International Seaways, Inc. (INSW) Q4 2017 Earnings Report, Transcript and Summary

Good morning, and welcome to the International Seaways Fourth 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. Please go ahead.

Thank you. Good morning, everyone, and welcome to International Seaways Earnings Release Conference Call for Fiscal Year 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; forecasts of world and regional economic activity; forecasts of demand for and production of oil and petroleum products; International Seaways' strategy; purchases and sales of vessels; anticipated financing transactions; expectations regarding revenues and expenses, including both vessel expenses and G&A expenses; estimated bookings and TCE rates for periods in 2018 and other periods; estimated capital expenditures for 2018 and other 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; 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 those forward-looking statements. Factors, risks and uncertainties that could cause International Seaways actual results to differ from expectations include those described in its forthcoming interim report on Form 10-K for 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 very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call to discuss our fourth quarter and our full 2017 results. 2017 was an important year for International Seaways. During our first year as an independent public company, we made significant progress growing and modernizing our fleet, strengthening our position to take advantage of a market recovery in both the products and crude tanker sectors. Our strong balance sheet served us well throughout the year providing us the financial strength and flexibility to effectively allocate capital for our shareholders. Including our agreement to acquire 6 VLCCs, we have invested over $600 million in 9 modern vessels since our spin-off. As part of our fleet growth and renewal strategy, we also divested 4 select older assets with an average age of 15 years. The acquisitions and vessel sales that we have entered into since completing the spin-off in December 6 of 2016 underscore the significant progress that we have had growing and modernizing the fleet. This positions us to reduce the fleet's age by over 2 years and increases deadweight capacity by 40%, as we strengthen our earnings power. Despite a current challenging market, which persisted throughout 2017, we continue to benefit from our scalable model and our low breakeven. This allowed the company to remain cash flow positive in the fourth quarter after taking into consideration all debt service and maintenance capital expenditures. For the fourth quarter, we reported an adjusted EBITDA of $22.9 million on time charter equivalent revenue of $65.1 million. Net loss was $90.7 million, which reflects a noncash impairment charge of $81.1 million, primarily on our older vessels. Turning to Slide 5. We will review our agreement to acquire the 6 VLCCs from Euronav for $434 million in connection with the closing of Euronav's announced acquisition of Gener8 Maritime. We are pleased to add these highly efficient modern sister ships to our fleet at an attractive price, and we note that this transaction, which is subject to financing and other closing conditions, marks the lowest prices paid for such assets and is consistent with our strategy of taking advantage of attractive asset values at the low point of the tanker cycle. We continue to prepare for a second quarter closing and intend to fund the 6 vessel acquisition with a combination of available liquidity and the anticipated assumption of existing Chinese export agency financing and other debt financing sources. Jeff, our CFO, will discuss this in more detail later on the call. In terms of the vessels we are acquiring, they include 5 300,000 deadweight 2016-built VLCCs, and 1 300,000 deadweight 2015-built VLCC, all constructed at Shanghai Waigaoqiao Shipbuilding with an average age of 1.7 years. As I mentioned, we intend to assume the debt currently secured by the 6 ships. The $311 million Chinese export agency financing is attractive as it matures between 2027 and 2028 and carries a fixed annual interest rate of LIBOR plus 2%. We expect that the 6 vessel transaction will have a positive impact on the company's fleet profile and earnings power. In addition to reducing our average age and increasing our deadweight capacity, our operating leverage and upside potential for capitalizing on a market recovery will be significantly enhanced. Turning now to Slide 6. We summarize specific progress we have made executing our fleet renewal strategy in terms of increasing the size, the scale and age profile of our fleet. As you can see, including the 6 VLCCs, the average age of the 9 vessels acquired is just over 2 years, and the average age of our opportunistic vessel sales is close to 15 years. Based on this progress and upon delivery of the 6 VLCCs, the average age of our fleet would be reduced by 20% to just over 9 years compared to an average age of 11.6 years at the beginning of 2017. We will also increase our deadweight capacity by 40% to close to 8 million deadweight compared to 5.6 million deadweight in January of 2017. Please turn to Slide 7, where we provide an overview of the vessels owned and operated by International Seaways. Our fleet list has been updated to reflect the acquisition of 2 Suezmax vessels and 1 VLCC as well as for the sale of 4 MRs. The list has not yet been updated to reflect the 6 VLCCs, which we expect to add to the fleet during the second quarter. We currently have a 53-vessel fleet of crude and product tankers operating in both the time charter markets and the spot markets. With 8 ships on time charter, plus distributions from our joint ventures, we expect to continue to substantially cover our fixed costs for debt service, our G&A, our dry-docking and other maintenance CapEx in 2018. The combination of our balanced fleet deployment strategy and moderate level of predictable cash flows from our joint ventures and contracted fixed-rate charters positions International Seaways to both optimize revenue through the current tanker cycle and capitalize on a market recovery in both the crude and product space. Now please turn to Slide 8, where we provide an update on the tanker demand. Consistent with the strong global demand for oil that we saw in 2017, the IEA is forecasting global demand to be 1.4 million barrels in 2018. This was recently advised -- revised upward. Demand growth continues to be fueled by China, as China has now surpassed the United States as the world's largest importer. Of note, total Chinese crude imports increased over 10% in 2017 compared to 2016. Global crude and product stocks continued to decline in the fourth quarter. And the IEA estimates that OECD commercial stocks fell in December to 2.8 million barrels -- to 2,851 million barrels, which is 52 million barrels above the 5-year seasonal average. This was the largest draw since February of 2011. This supports positive oil demand fundamentals and represents the lowest levels since July of 2015, and is below the peak of 366 million barrels in July of 2016. In addition to this, in the United States, stocks, as depicted in the bottom right of the slide, continue to decline. OPEC continues to enforce the production cuts that were extended at the end of November of 2017. Compounding the effect of the cuts, Russia is also cooperating and has reduced production. Interestingly, Brent prices are about $10 per barrel higher now than when OPEC initially agreed to the cuts in December of 2016. With oil prices at 2-year highs, we continue to monitor the effects this may have on future OPEC production. During 2017, the OPEC cuts had a clear negative impact on crude tankers. At the same time, some of the cuts have been replaced by production in the Atlantic Basin, increasing exports to the Far East with a higher ton-mile benefit for larger tankers. As you can see in the chart at the top right of the slide, China is now importing more crude oil from non-OPEC countries. Please turn to Slide 9, and we provide an update on tanker supply. I'll start by providing an update on the order book. In 2017, crude tanker newbuilding orders increased versus 2016. However, compared to ordering activity during the 2013 to 2015 period, 2017 activity was markedly lower. Turning to 2018, we expect substantial crude tanker deliveries, although the amount is expected to be well down from 2017. We anticipate deliveries for Vs, Suez, Afra, Panamax and handy tankers to decrease by 16%, 40% (sic) [ 41% ], 19%, 21% and 29%, respectively in 2018. Turning to scrapping. As you can see in the chart at the lower right of the slide, 15 year old VLCC prices have approached scrap values at year-end of 2017. Notably, the last time that this happened, we witnessed increased scrapping which occurred prior to a spike in earnings and asset values. In 2017, we started to see scrapping activity commence after nearly 2 years of no activity. This was due to the weak rate environment and stronger steel prices. Specifically, 13 VLCCs were scrapped in 2017, and an additional 9 VLCCs have been sold for scrap already in 2018. We continue to anticipate that the aging global fleet will impact tanker supply and expect the scrapping activity we started to see in 2017 to continue. For example, at the beginning of March, 122 VLCCs were over 16 years old and will face substantial capital investments to continue trading within the next 18 months. I'll now turn the call over to Jeff to provide additional details on the third quarter results.

