Good day, and welcome to the International Seaways Third 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, Chief Administrative Officer. Please go ahead.

Thank you. Good morning, everyone, and welcome to International Seaways Earnings Release Conference Call for the Third Quarter 2017. Before we begin, I would like to start off by advising everyone on the call with us today of the following. During this call, International Seaways management may make forward-looking statements regarding the company or the industry in which it operates, which could include 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; the company's strategy; expectation regarding revenues and expenses, including both vessel expenses and G&A; estimated bookings and TCE rates for the fourth quarter of 2017, other periods in 2017 and periods in 2018; estimated capital expenditures for such periods; projected scheduled dry-dock and off-hire days; the company's consideration of strategic alternatives and its ability to achieve its financing and other objectives. Any such forward-looking statements take into account various assumptions the management makes based on various factors, including its experience and perceptions of historical trends, current conditions, expected and future developments, and other factors management believes are appropriate to consider in the circumstances. Such 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 those 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 third quarter of 2017, and in other filings that we have made or may in the future 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 very much, James. Good morning, everyone. Thank you for joining International Seaways' earnings call to discuss our third quarter 2017 results. Please turn to Slide 4 in your deck. During the third quarter, we made substantial progress implementing our disciplined capital allocation strategy, which is focused both on renewing and growing our fleet and opportunistically repurchasing shares. We also took steps to maintain our sizable contracted cash flows as we continue to operate through a challenging tanker market. In terms of fleet growth, we invested $169 million, capitalizing on the attractive asset values at the bottom of the cycle. We took delivery of the Seaways Hatteras and the Seaways Montauk, 2 Suezmax newbuilding resales that we agreed to acquire in the second quarter and which are currently trading in the Blue Fin pool. Subsequent to the quarter's end, we entered into an agreement to acquire the Seaways Raffles, a 2010-built Hyundai VLCC, which delivered to us earlier this week. The acquisition of these 3 ships adds to our sizable and diversified suite and demonstrates our commitment to growing and enhancing our fleet ahead of a market recovery. The Seaways Raffles was financed with existing company liquidity, consisting of a partial draw on our revolver and cash on hand. We expect to continue to utilize our financial strengths to capitalize on further opportunity. During the quarter, we also divested select older assets. In addition to selling the Overseas Petromar, a 2001-built MR, which delivered to buyers in August and on which we recognized a gain on sale of $1.9 million in the quarter, we entered into agreements to sell a 2004-built MR and a 2002-built MR. The first of these 2 ships, the Seaways Andromar, delivered this morning to new buyers. The second vessel will deliver in the first…

Okay. Thank you, Lois, and good morning, everyone. Let's move directly to reviewing the third quarter results in more detail, starting with Slide 9. Consolidated TCE revenues for the third quarter of 2017 were $56.5 million, compared to $77.2 million in the third quarter of 2016. This decrease was principally driven by lower daily rates this quarter compared to Q3 of last year. Let me now discuss the results of our business segments, beginning with the crude tanker segment. TCEs for crude tanker segment were $34.9 million for the quarter, compared to $50.2 million in the third quarter of last year. This decrease was primarily due to significantly lower average blended rates in the VLCC, Aframax and Panamax sectors, with spot rates there declining to $16,200, $10,800 and $11,100 per day, respectively. Also, fewer revenue days in Panamax and Aframax sectors resulting from an increase in drydock days and decreased contributions from the crude tankers lightering business, which I'll talk about more in just a moment. These revenue declines were partially offset by the addition of 2 2017-built Suezmaxes, which, as Lois mentioned, delivered to the company in July. Talking about product carriers. TCE revenues for the product carrier segment were $21.6 million for the quarter, compared to $27.0 million in the third quarter of last year. This decrease was primarily due to a decline in average daily blended rates earned by the MR, LR1 and LR2 fleets, with spot rates declining to $10,100, $11,100 and $12,000 per day, respectively. The decline in blended MR, LR1 and LR2 rates accounted for $5 million of the decline in TCE revenues. The revenue was lower due in part to the repositioning for sale of the Overseas Petromar during the quarter. Turning to our consolidated results. Net loss for the third quarter was…

All right. Thank you very much, Jeff. During the third quarter, we maintained our strong financial position with low leverage, highlighted by our 43% net loan-to-value and our debt-free FSO joint ventures. International Seaways' financial strength, combined with its low cash breakeven, enabled the company to be cash flow positive in the weakest market in 4 years, as well as to take advantage of the compelling growth opportunities at the bottom of the cycle. Based on our success adding to our quality fleet, reducing the average age of the fleet, and growing on a deadweight basis, we currently have a 57-vessel fleet with 6.5 million deadweight, compared to 6 million at the beginning of the year, with an average age that has decreased from 12 to 11 years over the same period. We continue to maintain a balanced fleet deployment strategy, through which we strive to substantially cover fixed costs from our contracted cash flows, from the joint ventures, and our fixed time charters. In addition, our sizable operating leverage to the spot market positions us very well to capitalize on a market recovery in both the product and crude tanker sectors. As we continue to position the company for a market recovery, we believe our lean and scalable model as well as our ongoing focus for meeting the high operational standards for customers and partners will continue to serve us well. We are guided by a disciplined capital allocation strategy. During the quarter, we invested $169 million in our fleet and opportunistically repurchased shares given the discount of our NAV to share price. We remain well positioned to both capitalize on attractive opportunities to grow and modernize the fleet while returning capital to shareholders. We will now open up the call to questions. Operator?

[Operator Instructions] Our first question comes from Noah Parquette of JPMorgan.

