Good morning, and welcome to the International Seaways Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note, this 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 Release Conference Call for the Second Quarter of 2019. 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, management may make forward-looking statements regarding the company or the industry in which it operates, which could include, without limitation, the following: statements about the outlooks 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; the company's strategy; purchases and sales of vessels and other investments; anticipated financing transactions; expectations regarding revenues and expenses, including vessel expenses, charter hire expenses and G&A expenses; estimated bookings and TCE rates for the second half and other periods in 2019; estimated capital expenditures for 2019 or other periods; projected scheduled dry-dock and off-hire days; the company's consideration of strategic alternatives; 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 risks, uncertainties and assumptions, many of which are beyond the company's control, which could cause actual results to differ materially from those implied or expressed by those statements. Factors, risks and uncertainties that could cause International Seaways' actual results to differ from expectations include those described in its annual report on Form 10-K and its quarterly reports on Form 10-Q 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 second quarter 2019 results. Over our 2.5-year history, International Seaways has successfully implemented our disciplined and balanced capital allocation strategy, which has been focused on renewing our fleet and our earnings ability ahead of the market recovery. The second quarter marks a significant turning point. Not only have we spent $600 million renewing our fleet, in the second quarter cash and liquidity reached their highest levels ever at Seaways. So we are able to turn towards other accretive capital allocation decisions, starting with deleveraging. Firstly, during the quarter we strengthened our balance sheet and our liquidity. Consistent with our approach to allocating capital, we made a prepayment of $10 million on our 2017 term loan facility in July, using restricted cash set aside from the proceeds from our vessel sales. During the second quarter, as part of our fleet renewal program, we also sold and delivered an inefficient 2004-built MR to its buyer, ahead of its dry dock, and agreed to sell our final 2004-built MR, which was then delivered to its buyer in July. Jeff will discuss both our recent debt prepayment and vessel sales as they relate to reducing our interest expenses, enhancing our current liquidity position, in more detail later on the call. For the second quarter, our cash position increased by $13 million. We were able to grow our total liquidity, including the $50 million undrawn revolver, to $200 million. This represents nearly $33 million increase in liquidity year-to-date. This is our highest amount of cash and liquidity since our spinoff 2.5 years ago, and we continue to maintain one of the lowest leverage profiles in the sector, with our net loan to value below 50% and…

Thanks, Lois, and good morning, everyone. Before reviewing the second quarter results in greater detail, let me quickly summarize our results. As Lois mentioned earlier, net loss for the quarter was $16.5 million, or $0.57 per diluted share, compared with $18.8 million, or $0.65 per diluted share, in the second quarter of 2018. Excluding the impact of $1.6 million loss related to vessels sold in the quarter, our net loss was $15 million, or $0.51 per share. Now if you could turn to Slide 8. I'd first like to discuss the results of our business segments, beginning with the Crude Tankers segment. TCEs for the Crude Tankers segment were $46 million for the quarter, compared to $34 million in the second quarter of last year. This increase reflects our success improving the age profile and also increasing the capacity of the fleet as well as it primarily resulting from the impact of higher average blended rates in the VLCC, Suezmax, Panamax and Aframax sectors. The increase was also attributable to increased revenue days in the VLCC sector and higher activity in the company's lightering business in the second quarter this year compared to last year. Turning to the Product Carriers segment, TCE revenues were $17 million for the quarter, compared to $16 million in the second quarter of last year. This increase primarily resulted from the impact of higher average daily blended rates earned by our LR1s, LR2 and MR fleets, with spot rates rising to approximately $17,300, $17,700 and $11,600 per day, respectively. Serving to partially offset these increases was a decrease in MR revenue days, which resulted primarily from the sales of 3 MRs between the second and fourth quarters of 2018 and 1 MR during the second quarter of 2019, all of which are part of our…