Thank you, Lois, and good morning, everyone. Let's move directly to reviewing the fourth quarter results in more detail, starting, please, on Slide 11. Consolidated time charter equivalent revenues for the fourth quarter of 2017 were $65.1 million compared to $81.1 million in the fourth quarter of 2016. This decrease was principally driven by lower daily rates this quarter compared to Q4 of last year. Let me now discuss the results for our business segments beginning with the Crude Tankers segment. TCEs for the Crude Tankers segment were $42.1 million for the quarter compared to $54.1 million in the fourth quarter of last year. This decrease was primarily due to lower average blended rates in the VLCC and Aframax sectors with spot rates there declining to $20,100 and $14,100 per day, respectively. This was partially offset by increased revenue days contributed by the 2 2017-built Suezmax vessels and 1 VLCC that we acquired in the second half of 2017. In terms of product carriers, TCE revenues for the Product Carrier segment were $23 million for the quarter compared to $27.5 million in the fourth quarter of last year. This decrease was primarily due to a decline in average daily blended rates earned by the LR1 and MR fleets with spot rates declining somewhat to $13,600 and $10,800 per day, respectively versus the prior quarter. The decline in blended LR1 and MR rates accounted for $3.6 million of the decline in TCE revenues. The revenue was also somewhat lower due to the sale of 2 MR vessels during the year and the redelivery of a bareboat vessel late in December 2017. Turning now to our consolidated results. Net loss for the fourth quarter was $90.7 million or negative $3.12 per diluted share compared with net loss of $57.8 million or negative $1.98 per diluted share in the fourth quarter of 2016. However, this net loss reflects primarily $81.1 million in vessel impairment charges as well as the decline in TCE revenue compared with the fourth quarter of 2016. And again, that was partially offset by a decrease in general and administrative expenses reflecting management's streamlining of the company's operation after its spin-off from OSG in November 2016. Excluding impairments, net loss would have been $9.7 million or negative $0.33 per diluted share for the quarter. The impairments recognized in the fourth quarter stemmed from a reduction in general asset values of older vessels during the course of 2017. Adjusted EBITDA was $22.9 million for the quarter compared to $37.5 million in the same period of 2016. This decrease mainly reflects lower daily rates in the fourth quarter compared to the fourth quarter of the previous year. As you can see from the chart at the bottom of the slide, lightering EBITDA was 0 in Q4 compared to $1.8 million in Q4 2016, which was primarily due to fewer full-service lighterings. Although, second half 2017 lightering activity was lower in comparison to the first and second quarters. For the full year of 2017, lightering EBITDA was $3.7 million compared to $3.5 million in 2016. And the number of lighterings performed in 2017 was 352, which compares to 261 in 2016. So it continues to be a growing business. Turning to Slide 12. We provide a Q1 2018 earnings update. This quarter, for the first time, we've broken out spot rates for the modern Vs in our fleet and the spot rates booked for VLCCs overall. As you can see, therefore, at low points in the cycle -- in the tanker cycle, such as the current period, modern VLCCs will earn higher rates. As the market recovers, this gap will narrow significantly. In the short term, however, Seaways is well positioned to benefit from the improved rates for modern VLCCs based on the significant progress we've made implementing our fleet growth and renewal strategy, which resulted in the addition of 7 modern Vs out of 9 vessels acquired in total. Looking forward, we have booked 76% of available spot days for our modern VLCCs at an average of approximately $20,100 a day, and 80% of available overall spot days at an average of approximately $15,100 per day. The 2% of available Suezmax spot days are booked at an average of approximately $14,600 a day, 75% of Aframax and LR2 spot days are booked at $10,900 per day, and finally, 70% of the Panamax LR1 spot days are booked at approximately $13,200 per day for the first quarter. Turning to the MR side. We have booked 74% of our first quarter spot days at an average of approximately $12,300 per day, which notably is an increase from the first -- fourth quarter. Our prior tankers -- carriers are performing well, which highlights the advantage to us of operating a diverse fleet like ours and International Seaways ability to take advantage of the timing of a market recovery in 2 tanker sectors. Based on our fleet growth and modernization strategy, and specifically our agreement to acquire 6 VLCCs, we will increase our revenue days and enhance our upside potential. A $1,000 increase in spot rates in every vessel class would result in over [ $1,200 ] of cash flow, while $5,000 and $10,000 increases would add over $60 million and $120 million in cash flow, respectively. At the bottom of the slide, we've combined the rates earned by our vessels in the spot and time charter markets in an effort to give maximum visibility regarding overall expected earnings for the entirety of the first quarter. If we could now turn to Slide 13, looking at breakeven. Given our low cash breakeven rates, the company was cash flow positive in Q4, even during one of the most challenging points in the tanker cycle. The cash cost TCE breakeven for the full year ended December 31, 2017 were as follows, as you see on the page: $14,000 a day for VLCCs; $11,500 for Suezmax; $12,700 for Aframax; $17,600 for Panamax; and $11,900 per day for MRs. International Seaways overall breakeven rate, therefore, was $14,000 per day for the 12 months ended December 31, 2017, for our fleet. These rates are all-in daily rates our owned vessels must earn to cover operating costs, dry-docking, CapEx, G&A and debt service costs, which means principal amortization as well as interest expense. As