Good day. And welcome to the International Seaways Third Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note, today’s event is being recorded. I would now like to turn the conference over to Mr. James Small, General Counsel. Please go ahead.

Thank you. Good morning everyone, and welcome to International Seaways earnings call for the third quarter of 2018. Before we begin, I would like to start off by advising everyone on the call today of the following. During this call 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 and product tanker 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; purchases and sales of vessels; anticipated financing transactions; expectations regarding revenues and expenses, including both vessel and G&A expenses; estimated bookings and TCE rates for the fourth quarter of 2018 and other periods; regulatory developments and the company’s responses to such developments; estimated capital expenditures for 2018, 2019 and other periods; projected scheduled dry-dock and off-hire days; the company’s ability to achieve its financing and other objectives and its consideration of strategic alternatives; and economic, political and other developments around the world. Any such forward-looking statements take into account various assumptions made by management based on a variety of factors, including management’s experience and perception of historical trends, current market conditions, expected and future developments and other factors management believes are appropriate to consider in the circumstances. Forward-looking statements are subject to risks, uncertainties and assumptions, many of which are beyond the company’s control. These may cause actual results to differ materially from those implied or expressed by those forward-looking statements. Factors, risks and uncertainties that could cause actual results to differ from expectations, include those described in the company’s annual report on Form 10-K for 2017 and its quarterly reports on Form 10-Q for the second and third quarters of 2018 and in other filings that we have made, or in the future, may make with the U.S. Securities and Exchange Commission. Now I’d like to turn the call over to the company’s 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 2018 results. Please turn to slide four. We will review third quarter 2018 highlights and recent accomplishments. During the third quarter and consistent with our focus throughout 2018, we continued to position the company to capitalize on the tanker market recovery. Looking at the first bullet; we have maintained our strong balance sheet and liquidity positions through the major acquisition of six VLCC at the end of the second quarter, even as we continued to operate through a low point in the tanker cycle. Specifically, year-to-date we have increased our cash position by $53 million, giving us a total cash of $124 million and total liquidity of $174 million as of September 30, 2018. This represents an increase in total liquidity of $83 million since December 31, 2017, including $50 million of an undrawn revolver. We also continue to maintain one of the lowest net loan-to-value profiles in the sector, with a net loan-to-value of 55%. In addition, the earliest debt maturity is 2022. Moving to the second bullet; we have made strong progress executing our fleet growth and renewal strategy, capitalizing on attractive asset values at the bottom of the cycle. Since our spin-off in December of 2016, we have invested $600 million without issuing equity, in nine modern vessels, including six VLCC’s acquired in the second quarter as well as the two Suezmax vessels and one VLCC acquired in 2017. In addition to investing in modern vessels, with an average age of 2.3 years, we continue to opportunistically sell older ships, including three since our second quarter call, with an average age of 16.5 years reducing our fleet age by three years to 8.6 years, and increasing…

Thank you Lois, and good morning everyone. Let’s move directly to reviewing the third quarter results in more detail. Before turning to slide nine, let me quickly summarize our consolidated results. Net loss for the third quarter was $47.8 million or $1.64 per diluted share, compared with a net loss of $21.8 million or $0.75 per diluted share in the third quarter 2017. This difference primarily reflects the impact of the loss on vessel sales, including an impairment charge of $17.4 million. Excluding these items, net loss was $30.4 million or $1.04 per share. Also reflected in net loss was reduced TCE revenues of $5.2 million and higher interest expense of $6.1 million, compared to the prior period. A decrease in equity and income of affiliated companies of $7.5 million also contributed, probably due to the leverage placed on the FSO JV as well as a reserve for potential off hire claim on one of the LNG vessels. These factors were offset to a large degree by decreases in expenses associated with the changes to the company’s debt facilities, which aggregated $1.2 million as well as decreases in vessel expenses of $2.7 million, depreciation and amortization of $1.2 million and general and administrative expenses decreased by $1.1 million. Now let’s turn to slide nine. As reflected in the chart, which is top left; consolidated TCE revenues for the third quarter 2018 were $51.3 million compared to $56.5 million in the third quarter of 2017. This decrease was principally driven by lower average daily rates earned across the VLCC and Product Carrier fleets this quarter compared to Q3 of last year, as well as fewer MR revenue days resulting from vessel sales and redeliveries of charter rents during late 2017 and 2018. Let me now discuss results of our business segments…

