International Seaways, Inc. (INSW) Q3 2017 Earnings Report, Transcript and Summary

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 quarter of 2018. Complementing our successful acquisition of quality modern ships, we also executed on our share repurchase program. We repurchased 160,000 shares at an average price of $19.86 per share for a total cost of $3.2 million. $26.8 million remains under the existing $30 million program, which was initiated in May of 2017, and we intend to continue to further opportunistically execute on the repurchase program. We also remained very focused during the quarter on optimizing our revenue in a challenging tanker market and are pleased to have commenced 2 previously announced 5-year contracts for our FSO joint venture. Over the full contract period, we expect to generate in excess of $180 million of EBITDA for International Seaways as our joint venture continues to operate on the Al Shaheen field in Qatar for North Oil Company, whose shareholders are Qatar Petroleum and the oil major, Total. Since the joint venture began working on the Al Shaheen field in July 2009 through the end of the third quarter of 2017, the FSOs have processed $1.2 billion -- 1.2 billion barrels of fluids and exported more than 800 million barrels of high-quality Al Shaheen crude oil, with 0 time out of service and an excellent safety record. During the third quarter, we continued to benefit from our scalable model and low breakevens, which provide us with a competitive advantage. Of note, after taking into consideration all debt service and maintenance CapEx, we were still cash flow positive in what was the worst rate environment since the second quarter of 2013. For the third quarter, we reported an adjusted EBITDA of $15.8 million; on time charter equivalent, revenues of $56.5 million. Net loss was $21.8 million, which included $7.3 million in vessel impairment charges and $1.2 million in debt modification fees. Please turn to Slide 5, where we provide an overview of the vessels owned and operated by International Seaways. Our fleet list has been updated to reflect the acquisitions of the Seaways Hatteras, the Seaways Montauk and the Seaways Raffles and the sale of the Overseas Petromar. We are pleased with our progress growing and modernizing our fleet, and note that we have effectively reduced the age of our fleet. We have also increased the size of the fleet to 7 million deadweight, compared to 6.5 million deadweight at the beginning of the year. We currently have a 57-vessel fleet of crude and product tankers operating in the time charter and the spot markets. With 9 vessels on time charter plus distributions from our joint ventures, we expect to continue to cover our fixed costs for debt service, G&A, dry-docking and other maintenance capital throughout this 2017. The combination of our balanced fleet deployment, our contracted cash flow from joint ventures, and our portfolio of fixed-rate time charters positions International Seaways to both navigate the trough in the current tanker cycle and capitalize on the market recovery in both the crude and product sectors. Now turning to Slide 6. We would like to provide an update on tanker demand. Global oil demand has remained strong year-to-date, and the IEA currently projects 1.6 million barrels per day of demand growth in 2017. This is an increase from their previous projections of 1.4 million. For 2018, the IEA also projects strong incremental demand growth of 1.4 million barrels per day. Demand growth continues to be fueled by China. As you can see in the top right of the slide, China's imports increased sharply in September to more than 9 million barrels per day. This represented the highest level since imports reached a record 9.4 million barrels per day in the first quarter. Global crude and products stocks continued to decline in the third quarter, which supports positive oil demand fundamentals. According to the IEA, it is estimated that global crude and products stocks will decline in 2017 by a combined 300,000 barrels per day, with products representing 200,000 barrels a day of that decline. In addition, the chart at the bottom right of the slide highlights the continued decline in U.S. stocks. Year-to-date, U.S. crude stocks have declined by nearly 28 million barrels, and gasoline and distillate stocks have declined by a combined 32.5 million barrels. OPEC continues to enforce the production cuts that were renewed in May of 2017. Saudi Arabia has indicated that a further extension of the cuts beyond March of 2018 is likely, and Russia has recently signaled its intention to cooperate. Brent prices are about $10 barrel -- per barrel, higher now than they were when OPEC initially agreed to the cuts last December. One final note on the OPEC cuts. While we continue to see a negative impact on the midsized crude tankers from the OPEC cuts, some of the production cuts are being replaced with production from the Atlantic Basin, increasing exports to the Far East, with a higher ton-mile demand benefit for the larger tankers. Another factor that impacted tankers during the quarter was the severe hurricane season. Hurricanes Harvey and Irma shut down U.S. Gulf refineries for extended periods, resulting in less refined product exports out of the U.S. Gulf, hurting MR rates. Conversely, Aframaxes and VLCCs benefited from these disruptions as U.S. crude exports increased, and we experienced a sustained bump in rates for these 2 vessel classes. As an example, Aframax rates in the Caribbean and the Gulf basins went from $5,000 per day to $15,000 per day after Hurricane Harvey and remained relatively healthy in that region through September. During the