I mentioned earlier, taking into consideration distributions from our JVs, this breakeven rate actually drops down to $11,300 per day on a company-wide basis, highlighting a strong position for remaining cash flow positive even during the most challenging points in the tanker cycle as we did in Q4. Providing a little more detail on this slide and a view going forward for your modeling, the OpEx per revenue day by vessel class for 2017 were: VLCCs, $8,875; Suezmax, $7,500; Aframax, $8,000; Panamax, $8,500; and MRs, $6,900 per day. The targeted amounts per operating day for 2018 for the various classes are as follows: VLCCs, $9,200 per day; Suezmax, $8,100; Aframax, $8,500; Panamax, $8,400; and MRs, $7,700. Overall, these represent a modest increase from full year 2017 OpEx levels. Turning to G&A. G&A for Q4 was $6.6 million and $24.7 million for all of 2017, of which $21.7 million was cash G&A. Our 2018 cash G&A target is just slightly higher at $22.2 million or about $1,400 per vessel per day. Additionally, looking forward, we expect about $31.3 million of dry-docks and maintenance CapEx during the remainder of 2018. We incurred $3.2 million, for your reference, in Q4 of 2017. Interest expense in Q4 was $11.4 million, of which $1.3 million of that amount related to deferred financing costs are therefore a noncash portion of the overall expense. As we mentioned last quarter, quarterly interest expense, now, on the $550 million of outstanding term loan, including the $50 million increase from its original $500 million amount is expected to be $11.2 million per quarter, including approximately $1.2 million related to deferred financing costs, again, a noncash portion of that $11.2 million. Hopefully, that's helpful for your modeling. Now if we could go to Slide 14 for our cash bridge for the quarter. Moving from left to right, we start with the quarter, we had total cash of $73 million. During the quarter, we generated $23 million of adjusted EBITDA, as previously stated. This amount includes $9 million in equity income from the JVs, which is a noncash item so, therefore, we deduct that in order to reach the cash figure. Then we add the cash distributions from the JVs, which was $14 million. The issuance of the revolver raised an additional $30 million, the sale of the MR -- the Andromar contributed $11 million. We expended $53 million to acquire the Raffles VLCC. In addition, we expended $3 million on dry-docking and maintenance CapEx. Cash interest paid on our debt was $14 million in the quarter, and finally, changes in working capital and other noncash items had a negative impact of $2 million. The net result was we ended the quarter with approximately $71 million of cash, including $10.6 million in restricted cash. Now if I could ask you to turn to Page 15, we can talk a little bit about balance sheet. As of December 31, 2017, we had $1.1 billion of conventional assets against $529 million of long-term debt. In addition, we have $50 million revolving credit with $20 million undrawn as of December 31, 2017. As you can see on the right-hand column of the slide, we are 4.9x levered on a debt to EBITDA basis as of December 31. Total debt to capital stood at 35%, with net loan to value of 41% taking into account our conventional tanker fleet and the FSO JV, but not taking into account the LNG joint venture. I should mention that pro forma for the acquisition of the 6 VLCCs, this number will rise, but only slightly, to just over 50% net loan to value. Overall, our strong balance sheet and low cash breakevens combined with the substantial contracted revenues and cash flows protect us in the challenging environment, while our spot vessels provide significant upside opportunity as the market turns. At the bottom of the slide, we have noted book values for our 2 joint ventures, which we believe represent conservative estimates of their values. At the end of the fourth quarter, the FSO and the LNG JVs had book values of $252 million and $102 million, respectively. Hopefully, this helps and that investors and analysts can use this information and the rest of the balance sheet to come up with their own good estimates of our NAV per share. In terms of financing the acquisition of the 6 VLCCs that Lois discussed earlier on the call, I'd like now to provide some additional detail. We will fund the cash portion of the acquisition price from existing liquidity, which includes proceeds from the sales of vessels which have already been sold as well as proceeds from putting financing on the Seaways Raffles, which was originally purchased with cash, and the sale leaseback of 2 modern Aframax vessels. Both of those transactions are expected to close mid-March. As we mentioned, when we announced this transaction, we reiterate that we have no intention to issue equity to fund this deal. Also, we continue to work very closely with the Chinese export agency toward our goal assuming the debt currently secured by the vessels, and that process is going very well. It remains our expectation that this attractive financing, combined with the other sources I just mentioned, will fund the acquisition, which is expected to close during the second quarter of the year. Turning to Slide 16. We've outlined our chartered out and chartered in fleet. Regarding our 8 chartered-out vessels, we have 604 days fixed at a blended rate of $10,294 per day. This includes 1 bareboat chartered-out. Excluding the bareboat, we have 438 days fixed at a blended rate of $12,111 per day. Regarding our chartered-in vessels, we have 4 MR time charter-ins that are scheduled to be delivered in the second and third quarter 2018. For these vessels, we have charter hire expense for 2018 of $11.8 million. We also have 2 MR bareboat-ins that redeliver through Q2 2018, with charter hire expenses of $1.8 million. For chartered-in lightering, charter hire expense was $2.8 million in Q4 2017 compared to $3.9 million in Q4 2016, a decrease that reflects the variable demand for our full-service lighterings. This concludes my comments. I'd now like to turn the call back over to Lois for her closing comments.

