Good day, and welcome to the International Seaways Second Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to James Small, General Counsel. Sir, please go ahead.

Thank you. Good morning, everyone, and welcome to International Seaways earnings release conference call for the second quarter of 2017. Before we begin, I would like to start off by advising everyone on the call with us today of the following. During this conference call, International Seaways management may make forward-looking statements regarding the company or the industry in which it operates, which could include, without limitation, statements about the outlook for the crude tanker and product carrier markets; changing oil trading patterns; forecast of world and regional economic activity; forecast of demand for and production of oil and petroleum products; International Seaways' strategy; expectations regarding revenues and expenses, including both vessel expenses and G&A expenses; estimated bookings and TCE rates for the third quarter of 2017, the second half of 2017 and other periods; estimated capital expenditures for 2017 and other periods; projected scheduled drydock and off-hire days; International Seaways' consideration of strategic alternatives and its ability to achieve its financing and other objectives; and economic, political and regulatory developments around the world. Any such forward-looking statements take into account various assumptions made by management based on various factors, including its experience and perception of historical trends, current conditions, expected and future developments and other factors management believes are appropriate to consider in the circumstances. Forward-looking statements are subject to a number of risks, uncertainties and assumptions, many of which are beyond the company's control, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. Factors, risks and uncertainties that could cause International Seaways' actual results to differ from expectations include those described in its annual report on Form 10-K for 2016, its quarterly report on Form 10-Q for the second quarter of 2017 and in other filings that we have made or in the future may make with the U.S. Securities and Exchange Commission. With that out of the way, I would like to turn the call over to our President and Chief Executive Officer, Ms. Lois Zabrocky. Lois?

Thank you, James. Good morning, everyone. Thank you for joining International Seaways earnings call to discuss our second quarter 2017 results. During the second quarter, we enhanced our financial flexibility, executed on our fleet growth and renewal strategy and increased our contracted cash flows. We completed a $550 million refinancing in the quarter, which was upsized to $600 million in July. This successful refinancing was completed on attractive terms and reflects the strong support we've received from debt investors. In addition to extending our debt maturity, the $600 million refinancing enhances our ability to take advantage of compelling opportunity for shareholders. In June, we capitalized on asset values at a low point in the cycle, acquiring 2 high-quality Korean-built Suezmaxes at attractive prices. Upon delivery in July, the 159,000 deadweight Seaways Hatteras and Seaways Montauk commenced trading in a leading Suezmax pool. Consistent with the acquisition of these vessels, we intend to maintain a disciplined approach to capital allocation, as we seek opportunities to continue to take advantage of our strong balance sheet and attractive asset value to further grow and modernize our fleet. During the quarter, we also entered into an agreement to sell a 2001-built MR, which is expected to be delivered to buyers within August. We expect to recognize a gain on this transaction in the third quarter. We also increased our contracted cash flows in the quarter with the execution of 2 5-year contracts for our FSO joint venture with Euronav. The contracts are with North Oil Company, the operator of the Al Shaheen oilfield, whose shareholders are Total Limited and Qatar Petroleum oil and gas. These contracts for the FSO Africa and the FSO Asia commenced in the third quarter upon expiry of the current contract. Based on our 50% ownership in the joint venture,…

Thanks, Lois, and good morning, everyone. Let's move directly to reviewing the second quarter results in more detail. And if you can please turn to Slide 9. Consolidated TCE revenues for the second quarter of 2017 were $69.3 million compared to $101 million in the second quarter of 2016. The decrease was principally driven by lower daily rates this quarter compared to Q2 last year. I'll now discuss results by business segment, beginning with the crude tanker segment. TCE revenues for the crude tanker segment were $45.7 million for the quarter compared to $66.5 million in the second quarter of 2016. This decrease was primarily due to significantly lower average blended rates in the VLCC, Aframax and Panamax sectors, with spot rates declining to $26,700, $13,000 and $12,300 per day, respectively; and fewer revenue days in the Panamax sector resulting from an increase in drydock days. Increased activity levels in the crude tanker lightering business partially offset the declines in revenue. As we discussed on the last call, with crude being exported from the U.S. Gulf, we continue to see a significant increase in full-service lightering in our lightering business as Aframax vessels are used to transfer crude to VLCCs that can't gain access to U.S. Gulf ports. In the third quarter, we booked 52% of the available VLCC spot days at an average of approximately $19,000 per day; 45% of the available Suezmax spot days at an average of approximately $14,000 per day; 53% of the available Aframax/LR2 spot days at an average of approximately $11,000 per day; and finally, 43% of the available Panamax spot days at an average of approximately $11,000 per day. TCE revenues for the product carrier segment were $23.5 million for the quarter compared to $34.4 million in the second quarter of 2016. This…

Thank you very much, Jeff. Please turn to the summary slide, Page 16. During the second quarter, we strengthened our financial position through our successful $600 million refinancing and the completion of 5-year extensions on the company's FSO joint venture contracts. The 2 contracts which significantly increase our contracted cash flows will enable International Seaways to generate in excess of $180 million over the fixed 5-year term. We also added to our quality fleet, which continues to have a balanced mix of contracted cash flows and spot market upside aimed at optimizing revenues. We executed our fleet growth and renewal strategy during the quarter with the attractive acquisition of 2 Suezmax tanker newbuildings and the agreement to opportunistically sell a 2001-built MR. Our lean and scalable model also continues to serve us well during the quarter, allowing the company to effectively navigate the current tanker cycle while maintaining significant operating leverage to take advantage of a market recovery. Our focus remains on meeting the highest operational standards for customers and partners and benefiting from our low-cost model. Consistent with our acquisition during the quarter, we are driven by a disciplined and balanced capital allocation strategy and remain well positioned to capitalize on attractive asset values to grow our diversified fleet. Complementing this approach, we also intend to opportunistically execute against our share repurchase plan, which was authorized by the board in the first quarter. We will now open up the call to questions. Operator?