Thank you very much, Jeff. Please turn to the summary page on slide 15. During the first nine months of 2018, we’ve taken important steps to increase our earnings power ahead of the market recovery, while ensuring a strong financial position. Notably, our liquidity position in the third quarter remained strong at $174 million, representing an increase in total liquidity of $83 million since December 31, 2017. In addition, our current net loan-to-value is a very reasonable 55% and our earliest debt maturity is not until 2022. Our considerable success, growing and modernizing the fleet has enabled International Seaways to decrease its average age by close to three years and increase our deadweight capacity by 13%. Based on our increased scale, reduced age profile of under nine years and significant operating leverage, we are well positioned to benefit from a strengthening rate environment, with 38 vessels trading in the spot market, and reached that $5,000 per day improvement in rates represents $68 million in EBITDA and $2.35 in EPS annually. Our decision to install scrubbers on 10 modern VLCC also strengthens the company’s ability to take advantage of potentially stronger tanker markets resulting from the IMO 2020 regulation. As both, crude and product tankers began to benefit from the increased transportation demand. Since becoming an independent publicly traded company, in December of 2016, we have deployed capital in a disciplined manner with a focus on renewing and growing the fleet at the low point in the cycle and creating significant value for our shareholders. We believe our considerable progress has further enhanced International Seaways ability to take advantage of recent rate improvements as well as broader recovery in the crude and tanker sectors. Thank you very much. We will now open up the call to questions. Operator.

[Operator Instructions]. And our first question comes from Magnus Fyhr of Seaport Global. Please go ahead.

Yeah, good morning. Just one question on - I mean much of the focus has been on renewing the larger ships with your VLCC acquisition. You know with IMO 2020 coming up, how do you think about repositioning your, older ships maybe the Panamaxes and LR1s? You know I guess there will be some ships there, and the new fuel oil coming out. Just wanted to see your thoughts there? Thanks.

Yeah Magnus, I’ll take that question. Our Panamax fleet throughout this economic downturn, you know and the tanker rates has really outperformed, pretty much other sectors and certainly other competitors of similar size, and we expect to continue to be able to do that with our ships deployed in Panamax International with Ultragas of Chile and Flopec of Ecuador and really doing a lot of triangulation trade in North and South America. So, I think to your point as LR1 strengthens, some of the LR1s that are trading dirty may move out of the dirty sector and into clean, and that can improve the economics across the board.

Okay, thank you. And just one more question on the US crude exports. When you’re talking with your clients, you know refineries, what are there their concerns right now with the upcoming IMO 2020, and also, you know what are the constraints thus far as you know pipeline capacity, versus shipping capacity to facilitate more crude exports out of the US?

You know, I definitely would say that, we are seeing constraints on exports to some degree out of the U.S. Gulf, but we still continually increase the exports and crude production will continue to increase. So, on the lightering unit, we are seeing more reverse lightering out of the U.S. Gulf to VLCC as well as the traditional business of lightering from the Middle East crudes into the Gulf. So, you know it seems to me that, that’s the second part of your question, and the first part of your question around concerns, you know I’m sure that the market is very efficient and you start to see the refineries position themselves to take advantage of what they think will be increased spreads on products, and I think that you’re seeing refineries that are more sophisticated will be in position to be a winner in the IMO 2020 shakeout.

Okay great. Thanks, that’s it from.

Thanks, Magnus.

Our next question comes from Noah Parquette from JPMorgan. Please go ahead.