Thanks a lot, Jeff. Please turn to Page 18. During 2017, Seaways drew upon our considerable financial strength, our low leverage and our cash breakeven to remain cash flow positive at a challenging point in the tanker cycle. Our strong balance sheet also enabled us to deploy capital to the benefit of our shareholders and take advantage of our compelling growth opportunities at the low point in the tanker cycle. Our success in implementing our fleet growth and modernization strategy during the year has provided tangible benefits as we have taken steps to decrease the average age of our fleet by over 2 years and increase the deadweight capacity by 40%, strengthening our earnings potential going forward. The combination of our balanced fleet deployment strategy and moderate level of predictable cash flows from our joint ventures and contracted fixed-rate charters, positions International Seaways to both optimize revenue through the current tanker cycle and to capitalize on the market recovery in both the crude and the product tanker sectors. Notably, our recent acquisitions, combined with our lean and scalable model, have further enhanced our operating leverage and our upside potential. Our capital allocation strategy remains disciplined and balanced. Since our spin-off, we have invested over $600 million in our fleet, including the 6 VLCCs, and opportunistically repurchased shares during the year, given the discount to NAV per share. Going forward, our financial position remains strong. And as we progress through the year, we will maintain an intense focus on ensuring International Seaways has one of the lowest leverage profiles in the sector. We will now open the call up to questions. Operator?