[Operator Instructions] And our first question comes from Noah Parquette with JPMorgan.

I just wanted to get a sense. As you guys pursued the fleet renewal strategy, is there -- as you look across your fleet, is there any particular segment that you think is more urgently in need of it? Or is it really just a function of the deal at the time and its attractiveness?

Yes. Great to hear from you. So we believe that it's great to remain diversified. And in the quarter, we renewed 4 of our MR time charters for 1 option, 1 year as well as acting on the 2 Suezmaxes resales opportunistically. So across our fleet, we do have more MRs than we do on any one particular crude sector. We feel that the Suezmaxes, the fundamentals will recover well in tandem with the VLCCs and that they have a diversified route.

Okay. And then I just wanted to ask -- within your lightering business and with the increase in crude exports out of the U.S., can you give a sense on how more inefficient it is for those VLCCs to load that way versus a terminal, given how ubiquitous it's been?

I mean, in essence --I mean, if you assume that a V can load up within 24 hours, if you're going to do a lightering, it's going to take 4 Aframaxes to come alongside and to do that. So I think it all depends on where you're doing the lightering and how smooth that transition is. But beyond that, I wouldn't speculate. Noah, I might get some more background information for you on that if you follow up with it.

Our next question comes from Magnus Fyhr with Seaport Global.

Just a question -- follow-up on Noah's question on the lightering business. I mean your position, both ways, on the VLCCs and also through your lightering business -- I mean, with this recent developments of potential port expansions to accommodate VLCCs, how do you view expanding your lightering business short term versus potentially long term that could be a declining business?

It's interesting. Everybody thought lightering would be a declining business before as well, right? So what's important to keep in mind is that we operate on the West Coast, Panama, Bahamas and the U.S. Gulf. We do service only as well as full-service lightering and we do lightening and -- from the Vs to the Afras and from the Afras to the Vs. So overall, you might be talking about LOOP exports, which they think could happen at the second half of 2018. I still think that you will see a healthy base of lightering.

Right. And it's not like these assets are just -- if it would potentially decline long term, you can move those assets elsewhere. And I guess the capital's not that big to that business, correct?

That is correct. In fact, we operate our lightering in a very asset-light manner. And we charter workboats, but we do not own the workboats. We own basically the fenders and the hoses and the equipment.

Okay, great. Just switching gears to capital allocation going forward. I mean you guys have done a good job here in refinancing your debt. You secured some long-term contracts. With a currency that's very strong, are you guys ready to start playing offense now? I know you made a couple of acquisitions, but how's your view on buying individual assets versus fleets?

So for us, we feel it's still a very good time with asset values. Depressed -- markets are depressed, so that gives us time to carefully look at which sectors we want to move on, and we think it's critically important to continue to do ones and twos while -- in the meantime. We do always look at fleet purchases, M&As, but that's something that your execution is not always a given and you can't control everything. Jeff?

And how -- have you seen much changes in the [ S&P ] market? I'm sure the high-quality assets are -- you bought some high-quality Suezmaxes, but are there opportunities for more acquisitions like that? And what are the motivations by the sellers?

You do find opportunities. It is not -- for the modern second-hand tonnage, there isn't plethora a of vessels out there, but you do find opportunities. And when you find those, there are other owners looking at -- inspecting those vessels. And of course, the motivation of the sellers is always opportunistic. I mean, the tanker market, you're seeing low rates now, but you have not seen these low rates for a long period of time.

Okay, great. Just a final question on your chartered-in fleet. I mean, it's been pretty static, and I guess these MRs are rolling off next year. How do you view that business as an opportunity to expand your leverage? Or should we -- how should we view your chartered-in fleet going forward?

What we mentioned there is that we renewed 4 MRs for -- that were about to expire in the middle of 2017 for one option, one year. So if we choose, we can control those vessels until mid-2019. So we do still feel that the MR market will show recovery potentially before the [ cruise ], and we want to stay involved in that sector.

[Operator Instructions] And our next question comes from John Gandolfo with Clarksons.

Just had a follow-up. Basically, how are you looking now towards financing any incremental growth? I mean, more specifically, with the FSO contracts now secured and the assets expected to be debt-free by the close of the next quarter, do you and your JV partners see an opportunity to relever the assets and effectively monetize the contracts now?

John, it's Jeff. So in general, we expect to finance growth by continued cash flow from our low breakeven by -- so number one, by selectively [ moving ] sales of the older vessels, like you saw us mention on the call today, there's more opportunity for that; and other sources that could be opportunistic based on the markets. But we will examine the -- you're absolutely right that the FSO is now debt-free, so that's a theoretical option, certainly one that, along with our partner, we will study. But I can't give you any sense right now that there's a definite refinancing plan. It's just something that we will examine our options on. So clearly, we'll look at it.

Got it. And just one last question. Basically, with all disruptions and mysteries around Qatar, have you seen any effects on your JVs with that?

Yes. This is Lois. We have not seen any effects on the joint ventures, and everything continues to operate smoothly on both the FSOs and the LNG.

And there are no further questions, so this concludes our question-and-answer session for today. This also concludes our conference for today. Thank you for attending today's presentation, and you may now disconnect.