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…

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…

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.