International Seaways, Inc., one of the largest tanker companies worldwide providing energy transportation services for crude oil and petroleum products in International Flag markets, today reported results for the fourth quarter and full year 2019.

Highlights

Net income for the fourth quarter was $15.9 million, or $0.54 per share, compared to a net income of $7.0 million, or $0.24 per share, in the fourth quarter of 2018. Net income for the quarter reflects the impact of a $3.0 million cash gain on sale of the LNG joint venture with Qatar Gas Transport Company Ltd. (Nakilat), offset by the release of the Companys share of the unrealized losses associated with the interest rate swaps held by the LNG JV of $21.6 million into earnings from accumulated other comprehensive loss, a $0.3 million loss on sale of vessels, a $3.2 million write-off of deferred financing costs, and a $1.0 million loss from the extinguishment of debt. Net income excluding these items was $39.0 million, or $1.32 per share.
Time charter equivalent (TCE) revenues (A) for the fourth quarter were $117.6 million, compared to $93.0 million in the fourth quarter of 2018.
Adjusted EBITDA (B) for the fourth quarter was $72.2 million, compared to $46.2 million in the same period of 2018.
Cash (C) was $150.2 million as of December 30, 2019; total liquidity was $200.2 million, including $50.0 million undrawn revolver, compared to cash of $117.6 million and total liquidity of $167.6 million as of December 31, 2018.
Sold its 49.9% ownership interest in the LNG joint venture for $123 million in cash in October.
Made a prepayment of $100 million in October on the 2017 Term Loan Facility.
Agreed to purchase a 2009-built LR1, the Seaways Guayaquil, which delivered in February.
Sold a 2002-built Aframax, the Seaways Portland, and agreed to sell a 2001-built Aframax, Seaways Fran.
Subsequent to the end of the quarter, closed on new senior secured credit facilities aggregating $390 million, with proceeds used to refinance $383 million existing high-cost secured and unsecured debt of the Company and its subsidiaries.
Instituted a program of returning cash to shareholders, including a fixed, quarterly dividend of $0.06 per share to complement our existing $30 million share repurchase program.

“During 2019, we unlocked significant value for shareholders by monetizing our non-core investment in the LNG joint venture and allocating capital to further reduce our leverage and significantly lower our cost of capital,” said Lois K. Zabrocky, International Seaways President and CEO. “This success, together with our recently completed refinancing, transformed our capital structure and enabled us to maintain one of the lowest leverage profiles in the public company shipping sector, with our net loan to asset value of our conventional tanker fleet at 41%. The new credit facilities will reduce annual interest expense by approximately $15 million, by lowering our average interest rates on the refinanced portion of our debt by 350 basis points (or 3.5%), and our overall average interest rates by 200 basis points (or 2.0%). Our significant operating leverage and earnings power were also evident in 2019, as we capitalized on the strong market in the fourth quarter, returning to profitability and ending the year with over $200 million in total liquidity. While rates in the first quarter have come off of recent highs, primarily due to concerns around the impact of the coronavirus (COVID-19), we expect overall tanker fundamentals to remain positive and supportive of a strengthening market once the virus is contained.”

Ms. Zabrocky continued, “We have successfully completed our refinancing, delevered by paying down $110 million of our debt, and renewed our fleet without issuing equity during the lower portion of the cycle over the last three years. As a result of these steps, and taking into consideration our strong liquidity position and compelling long-term prospects, we are pleased to establish a program to begin to return capital to shareholders as part of our broader capital allocation strategy. This will initially consist of a fixed, quarterly dividend of $0.06 per share which provides us flexibility to allocate capital to best serve shareholders during a time when we have the ability to act on our $30 million share repurchase program.”

Jeff Pribor, the Companys CFO, added, “Proceeds from our new senior secured credit facilities, which closed in January 2020, allowed us to refinance high-cost debt, improving our capital structure for the future. In addition to eliminating restrictions that limited our ability to return capital to shareholders, the refinancing is expected to reduce our annual interest expense by approximately $15 million and enable us to maintain low cash break evens. We are proud to have collaborated with our leading banking group and Sustainalytics, a leading firm in ESG and corporate governance research, to become the first NYSE-listed ship owner and operator to include a sustainability-linked pricing mechanism in our new credit facilities. This groundbreaking sustainability feature is consistent with INSWs commitment to environmental initiatives and improving our ESG footprint.”

Fourth Quarter 2019 Results

Net income for the fourth quarter of 2019 was $15.9 million, or $0.54 per diluted share, compared to a net income of $7.0 million, or $0.24 per diluted share, in the fourth quarter of 2018. The increase in the fourth quarter of 2019 primarily reflects higher TCE revenues. These positive factors were partially offset by a decrease in equity in income of affiliated companies principally attributable to the Companys sale of its 49.9% ownership interest in the LNG joint venture with Qatar Gas Transport Company Ltd. (Nakilat) (“Nakilat”) to Nakilat on October 7, 2019. The Company received proceeds of $123 million on this sale, excluding fees and expenses. The Company recorded a cash gain on the sale of $3.0 million and reclassified the Companys share of the unrealized losses associated with the interest rate swaps held by the LNG joint venture of $21.6 million into earnings from accumulated other comprehensive loss, which was a noncash charge.