I just wanted to ask about the fleet renewal. It seems like the move you've made so far includes selling older MRs and buying crude tankers. Is that -- should we take that as any sort of statement on a strategy in terms of positioning crude versus products? Or is that just opportunistic from what you've seen so far?

And it's a very good question. While you have seen us purchase on the crude side, we remain committed to being diversified. And what we have done is renewed 4 time charters in the second quarter, or the end of the first quarter, right around that timing, on the MR front for 1 option 1 year. So what we have done is while we bought on the crude side, we've extended our commitments on the chartering side on the MR front. The selective MR sales, 2 of the vessels are the older handy tankers that we had, and then one of them is the 2004 MR series. And so it's just a very selective pruning of the fleet so that we can redeploy the capital to best position us for the upturn.

Okay. And then just moving to the lightering business. I understand the impacts from the hurricane. Have things normalized there? Can you give any sort of a statement on how Q4 is shaping up?

Yes. October was a busy period. But what's interesting with the hurricanes, with the refineries down and the ports were closed, it took some time to clear that and for the Coast Guard to open the ports for the refineries to be ready to take that crude in. So that really did impact in the third quarter, but October has been quite a busy month.

Our next question comes from Magnus Fyhr of Seaport Global.

Just a follow-up question on Noah's regarding the fleet renewal. How have you seen asset values develop here over the last 3 months? I mean, I guess our view is that we're seeing them bottoming out. But as you guys are actual buyers of assets in the market, it'd be interesting to get your view. Have you seen asset values develop here in the last 3 months?

When you see quality second-hand assets -- I mean, the 3 vessels we bought are all from Hyundai, so it's a top Korean yard in the world. When you see ships that are well-built in the second-hand market, you will see multiple inspectors, and the market is definitely not downward for a second-hand tonnage; more, I would say, has bottomed out a little bit sideways.

Are you still finding good opportunities? And is there any difference between the crude versus the product as far as finding good prospects?

We are finding good opportunities, and we're judicious, and we want to be -- I don't know if I want to use the word careful or simply paced, in what we do, but we do find quality second-hand assets out there across the tanker space.

All right, good. And also, a follow-up question on the hurricane impact and where we're seeing crude exports peak kind of after the hurricane, up to 4 million barrels a day. What do you think is a normalized number here? Is 2 million barrels a kind of a good number? Or you think we're going to normalize back to a lower number?

It's interesting when you think we all watch the WTI, the Brent spread, which is still very wide. But just physically, I think we only had 1 week of 2 million barrels a day. So I'm definitely thinking that we will be increasing, but it will be a little while before we can sustain 2 million barrels every week.

[Operator Instructions] And our next question comes from Poe Fratt of NOBLE Capital Markets.

I was wondering if you could quantify the actual price that you sold the 2 MRs for.

I think, in general, we don't comment on the price until we have delivered everything, and then we follow up with the quarterly results, right? But these older assets are, I would say, sideways prices, and similar to what you would probably see in vessel values.

And I guess relative -- a different way to ask is, relative to what you put in the gain for the last sale in August, would you expect to book a gain for these 2?

For the 2 MR sales?

In other words, I mean...

If there's a gain or -- it's going to be very small. It will be very, very close to book value is what we expect. So we really wouldn't expect it to move the needle either way.

Great. And then you drew on the $50 million revolver. Can you quantify how much you drew down?

Yes. We drew down $30 million on the revolver.

Okay. And then third quarter EBITDA was $15.8 million. Do you break out the JV contribution in those numbers? You've quantified the lightering loss on an EBITDA basis of, what, $200,000. So could you break out the JV contribution?

Yes. When I was walking through the cash -- it's Jeff here. When I was walking through the cash bridge, I pointed out that you need the -- I mean, it is a little complicated but not too bad. But the way it works is we get a noncash item, which is equity income, for the joint venture. And then it's either matched or not matched. And then it typically happens -- the cash comes a little bit differentiated with the equity income during the course of the given year. So we said that we backed out -- in the $16 million was $13 million of equity income, noncash, from JV. But we then received $8 million of cash from the JVs, so add that back in. I hope that's relatively clear.

So I guess, Jeff, just to be clear, was there a negative $5 million contribution from...

No, no, no. The cash contribution from the JVs was $8 million.

It was $8 million. I'm sorry, $8 million, wasn't it?

$8 million, yes, absolutely.

So did you recognize $13 million in an EBITDA number? Or was it the $8 million? Sorry.

$13 million is in the EBITDA number, but $8 million is the cash number. So that's why we put the cash bridge, just to make it very clear, cash versus noncash items. So that's why we put it there.

It's the difference between accounting and cash.

Yes. And the timing on the 5-year renewals, that wasn't fully felt in the third quarter, was it?

They came on in the July...

July 22, and then September.

Yes, and then September. But I think that while they were new, we had a fairly similar contribution in revenue going into that. So I don't think there's a huge difference in the second half of the quarter than the first half.

The earnings will fall in Q4 from Q3 because of the full effect of the full quarter of the new charters.

Yes. So he was saying that the earnings side might be a little lower in Q4 than in Q3 because of the full effect of the new charter. But the cash is what we put those many, many times, which is the minimum of $36 million a year in cash. So it's spread out -- it's spread pretty evenly over the quarters.

And that's actually stronger than it has been.

This concludes our question-and-answer session. I would like to turn the conference back over to Lois Zabrocky for any closing remarks.

Yes. We just want to thank everyone for joining our call here at Seaways, and we look forward to the next quarter. Thank you all very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.