Thanks, good morning. I wanted to ask, in the TI pool, obviously one of the other big expansion is I wouldn’t say anti-scrubber, but doesn’t seem to be installing scrubbers in their ships. Have you guys discussed or how do you think it would shape out? How the kind of the pool is run or how the calculations are done versus ships with scrubbers and ships without?

It’s a good question, and what I would say is that the Tankers International, the founding members that have been part of that pool for 18 years, and we’ve always managed a way to have fair distributions. And in fact, across all of the pools that were involved in - across all of our sectors, this is a question everyone is grappling with and thus far, you know early indications are that, you know those with scrubbers or those without will be able to receive a fair distribution in a manner with their investment. I think an additional piece to that, is very important to International Seaways as we look forward to IMO 2020. You know when we add these newer VLCC to the fleet that are eco, you know their overall consumption is around 15 tons per day less than even modern vessels built in 2010 and 2011, and that’s part of our program for reducing emissions and really kind of moving forward. In addition to a program that we’ve started, I’ll ask Bill from our operational team to join. Bill, maybe you could just touch on our get-to-green program that you’re working across the fleet.

Certainly Lois, thanks. Noah, we have a comprehensive program to reduce our emissions on all of our vessels, scrubbers or not through a really detailed analysis and data gathering and big data approach to every piece of consumption on board each vessel. And in doing that, along with lot of analysis and lot of human interaction from ship-to-shore, our goal there is to reduce our sulfur emissions, our Co2 emissions, that particulate matter, and really raise the profile and change the dialogue within the organization. And looking forward, not just past 2020, but to 2050 when IMO talks about reducing Co2 emissions by 50%, which if we thought 2020 was a challenge, 2050 is going to be something completely beyond. Lois, I hope that was enough.

Yes, thank you very much, Bill.

Okay, that’s great. Thank you.

Thank you, Noah.

Our next question comes from Randy Giveans of Jefferies. Please go ahead.

Thanks. Good morning Lois and Jeff.

Good morning, Randy.

So yeah, long time listener, first time caller, so very excited about this. Now in recent weeks, spot rates have rallied pretty substantially. Obviously VLCC spot rate $50,000 a day, Suezmax $35,000 a day. So if you can kind of talk on the biggest driver of that improvement, and if you expect this kind of improvement to continue throughout 4Q, ‘18 or what kind of rates does this rally have?

So, its. I’ll take that, you know interestingly, I think you have a confluence right now of factors where oil prices were ratcheting up, Brent was up around $85, $86 people were becoming concerned, and you really saw, you know OPEC respond, you know between the United States, Russia and Saudi. I think we are producing about 33 million barrels a day. So you are seeing OPEC respond to the call and oil prices are, I think Brent somewhere around $73 per day barrel right now, which I actually like to see because it’s very important that we have that 1.4 million barrels per day of demand next year. So, I think, you know coming off of a really, really tough market, you saw a lot of scraping, I think the market was more finally balanced than what it looked and then you have a call on the demand because inventories have come down, and the oil market is responding. So, we do expect for that to extend through Q4 to have a pretty robust Q4.

Okay, and then for a chartering strategy. Does INSW play on kind of locking in some of these higher rates for six,12, 18 months perse, switch over some of your spot coverage to time charter?

We, you know are definitely, finally seeing the time charter market react and start to recover. So, that’s something that we will constantly be taking a look at as markets move upward.

Okay. And then last question, you referenced early a little bit, some of the switching between crude and product tankers. Have you thought about switching maybe some of your older LR1s, LR2, from products to the crude trade?

You know it’s interesting. All of our LR1s and Panamaxes are trading dirty, and that PI pool pretty much out earns all the competition. Our only LR2 is actually trading clean, the Seaways Shenandoah, and we are really watching that because the earnings on the LR2 have lagged the Aframaxes, but so far we are committed to keeping her clean for now.

All right. That’s it from me. Thanks again.

Thank you.

Thanks, Randy.

[Operator Instructions] Our next question comes from Peder Jarlsby of Fearnley Securities. Please go ahead.

