Good morning and welcome to the International Seaways' Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would like to now turn the conference over to James Small, General Counsel. Please go ahead.

Thank you. Good morning everyone and welcome to International Seaways' earnings call for fourth quarter and full year 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 outlooks 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 operational and G&A expenses; estimated bookings and TCE rates for the first quarter of 2019 and other periods; regulatory developments and the company's responses to those developments; estimated dry-dock and capital expenditures for 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 perceptions of historical trends, current market conditions, expected and future developments, and other factors that 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 the 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 2018 and in other filings that we have made or in the future we may make with the U.S. Securities and Exchange Commission. In addition, please note that this morning's presentation will refer to certain non-GAAP financial measures. Please refer to the appendix to our earnings presentation for a reconciliation of these non-GAAP measures to comparable GAAP financial measures. Now, I would 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, and thank you all very much for joining International Seaways' earnings call to discuss our fourth quarter and full year 2018 results. Please turn to slide 4 and we will review fourth quarter 2018 highlights and recent accomplishments. In the last 18 months, we have taken important steps to execute on our disciplined capital allocation strategy and our position at International Seaways with increased earnings power to fully capitalize on the market recovery. Looking at the first bullet, we're pleased to have taken advantage of an improved market in the fourth quarter to return to profitability. This underscores our significant operating leverage in a market recovery as our cash flow and earnings immediately reflected the stronger rate environment. For the quarter, net income was $7 million or $0.24 per share which reflects the impact of a $2.5 million loss related to vessels sold in the fourth quarter. Excluding this item, net income was $9.4 million or $0.32 per share. For the quarter, TCE revenues increased to $93 million and adjusted EBITDA increased to $46.2 million. We were encouraged by the strength of the tanker market in the fourth quarter and how the market is developing thus far in 2019. While the exact timing for a sustained rate recovery is not yet clear, the market has continued to strengthen in Q1 and we see optimistic signs supporting a balanced tanker market in the near-term. This is led by increasing exports out of the U.S. Gulf, sustained growth in global oil demand, and the expected positive effects of IMO 2020 on tanker demand which I will discuss in more detail later on the call. To-date, our Q1 bookings are higher than Q4. And based on our spot market upside and significant operating leverage, we…

Thank you, Lois and good morning everyone. Let's move directly to reviewing the fourth quarter results in more detail. Before getting to slide 11, let me just give a quick summary of our consolidated results. Net income for the fourth quarter was $7 million or $0.24 per diluted share compared with a net loss of $90.7 million or $3.12 per diluted share in the fourth quarter of 2017. The 2018 results reflect the impact of loss on vessel sales including impairment charges of $2.5 million. If we exclude these items, net income was $9.4 million or $0.32 per share. Our strong results in the fourth quarter were driven by International Seaways significant operating leverage and its success in growing and modernizing its feet. Reflected in the net income were an increase in TCE revenues of $27.9 million, a decrease in vessel impairment charge of $79.0 million compared to the fourth quarter of 2017 and a decrease in vessel expenses. These factors were partially offset by increases in charter hire expenses, principally attributed to the company's lightering business and a decrease in equity and income of affiliated companies as well as a slight increase in interest expense. Now, if you would please turn to slide 11. I'll first discuss the results of our business segments beginning with the Crude Tankers segment. TCEs for the Crude Tankers segment were $71.6 million for the quarter compared to $42.1 million in the fourth quarter of last year. This increase reflects our success in improving the age profile and the capacity of the fleet, and primarily resulted from the impact of higher average blended rates in all of the VLCC, Suezmax and Aframax sectors with spot rates climbing to approximately $31,700, $30,600 and $19,000 per day respectively. The increase was also attributable to increased revenue…