Consolidated TCE revenues for the fourth quarter of 2019 were $117.6 million, compared to $93.0 million in the fourth quarter of 2018. Shipping revenues for the fourth quarter of 2019 were $124.0 million, compared to $100.6 million in the fourth quarter of 2018. Strong TCE rates in the fourth quarter of 2019 were driven by increasing crude oil demand on the back of improving trade conditions and the end of a prolonged period of refinery maintenance ahead of IMO 2020, as well as external geopolitical factors including U.S. sanctions imposed on certain entities owned by China Ocean Shipping Company (“COSCO”) due to alleged trading with Iran and the drone attack on a Saudi Arabian crude oil processing plant at Abqaiq.

Adjusted EBITDA was $72.2 million for the quarter, compared to $46.2 million in the fourth quarter of 2018.

Crude Tankers

TCE revenues for the Crude Tankers segment were $92.5 million for the quarter compared to $71.6 million in the fourth quarter of 2018. This increase primarily resulted from the impact of higher average rates in the VLCC, Suezmax, Aframax and Panamax sectors, with average spot rates climbing to approximately $54,100, $50,900, $31,300 and $29,100 per day, respectively, aggregating approximately $32.8 million. Partially offsetting the TCE revenue increase was the impact of a 325-day decrease in VLCC and Aframax revenue days aggregating $8.5 million, and a $3.9 million decrease in revenue from our Crude Tankers Lightering business during the current period Shipping revenues for the Crude Tankers segment were $98.6 million for the fourth quarter of 2019 compared to $79.0 million in the fourth quarter of 2018.

Product Carriers

TCE revenues for the Product Tankers segment were $25.1 million for the quarter, compared to $21.5 million in the fourth quarter of 2018. This increase primarily resulted from the impact of higher average daily blended rates earned by the LR1, LR2 and MR fleets, with average spot rates rising to approximately $28,700, $23,200 and $14,000 per day, respectively, increasing TCE revenues by approximately $5.0 million in the aggregate compared to the fourth quarter of 2018. This was partially offset by a $1.4 million decline in TCE revenue arising from the net impact of a 442-day decrease in MR revenue days resulting from vessel sales and a 180-day increase in LR1 revenue days primarily driven by the commencements of a six-month time charter-in of a 2010-built LR1 in May 2019 and a two-year time charter-in of a 2006-built LR1 in August 2019. Shipping revenues for the Product Carriers segment were $25.3 million for the fourth quarter of 2019, compared to $21.6 million in the fourth quarter of 2018.

Full Year 2019 Results

Net loss for the full year ended December 31, 2019 was $0.8 million, or $0.03 per diluted share, compared with net loss of $88.9 million, or $3.05 per diluted share, for the full year 2018. During 2019, income from vessel operations increased by $109.7 million to $55.2 million from a loss of $54.5 million in 2018. This improvement resulted primarily from increased TCE revenues, decreased vessel expenses due to the sale of a number of older vessels during 2018 and 2019 and lower losses on the disposal of vessels and other property, offset partially by increased charter hire expense. In addition, there was a year-over-year decrease in equity in income of affiliated companies of $18.2 million and an increase in interest expense of $6.0 million.

Consolidated TCE revenues for the full year ended December 31, 2019 were $339.9 million, compared to $243.1 million for full year 2018. Shipping revenues for the full year ended December 31, 2019 were $366.2 million compared to $270.4 million for the prior full year.

The reduction in equity in income of affiliated companies was principally attributable to the Companys sale of its interest in the LNG joint venture, as discussed above.

The increase in interest expense was primarily attributable to interest expense incurred on the debt facilities that the Company entered into during the second quarter of 2018 in connection with the completion of its acquisition of six VLCCs. Partially offsetting this was a decrease related to the 2017 Term Loan Facility due to a $10 million prepayment made in July 2019 and a $100 million prepayment made in October 2019, both using restricted cash set aside from the proceeds of vessel sales and a portion of the proceeds from the sale of the Companys equity interest in the LNG Joint Venture and lower average LIBOR rates during the 2019 periods compared with the comparable periods in 2018.

Adjusted EBITDA was $164.7 million for the full year 2019, compared to $68.3 million for the full year 2018.