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

I just wanted to ask, obviously, you guys have done a lot for fleet renewal, I mean, put a little bit more leverage on the balance sheet. Are you comfortable with this level of leverage? Or is there more or more renewal to come?

Thanks for the question. So I'll start and I'll probably let Jeff finish on that. So we are still in the process of concluding the 6 VLCC transaction. And we want to make sure that we remain focused on that before we -- and really digest that before we would make any other moves.

Yes. But adding on to that, what we've said before -- I can't remember if you and I have talked about it, but it certainly says frequently that as we think about fleet renewal, part of that is selling older vessels and that will continue. But in terms of cash additions to the fleet, what do we look for? You want to check a couple boxes, right? If the assets are well below historical values, that's one, right? And that -- even though, we've noticed that values have started to tick up a little bit across the sectors, they're still at low value. So on the one hand, it's attractive to look at other assets. On the -- but secondly, the other thing we've always said is, well, especially for cash [indiscernible] and let's look at the effect on our leverage. I mentioned in my remarks that we finished the year at 30-some percent net debt to book value, but more importantly, 40% or 41% net debt to vessel values or asset values, excluding the LNG. And that we would moderately, just as you said, take that up for the 6 VLCC transaction to just over 50% net loan to value, again excluding the LNG. So that's probably enough leverage for now, right? So I think Lois and I and everyone else feels like if we've done that and we have to focus on getting it done, as she said, that's probably a comfort level, and that we wouldn't be looking to push that much more.

Okay. Great. Nice and clear. And just another question. On the Laura Lynn, what other options are you looking at? A potential conversion to FSO? Or to sell the ship? Or what are you thinking about right now?

No. The -- right now, we continue to market her for either short- or medium-term storage contracts. If we are not able to secure one, the likelihood is that we would temporarily lay the vessel up. We did this a couple of years ago. The vessel is extremely well built and is ideal for multiple different opportunities, including, eventually, a conversion project. We anticipate that we would have very healthy earnings on the vessel once the market moves. And that was evidenced during the last 3 years when that ship earned a time charter, very high revenue.

Your next question comes from Magnus Fyhr with Seaport Global.

Staying on the topic of fleet renewal. Much of the focus has been on the larger tankers, I mean, the 6 VLCCs and 2 Suezmaxes. What about the -- I mean, going forward, looking at the MRs, I mean, you had 15 MRs 1 year ago, now you're at 9. And you have another 6, I guess, that are up for redelivery here in Q2, Q3. And I guess, 4 of those are 2004-built. Can you talk a little bit about the strategy for the product tanker fleet going forward?