Thank you very much, Jeff. If you please turn to page 18, we'll do the summary page. 2018 was a very important year for International Seaways. We executed on our disciplined capital allocation strategy. We invested $600 million in modern vessels at the bottom of the tanker cycle without issuing any equity. We reduced our fleet age by nearly three years. We grew our deadweight capacity by over 11% and we increased the fleet capacity over its lifetime by 45%. In accomplishing this critical objective, we strengthened our earnings power and maintained our financial strength. We ended the year with liquidity of $168 million, representing an increase in total liquidity of $77 million since December 31, 2017. Highlighting our strong balance sheet, we have also maintained a low loan to value which stands at 50%. And our earliest debt maturity is not until 2022. Since inception International Seaways has differentiated the company in a number of important areas. In addition to our proven track record of being a disciplined allocator of capital, we have a strong reputation for providing safe reliable service to energy customers across multiple sectors including crude products, gas and lightering. We have also demonstrated a commitment to transparency and ESG principal and are proud to be the number one rated tanker company for corporate governance. As we progress through 2019, we're confident that the capital allocation decisions we have made over the past two years position us to fully capitalize on a market recovery. While it's difficult to predict the timing for a sustained recovery, we're optimistic on the outlook for the tanker market based on a number of drivers, including a manageable order book and robust oil demand. We also believe that IMO 2020 and increasing U.S. export could be game changers in terms of tanker demand directly benefiting International Seaways. In addition to our success increasing the company's scale and reducing the fleet's age profile, we maintained significant operating leverage. Every $1,000 increases -- increase in rates corresponds to a $15 million increase in EBITDA and $0.52 in earnings per share. Thank you very much. And we will now open it up the call to questions. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Noah Parquette of JPMorgan. Please go ahead.

Hi. Yes. Great. Thanks. Good morning. I just want to ask about the share repurchase program. Obviously, you guys have done a lot in terms of renewing the fleet, but there's still a couple older ships. It seems like a nice straightforward NAV accretive transaction if you sell those ships and buyback stock. Is that something you're considering, or is it simply -- is the share repurchase program more not unlike opportunistic? Thanks.

Hey, Noah. How are you? Look as the K was filed earlier, you will see that we renewed our share repurchase program for another two years, so we'll have it in place. And we think that's the right thing to do. As well as me and the rest of senior management look at it right now, while we're happy with the liquidity that we have, which is actually higher than -- a little higher than the year-end. We still are very, sort of, prudent and cautious about what we view as extra liquidity. So at this point in time we think the right thing to do is just to sort of hang on to the liquidity we've got.

Yes. That's perfect. Thank you. And then I want to ask about the rates in the LR1 market were pretty good. Can you give some color on what you saw there? Was it something very specific? Or is it a little bit more sustained?

So the -- all of our LR1s and our Panamaxes trade in the Panamax international pool that focuses on South and North America, primarily on the West Coast. We did see very good earnings in Q4 and we've seen that sustained into Q1. All of those ships are trading in the dirty trades. And we have seen that market sustain thus far.

Okay. That’s all I had. Thanks.

Thanks, Noah.

Our next question comes from Magnus Fyhr of Seaport Global. Please go ahead.

Hey, good morning. Just two questions. First, you mentioned that 30% of the fleet will be over 15 years of age come 2020. You have a couple old ships on the Panamaxes and the MRs that are in that range. What is your plan to address that fleet renewal? You have successfully done the fleet renewal on the bigger ships, but should we expect the next focus will be on those vessels?

So how are you Magnus? It's good to hear from you. On our Panamax fleet many of those vessels are not up for CapEx and so well into 2020. And we are earning very well on those ships at the moment. So we routinely take a look at DCF analysis and run our numbers all the time on whether or not these ships are earning their keep. But right now we think that, particularly those older Panamaxes are earning quite well and we expect that to continue. And we are opportunistically – sorry, go ahead.

And should -- on the MRs you extended for time charter rents on four MRs. Should we expect them kind of to remain with the fleet, I mean, given the positive outlook for the MRs? Or do you think about maybe even expanding that exposure?

So we've consoled those particular MRs since their delivery in 2007, essentially. So we have optionality and we'll look at it as we go. But we have kept them in our fleet and we are opportunistically looking to think that with the market volatility we may be able to add more tonnage on the smaller side through charter in.

Okay. And just one last question on the IMO 2020. There's seems like there's a lot of confusion in the market with the implementation starting January 1. I mean you have announced scrubber investments on your Vs. What -- have your view changed at all during the last few months? And maybe you can just highlight what kind of returns you expect, especially how many days you expect to operate these using scrubbers during the full year?