Hi good morning. Just following a bit up on Randy’s question, last year I guess a few people were disappointed because we saw a lot of the owners positioning them for yearend cargoes, and then the market came off quite brutally. Do you see any indications that this will happen this year as well, or you are a bit more comfortable now?

You know I guess, I mean we are getting very into the, you know immediate, you know next voyages and positioning and its exactly where everything is. I would say, you never have a straight line upward and so we are going to see the market within a band, but I do think that Q4 will stay strong through the end of the year.

Okay. Thank you. And just kind of looking a bit further ahead into 2019, I’m trying to figure out how that year will develop. Do you think, the refinery industry will focus or change its maintenance to the spring turnaround rather than the fall period next year, given that they have to kind of ramp up for gas output in the second half of ’19? Is that something you see affecting the market in a big way?

I mean, I think it’s interesting that the refineries and the oil industry is an extremely efficient market, so you know like yourself we are reading all about it daily and I think that these guys are looking forward and they’ll make their preparations and it’s going to disrupt the market, which you know overall should be positive for us with the amount that we think that refineries will have to increase production next year, so to gear up for 2020.

Okay, that’s all for me. Thank you.

Thanks Ped.

Our next question comes from Phil Lee of Mangrove Partners. Please go ahead.

Hi, thank you for the questions. On the scrubbers that you are installing, have you decided upon the scrubber type, whether it’s open loop, closed loop, a hybrid system or an open loop that’s hybrid ready?

Bill, you want to just go ahead and answer that?

These are open-loop scrubbers, and we do have the ability to convert them to hybrid if we so desire.

And I guess how did you think about the economics of that, like in terms of maximizing the return on your investment versus kind of having some certainty on future changes and what’s the line in port and things like that?

So Phil, one of the things is you know right now you are burning 0.1% sulfur in the ecozones right? So in many of the ports around the world you are burning 0.1% already, where the scrubbers will be able to reduce to 0.1%. Our economics were based on it actually burning NGO [ph] or 0.1% in the ecozone. So we feel that that investment will stand even if in port areas we are burning NGO and not using the scrubber at that point.

Okay, so you are still burning 0.1% NGO in ports in ecozone?

That is a requirement and in many areas in the world that has been in place and will continue to come into effect.

I’m sorry Lois, if I could just jump in for one moment. Phil, yes, our intention in all of our economics is to within the ecozones burn 0.1% fuel and not in those areas scrubbed down to 0.1%.

Okay, thank you.

Thanks Phil.

Our next question comes from Eirik Haavaldsen of Pareto Securities. Please go ahead.

Hi guys. Just a quick one on your docking schedule, because you must have well 15 dry-dockings, either 17 or 20 year old over the coming 18 months or so. How are you thinking? I mean a lot of the tanker optimism is also based on many of those ships leaving the fleet. So how are you thinking in terms of scrapping? You have been scrapping quite a few, keeping them for optionality and then taking them through this fairly costly dockings?

So I guess you know if you watch what we actually have done as you clearly have, we have sold 2 of 5 older VLCCs in 2018 and the remaining vessels presently, it’s our present intention to keep those ships and we will of course look at the economics and as every quarter and every month, every ship goes through this kind of cash flow and we make estimations on whether to keep or to sell and we will continue to do that as part of our rigorous process in making sure we’re looking at the bottom line.

Alright, but then just if you look at your LR1 fleet or Panamax fleet for instance, then you – so far all the renewal focus has been on the big ships. So if you are to continue in that market a couple of years down the road, I guess that’s the segment you will have to focus on then in terms of renewal?

It is true that we do have a number of the Panamaxes that are built in ‘02, ‘03 and ‘04 and those vessels as I mentioned earlier have performed particularly well throughout the market cycle, and certainly for 2019 our present intention is to trade those ships.

Alright, thank you.

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

Thank you very much, and International Seaways, Jeff and I and James, we just all want to thank you very much for joining us, and we look forward to a good Q4 and speaking with you in the next quarter. Thank you.

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