Yes, Magnus. So we do have 4 2006-, 2007-built in-charters that are up for renewal at the moment. We do have options on them, but we are -- we would exercise those options only if we're able to negotiate a little bit better price so that we can be pretty confident we're going to make some money on the next year. So the way we look in the MR side is that it's a much more liquid time charter market and that we can -- we have a history of opportunistically being able to charter in vessels on that side to complement the fleet. And we spent our first capital allocation dollars on the fleet renewal on the crude side. So it doesn't mean that we don't like product carriers. And just remembering that we also have LR1s and 1 LR2. The LR2 is trading clean as well. So we still feel that we have a good strength on the product side, and we look to supplement that, at the moment, more through in-charters than through purchases.

Okay. And then just on the 4 MR, the 2004-builds, you sold a couple of them and you still have 4 left. I guess, they're not in -- up for dry-dock until next year. And I guess, the market could look different then. But what's your thinking there as far as upgrading those with water ballast treatment systems?

We indeed intend for those vessels to install the ballast water treatment systems and we have them on order.

Okay. Great. And just 1 last question. On the lightering business, I can't recall if you made any comments in the prepared remarks. But performance has been, I guess, impacted by the hurricane. Was that the case in the fourth quarter as well? I guess, there was carryover from third quarter. I mean, The EBITDA has been pretty much breakeven here the last 2 quarters. Is there anything else to read into that as far as crude exports? You may benefit there on the VLCCs, but it may take some business away from the lightering business. Or how should we look at that?

Well, we look at lightering as something that we really value. It's extremely asset-light with only a couple million dollars invested. Year-on-year, we did have EBITDA growth of -- incrementally. So it's still a growth business. And we think it's a key differentiator. It is definitely a business, Magnus, where you do have some fluctuations quarter-to-quarter. But we're still seeing the volume grow, and we're looking to capture a piece of those crude exports that are happening. And indeed, our lightering group is pursuing some of that business at this time.

Yes, Magnus, just underscoring the previous question. Prod tankers, I think I mentioned it in my remarks, but the MRs are the segment that are sequentially up Q1 from Q4, which is a nice, encouraging sign. And so we really, as Lois said, [ aren't ] committed to being in both the crude and product sectors. We like being diversified.

And then just on the chartered-in opportunities there, vis-à-vis the ones that you have options on to extend, is it fair to say that those are out of the market currently? And that you could get better deals on new chartered-in opportunities?

Since they might be listening, I would say they're close, they're close, but the MR market continues to attempt to stage a rally. But it hasn't been as sustained yet as I think will come. And so there's still opportunity out there for owners who are looking for secured earnings. And we still think that we can take advantage of that.

So we're having discussions. We're having discussions.

[Operator Instructions] Your next question comes from Poe Fratt with NOBLE Financial.

Just a couple things. One is, could you just highlight your stance on the buyback just going forward?

Yes. Absolutely. Regarding the buyback, our response would largely be that we have been engaged in a lot of strategic deals, and not really been in position to execute on the buyback. But principally, we are discussing it with the board on an ongoing basis. And we are very focused on concluding the 6 VLCC transaction that we've outlined here. We do have the program, as you are aware. And we do feel that our shares are a deep value, but we want to watch very carefully the spot rate environment, concluding our 6 VLCCs, and then judiciously enacting on that program when we get the support of the board. Together we decide that that's the right decision.

Great. And Jeff, were there any outstanding issues on the debt assumptions with the Chinese agency?

What I said, and I'll just maybe give it a little more color, is that we are making very good progress there. It's just that being a work in progress, out of respect for those institutions, we don't think it'd be appropriate to talk too much about their process, but -- so that just wouldn't be the way we roll. But I can tell you that we went to China to meet with them, had good discussions. This company has long ties to China with Chinese ships in our fleet, et cetera. So all that's good. And I think the best thing to say is, what I said in my comments, is that we're making -- we have very good relations and very good progress with them. So we have high hopes of assuming this debt along with the ships.

Okay. Great. And then any comment on how you're going to -- whether you're actively managing your interest rate risk in here?

In the Q? Yes, if you take a look at the K, you'll see a mention of it. We do have some hedging in place for a portion of our Term Loan B. So that we are hedged against interest rate rises. It's in the form of a cap.

[Operator Instructions] Since there appears to be no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Lois Zabrocky for any closing remarks.

I just want to thank all of you for listening to International Seaways results today. We appreciate your time and attention, and look forward to hearing from you in the future. Thank you very much.

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