So, Magnus, you have bunched in there in those questions. So we do not expect the implementation date to move at all and our Head of Technical has attended IMO meetings and that date looks to be set in stone. So that's the first part of your question. As far as the number of days that we anticipate to be operating the scrubbers from the very beginning when the team developed the model, they have not counted on us running the scrubbers import. So we are counting on running those subscribers at sea. And based on everything that we've seen, we're still anticipating to basically pay for your scrubbers with maybe like a year or a year and a half, something like this, even as we've seen fluctuations in the forward curve on the bunker pricing.

So do you have -- so what number goes into that return calculation as far as the number of days you expect to use the scrubber? I know -- I mean if you turn to VLCC four, five times a year, I mean, would you expect to at least use the scrubber maybe 80% of the time? A – Lois Zabrocky: We did those numbers. I'd like to come back to you with exactly what that is. And when we worked it out, we ended up coming up with a number of if you have used your scrubber 365 days a year, you would be assuming 40 tonnes of consumption a day. I'm thinking that it's somewhere around two-thirds, one-third time at sea versus time in port, but I'll get back to you Magnus with exact number on that. A – Jeff Pribor: So maybe a little less than 80%, but we'll try to distribute that to everybody. But as Lois said, the returns still look attractive for this capital expenditure decision. Q – Magnus Fyhr: Very good, thanks for taking my questions. A – Jeff Pribor: Sure.

Our next question comes from Randy Giveans of Jefferies. Please go ahead. Q – Randy Giveans: How are you, Lois and Jeff, how are you all? A – Lois Zabrocky: Good, thanks, Randy. How are you? Q – Randy Giveans: A little tired, but doing well. A few quick questions. So if you look at the time charter market, how has that responded to kind of the recent surge in spot rates? And will International Seaways look to secure some one to three year time charters to lock-in some of that cash flow? A – Lois Zabrocky: So you have seen the time charter market respond, but it's been pretty opportunistic thus far because again you've had a strong Q4. You're going to have a strong Q1. But we've seen a lot of shorter-term time charters. And I think that as we head into the second half of 2019, you're going to see the charters there for a longer period like a three-year deal at healthier rates. And then indeed we'll look hard at those numbers. Q – Randy Giveans: Okay. And then just to clarify, how many vessels currently are on time charter I think some of your Aframaxes LR1s may be? A – Lois Zabrocky: Yes, we have six of our Panamaxes that are on short-term time charters on rolling on six months in Panamax International. Q – Randy Giveans: Panamax got it. All right. And then one more question, looking at the lightering business, so 4Q 2018 EBITDA increased to almost I guess $4 million. Now with increasing U.S. crude exports, can you give some guidance for the lightering EBITDA in 1Q 2019 and even 2019 as a whole? A – Lois Zabrocky: So yes, we've -- we closed the year with EBITDA in lightering at $6.6 million. And if you were going to project for us for 2019, we expect to be able to replicate that and potentially increase it, but the year is not always even in lightering. It has a high amount of variability. So we wouldn't want you to take the Q4 and model that going forward on good quarter. A – Jeff Pribor: Yes, but wouldn't annualize that. But that as Lois said, take the full year and figure. Hopefully we move upward there, but it's certainly been a strong performer as you say in large part because of increase in U.S. exports. Q – Randy Giveans: Got it, makes sense. All right. Well that’s it from me. I’ll get back to it. So have a good one. A – Jeff Pribor: Thanks, Randy