quarter, the hurricanes also resulted in decreased lightering activity due to port closures and damage to the refining infrastructure in the U.S. Gulf. Turning to Slide 7. We provide an update on tanker supply. We start with an update on the order book. Year-to-date, crude tanker newbuilding orders increased versus 2016. But compared to ordering activity during the 2013 to the 2015 period, current activity is low. Looking into 2018, we expect substantial crude tanker deliveries next year, although the amount is expected to be well down from 2017 levels. We anticipate deliveries for VLCCs, Suezmax, Aframax, Panamax and MR tankers to decrease by 16%, 41%, 19%, 21% and 29%, respectively, in 2018. In particular, the product tanker sector has a low order book, currently below 8% of the existing fleet. On previous calls, we have discussed the expectation that a lack of shipyard capacity will have a positive effect on supply. In addition, shipyards have recently struggled to secure refund guarantees from banks, with a number of VLCC orders being canceled as a result. We expect both of these factors to continue to affect the level of newbuilding activity. We also anticipate the aging global fleet to impact tanker supply. Currently, 9% of VLCCs are over 17.5 years old, and this percentage is expected to steadily increase over the next 3 years, doubling by 2020. Scrapping levels became a noticeable factor in the third quarter as weak rates and strong steel prices led to a spike in pent-up scrapping activity, compared to very little scrapping activity in 2015 and 2016. During the first 10 months of 2017, 44 crude oil tankers totaling 6.8 million deadweight were scrapped, which is 2 million more than in 2015 and '16 combined. To conclude. The present softer market has tested owners. Seaways has strong contracted cash flows, well-controlled costs, low overhead and strong commercial pool participation. These factors, combined with our low leverage, lead to low cash breakeven levels, affording Seaways the opportunity to renew and grow our fleet at the right moment in the cycle and buy back shares, delivering value to shareholders. I will now turn the call over to Jeff to provide additional details on our third quarter results.

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 $21.8 million or negative $0.75 per diluted share, compared with net loss of $15.4 million or negative $0.53 per diluted share in the third quarter of 2016. This net loss reflects $7.3 million in vessel impairment charges and $1.2 million in debt modification fees, and a decline in TCE revenue compared with the third quarter of 2016, which were partially offset by a decrease in general and administrative expenses, reflecting management's streamlining of the company's operation after its spinoff from OSG in November last year. Excluding the impairment charges and debt modification fees just mentioned, but also adding back $1.9 million gain on vessel sales, net loss would have been $15.2 million or $0.52 per diluted share for the quarter. The impairments relate to 2 older MRs and 1 Panamax, for which there was an increased probability of disposal in the near term, including $1.3 million attributable to a 2004-built MR that will be delivered to buyers by mid-November. The $1.2 million in debt modification fees in the third quarter relates to the upsizing of our Term Loan B facility, from $500 million to $550 million, that was completed in July. Such charges are very similar -- are similar in nature to the $7.9 million reported in the second quarter. Adjusted EBITDA was $15.8 million for the quarter compared to $37.1 million in the same period of 2016. This decrease mainly reflects lower daily rates in the third quarter compared to the third quarter of last year, and decreased earnings from our lightering business. As you can see in the chart at the bottom of the slide, lightering EBITDA was a loss of $200,000 in Q3 compared to $900,000 in Q3 2016, due to hurricane-related disruptions and lower margins. Charter hire expenses increased by $500,000, up quarter-over-quarter, due to an increase in the number of time chartered in workboats as well as an increase in the amount paid to charter in Aframaxes to perform full-service lighterings as a result of the hurricane disruptions. Although Q3 was slow in comparison to the first and second quarters, for the last 12 months ended September 30, lightering EBITDA was $5.5 million. And the number of lighterings performed year-to-date in 2017 was 278, including 23 full-service jobs, which compares to 186, including only 7 full-service jobs, in the comparable period of 2016. Increasing U.S. exports have led to an increase in the number of reverse lighterings performed and increase for lightering contracts. Now if we could turn to Slide 10, we provide a Q4 earnings update. Looking forward, we booked 57% of available VLCC spot days at an average of approximately $24,000 a day; 51% of available Suezmax spot days at an average of approximately $20,600 per day; 45% of available Aframax/LR2 spot days at an average of approximately $15,400 per day; and finally, 41% of available Panamax/LR1 spot days at an average of approximately $11,900 per day. These rates are significantly higher than those we earned in the third quarter. On the MR side, we booked 46% of our fourth quarter spot days at an average of approximately $9,100 per day. Now turning to Slide 11, we look at breakevens. The cash cost TCE breakeven for the last 12 months ended September 30, 2017 were $15,600 per day for Vs; $16,500 a day for Suezmax, reflecting the aging market value of these July 2017 acquisitions; $13,400 per day for Aframaxes; $16,500 per day for