these non-GAAP measures are intended to provide supplemental information, and should not be considered in isolation or as a substitute for measures of performance prepared with GAAP.
Source: International Seaways