[Operator Instructions] Our next question comes from Ben Nolan of Stifel. Please go ahead. Q – Ben Nolan: Hi guys. I did want to say I -- first -- I really appreciate all of the detail and the transparency that you guys given. I think it's very helpful and certainly it makes my job easier. But I wanted to -- and I usually don't like to ask kind of macro-type questions. But Lois, you're really sharp on these kind of things. So as you think through the 2020 implications and the crude slates and who's going to be needing what and those kind of things, how do you envision -- where let's say U.S. crude which is obviously growing quickly. Where do you think that will end up? Will it be different than what we're currently seeing with respect to the mix of Asia versus Europe and so forth? And then extrapolating them in another step, how would that impact sort of the relative demand for the various types of ships VLCCs versus Aframaxes and so forth, any thoughts there? A – Lois Zabrocky: Thanks Ben. Yes, you’ve given us a tough one. It's really interesting. I think what we're seeing right now in the market and the U.S. crude you're seeing go very long haul on the VLCCs and they are benefiting while especially with Venezuela being very impacted and reduced in their exports you're seeing Aframaxes in particular hurting. So as you look at it with OPEC reduced and with Venezuela reduced, the price between Dubai and Brent is basically there at parity. And that's making U.S. crude exports very attractive. So you're really seeing that being pulled east for long haul. So I think it's interesting because on top of the turnarounds that we're going to see for 2020, we're compounded by these geopolitical events, which includes Venezuela. And I think the thing that we're starting to watch now is that the U.S. Gulf producers are starting to pull heavy crude in. Some is coming over land from Canada which doesn't help us. But we're also seeing them pull fuel oil from the continent. So we may start to see those Aframaxes pickup a bit as the U.S. Gulf sources crude. So I think we're seeing -- we're in for some volatility as you see trade patterns changing more refinery turnaround. And then on top of that, all this OPEC reductions and geopolitical pressure on Venezuela.

Okay. No, that's helpful. And yeah, I guess, that's the whole business of prognostication one just have to see. But the -- switching gears a little bit, obviously even since December when you guys did your Analyst Day, there's been certainly some movement on the LNG side, specifically around Qatar with MNX on having gone made a final investment decision at Goldman pact. I was curious if you've had any conversations or maybe just how you're thinking about the possibility of doing potential add-on Q-Max deals or have you with Nakilat or the Qataris more generally? Is that on the radar something that you would consider, or obviously, they're even gone so far as talk to remember the shipyards are ready? So, is that something that is gaining traction in your view?

We're in constant communication, obviously with Nakilat our joint venture partner and our customer Qatar Gas. Our existing vessels are operating fully utilized. And if we see an opportunity in the future, we're definitely open to that. Right now, we still feel like we have some work to do on strengthening our conventional tanker fleet base, but LNG is something which obviously will be growing a lot in the future and we watch it very closely.

Okay. Well, that’s it for me I think. Again, no hit on the other one, lower rates I mean, you guys are just crushing it. So nice work there.

Thanks, Ben.

Thanks, Ben.

Our next question comes from Liam Burke of B. Riley FBR. Please go ahead.

Thank you. Lois, good morning. On the scrubber investment, you highlighted the 10 larger vessels that you are -- you made the decision and the economics are pretty clear. Is there any thought of moving down the feet into smaller vessels or does it make sense, or you're pretty much firm on the written analysis you've done on the -- on just the VLCCs?

That's really a great question. And when the team developed the model, they really sort of handicapped by size bunker availability. And we're pretty happy having targeted the VLCCs. You see like BP just you can Google it, came out yesterday with a map of where they're going to have various fuel availability and they'll have heavy sulphur fuel availability in Fujairah, Rotterdam, Singapore off the Cape. And these are important positions for the VLCCs. We're not so certain that it would be everywhere where our MRs would be calling. So, we're lucky in that we have a diversified fleet. And we think that having just done the VLCCs is going to be the best balance approach that we can take for now.

Okay. And on your fleet your breakeven rates continue to decline. You had a nice step down. How much more is there to go? Or is there anything you see you can do to keep that trend going?

Well, Liam, it's Jeff.

Hi, Jeff.

In fact some of the -- it reflects financing in part. So, you see the Vs and Suezs are a little higher, because they're newer and have -- financing on the Vs was higher loan to advance ratio from the six Vs that we acquired last year. But overall, we think it's from pushing hard on all areas that we can and our philosophy on OpEx is to push hard, but not cut corners, right? So, we don't want to be the lowest, but we want to keep a close eye on it and we do and to push hard on G&A. So, I think we just have to be vigilant. It's a kind of business where a little bit of cost matters. So, we will -- thanks for the complement, we'll stay on it.

Okay. Thanks, Lois. Thanks, Jeff.

Thank you.

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 everyone for joining us today and participating in our call and we look forward to another good quarter in the first quarter of 2019. Thank you very much.

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