Crude Tankers

TCE revenues for the Crude Tankers segment were $259.5 million for the full year 2019, compared to $175.5 million for the full year 2018. This increase resulted primarily from the impact of significantly higher average blended rates in the VLCC, Suezmax, Aframax and Panamax sectors, with average spot rates increasing to approximately $31,700, $29,800, $20,000 and $16,300, respectively, aggregating approximately $77.1 million. Further contributing to the increase was the impact of a 259-day increase in VLCC revenue days, aggregating $4.7 million, and a $13.7 million increase in revenue in the Lightering business during the current year, which reflects in part the re-deployment of the Companys 2002-built Aframax into the Lightering business. The net increase in VLCC days was the result of the acquisitions of one 2015-built and five 2016-built VLCCs which were delivered to the Company in June 2018, partially offset by the disposals of one 2000-built and one 2001-built VLCC in 2018, and 294 more drydock, repair and other off-hire days in 2019. Partially offsetting the revenue increases was a 961-day decrease in revenue days for the Aframax and Panamax sectors, which accounted for a revenue decrease of approximately $11.5 million, and was driven primarily by the sale of two 2001-built Aframaxes and a 2002-built Panamax between May and October 2018, along with the re-deployment of the Companys 2002-built Aframax into the Lightering business noted above. The increase in revenue in the Lightering business in 2019 compared to 2018 was substantially offset by an increase in spot and short-term time chartered-in vessels in the Lightering business to support an anticipated increase in full service lightering activity.

Shipping revenues for the Crude Tankers segment were $285.4 million for the full year 2019, compared to $202.4 million for the full year 2018.

Product Carriers

TCE revenues for the Product Carriers segment were $80.4 million for the full year 2019, compared to $67.6 million for the full year 2018. This increase was primarily attributable to higher average daily blended rates earned by the MR, LR1 and LR2 fleets in 2019, with average spot rates increasing to approximately $12,600, $21,500 and $20,200, respectively, aggregating approximately $22.6 million. This was partially offset by a 1,242-day decrease in segment revenue days, which reflected the impact of (i) a 1,585-day decrease in MR revenue days in the current period, resulting primarily from the sales of seven MRs between the first quarter of 2018 and the third quarter of 2019, and the redeliveries of one time chartered-in MR during the third quarter of 2019 and two bareboat chartered-in MRs during the second quarter of 2018, partially offset by (ii) a 367-day increase in LR1 revenue days in the current year primarily due to the commencement of a six-month time charter-in of a 2010-built LR1 in May 2019 and a two-year time charter-in of a 2006-built LR1 in August 2019.

Shipping revenues for the Product Carriers segment were $80.8 million for the full year 2019, compared to $68.0 million for the full year 2018.

Vessel Acquisitions and Sales

During the quarter, the Company acquired a 2009-built LR1, the Seaways Guayaquil, which was delivered in February 2020.

Additionally, the Company sold a 2002-built Aframax, which delivered to its buyer in January, and a 2001-built Aframax for delivery to buyer sometime before April 2020.

Refinancing and Closing of New Senior Secured Credit Facilities

In January, the Company closed on senior secured credit facilities (the “Facilities”), in an aggregate principal amount of $390 million. The Facilities consists of a 5-year $300 million senior secured term loan facility (the “Core Term Loan Facility”), a 5-year $40 million revolving credit facility (the “Core Revolving Facility”), of which $20 million has been drawn, and a 2.5-year $50 million senior secured term loan credit facility (the “Transition Facility”).

The proceeds from the Facilities were used to refinance $383 million existing high-cost secured and unsecured debt of the Company and its subsidiaries. This included repaying the Companys 2017 Term Loan Facility and its senior secured credit agreement with ABN AMRO and repurchasing the Companys outstanding 10.75% subordinated notes.

Borrowings under the Core Term Loan Facility and the Core Revolving Facility initially bear interest at LIBOR plus 2.60%, while borrowings under the Transition Facility bear interest at LIBOR plus 3.50%. The margin on the Core Facilities may adjust by 0.20%, based on whether the Company meets certain leverage ratios. The Company currently anticipates the margin on these facilities will decrease to 2.40% by the third quarter of 2020.

The 2020 Debt Facilities will reduce annual interest expense by approximately $15 million by lowering the Companys average interest rates on the refinanced portion of the debt by 3.5% and the overall average interest rates by 2%.

In addition, the Core Facilities include a sustainability-linked pricing mechanism, which is the first of its kind for a NYSE-listed ship owner and operator, which has been certified by an independent, leading firm in ESG and corporate governance research as meeting sustainability-linked loan principles. The adjustment in pricing is linked to the carbon efficiency of the INSW fleet as it relates to reductions in CO2 emissions year-over-year, such that it aligns with the International Maritime Organizations 50% industry reduction target in GHG emissions by 2050. This key performance indicator is calculated in a manner consistent with the de-carbonization trajectory outlined in the Poseidon Principles, the global framework by which financial institutions can assess the climate alignment of their ship finance portfolios.

Declaration of Dividend

The Company has declared a quarterly cash dividend of $0.06 per share of common stock. The dividend will be payable March 30, 2020 to shareholders of record at the close of business on March 17, 2020.
Source: International Seaways