Panamaxes; and $11,000 per day for MRs. International Seaways' overall breakeven rate was $14,200 per day for the 12 months ended September 30, 2017. These rates are the all-in daily rates our owned vessels must earn to cover operating costs, dry-docking, CapEx, G&A expense and debt service costs scheduled -- which means scheduled principal amortization as well as interest expense. Of note, taking into consideration distributions from our JVs, the overall breakeven rate for the company drops to $12,400. This highlights the importance of our JVs' contracted cash flows and minimal levels of debt amortization, which, together with our 9 vessels on time charters, allows us to remain cash flow positive even during the most challenging points in the tanker cycle, such as Q3. Providing a little more detail on the slide and a view towards the remainder of 2017. The OpEx per revenue day by vessel class for the third quarter were: VLCCs, $9,300; Suezmax, $8,700; Aframax, $8,400; Panamax, $9,500; and MRs, $7,300. I would note, the Panamax number is somewhat inflated because the heavy dry-dock schedule -- because of heavy dry-dock schedule. On an operating day basis rather than revenue day, the Panamaxes would have been $8,600 a day. As discussed on previous calls, the targeted amounts per operating day for 2017 for the various classes are as follows: VLCCs, $9,300 per day; Aframax, $8,600; Panamax, $8,300; and MRs, $7,300 per day. G&A for Q3 was $6.6 million. Our cash G&A run rate for year-to-date 2017 of $16.1 million, or $1,180 per vessel per day, is well inside our previously disclosed 2017 cash G&A target of $24 million, or $1,340 per vessel per day. Additionally, looking forward, we expect about $7 million of dry-docks and maintenance CapEx during the remainder of 2017. We incurred $4 million in Q3, excluding payments for our 2 new Suezmaxes. Interest expense in Q3 was $11 million, with approximately $1.2 million of that amount related to deferred financing cost, so therefore, a noncash cost. Looking forward, quarterly interest expense, now on a $550 million of outstanding term loans, including the $50 million increase at close in the third quarter, is expected to be approximately $11.2 million total, including approximately $1.2 million related to deferred financing cost, again, a noncash cost. Now if we could go to Slide 12 for our cash bridge. Moving from left to right, we began the third quarter with a total cash of $121 million. During the quarter, we generated $16 million of adjusted EBITDA. This amount includes $13 million in equity income from the JVs, a noncash item, which is therefore deducted from EBITDA in order to reach a cash figure. The cash distributions from the JVs was $8 million. The exercise of the accordion on our term loan net of fees raised an additional $47 million. The sale of the Petromar contributed $8 million. Then we expended $100 million for the 2 Suezmaxes that we discussed earlier. In addition, we expended $4 million on dry-docking and maintenance CapEx. Cash interest paid on our debt was $10 million in the quarter, and we expended $3 million on share repurchases. Finally, changes in working capital and other noncash items had a positive impact of $3 million. The net result was we ended the quarter with approximately $73 million of cash. As noted earlier, after backing out vessel and share repurchases and incremental borrowings for vessel acquisitions, the company was cash flow positive for the quarter. Please turn to Slide 13, our balance sheet. As of September 30, 2017, we had $1.2 billion of conventional assets against $512 million of long-term debt, which reflects our recently completed refinancing. In addition, we have a $50 million revolving credit facility, which was undrawn as of September 30, 2017. As I mentioned on the second quarter call, the new term loan facility, which carries an interest rate of LIBOR plus 5.5%, extended our final maturity date out 5 years to June 2022. The revolving credit facility was also extended and has a final maturity date slightly sooner in December of 2021. Amortization is 2.5% in the first year ending June of 2018, and 5% per year thereafter. We continue to have relatively low amortization, which contributes to our low breakevens compared to our peers. This successful refinancing provided for the added liquidity to capitalize on an attractive opportunity to acquire the 2 Suezmax newbuildings and the recently acquired 2010-built VLCC. As I mentioned on the last call, we funded the 2 Suez newbuildings acquisitions with the $50 million increase in the term loan facility as well as cash on hand. Regarding the VLCC that we just recently acquired, we funded that through a partial drawdown of our $50 million revolver and cash on hand. As you can see on the right-hand column of the slide, we are at 4.2x leverage on a debt-to-EBITDA basis as of September 30. And total debt-to-capital stood at 32%, with net loan-to-value of 43%, taking into account our conventional tanker fleet and the FSO JV. Overall, our strong balance sheet and low cash breakevens, combined with their substantial contracted revenues and cash flows, protect us in a challenging environment, while our spot vessels provide significant upside opportunity as the market turns. At the bottom of the slide, we also noted book values for our 2 joint ventures, which we think are representative of their fair values. As of the end of the third quarter, the FSO and LNG JVs had book values of $261 million and $95 million, respectively. This concludes my comments on the financial statements. I'd now like to turn the call back to Lois for her closing comments.

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.