Thank you very much, Jeff. During the second quarter and year-to-date 2019, we've taken steps to further strengthen our financial position. We ended the quarter with a total liquidity of $200 million. This was up $33 million year-to-date and nearly $60 million higher than we were at our spinoff. We have maintained a low loan to value ratio, which stands at 50%. Our earliest debt maturity is not until 2022. International Seaways remains poised to continue to capitalize on our core differentiators. Specifically, we are in a strong position to further our leading reputation as a disciplined allocator of capital, prepaying $10 million of debt in July, as we focus on enhancing long-term shareholder value. We also maintain a commitment to providing safe, reliable service to leading energy companies as well as a commitment to transparency and corporate governance. We are the number one rated tanker company for corporate governance. As we progress through the second half of 2019, we are optimistic about the outlook for the tanker market, based on the order book being at the lowest level since 1997, robust oil demand forecasts for the second half of 2019 and for the year 2020. In addition, tanker demand game-changers, such as increasing U.S. exports and the upcoming IMO 2020 regulation, will provide incremental benefits to our sizable fleet of crude and product tankers. Importantly, we continue to maintain significant operating leverage to a rising-rate environment. Every $1,000 per-day increase in rates corresponds to $14 million in EBITDA and $0.48 per share in earnings per share. In conclusion, our financial position is robust. Seaways remains a disciplined, transparent company with strong corporate governance, and we are excited about the favorable outlook, with our strong operating leverage poised to take advantage of a recovering tanker market. We will now open up the call to questions. Operator?

[Operator Instructions]. Our first question comes from Randy Giveans, of Jefferies.

All right. So first, kind of on a market question. We're hearing one-year time charter rates of $35,000, maybe $37,000 a day for Eco VLCCs, without scrubbers. Have you gotten any bids for some of your vessels at or near those rates? And also, obviously, 10 of your vessels, your Vs, will have scrubbers installed, ideally by the end of the year. What is the charter premium for a scrubber-equipped VLCC for a one-year time charter?

Well, Randy, I would say that for a one-year time charter it's a little trickier to identify that scrubber premium. If you're going to look at, like, three years or five years, you're somewhere $4,000 per day, $5,000 per day there.

That's right. And we haven't really received too much interest on a one-year time charter because we're not too keen on doing one-year, given 2020 scrubber retrofits.

Right. Similar to most owners, Randy, if you're going to do a one-year time charter really starting in the fourth quarter for a scrubber-fitted V, we really expect a lot of upside, especially when you have a lot of inefficiency and disruption to the oil markets in early 2020.

Okay. And then before I get to my next question, the 10 scrubbers, are they going to be completed by this year? Or how many are slipping into 2020?

Nothing is slipping. We have scheduled from the beginning for seven of our scrubbers to be installed in 2019 and 3 of them to be in the first quarter of 2020.

Okay. So no delays to that.

No.

All right. Okay. Last question for me. As you mentioned, cash balance, highest level since the spinoff. You have very low debt due until 2022. Outlook is very strong for the back half of this year, obviously 2020. That said, your shares, trading near the lowest level since 2016, early 2017, 30-plus percent discount to NAV. You recently sold those two vessels at NAV. So should we expect INSW to repurchase shares here in the near term since you already have the authorization in place?

Randy, it's Jeff. I think what Lois said, and I'll repeat, is that we're really super pleased at having first allocated capital in our existence to the $600 million we spent renewing our fleet, putting ourselves in really good position for this upturn that is at hand. But still, we generate a lot of liquidity from operations and from selling older vessels, which brings in cash and saves dry dock, right? So we've put ourselves in a position to have the highest liquidity since we've been spun off. And we look at it and say, all right, we've already bought enough ships to be really well positioned. So now we can turn to other types of capital allocation that are accretive. And it isn't like you make a choice of any one thing. They're really all tools that you have in the tool kit; so, deleveraging, share repurchase, dividends. That's where capital is going to go now, and that's what you should be looking for. We started it with deleveraging. We love that because, first of all, it's just good, deleveraging. Secondly, it's flexible. You can always relever if you want to. And really, also keep in mind that a lot of the proceeds that we have in terms of this cash are from selling older vessels and they're really earmarked for deleveraging because of the way that the credit facilities work. So that's where it started. But yes, we're looking at share repurchase, dividends, all of the above for capital allocation in the future.

Our next question comes from Liam Burke, of B. Riley FBR.

Lois, on the sale of the 2004 MR, are you seeing better pricing or liquidity in those markets? And does that affect your decision on what to do with some of your older MR vessels?

Well, the sale of these final two MRs were the completion of a program that we had of 6 2004-built MRs, specifically. And the prices that we were able to realize for those had indeed strengthened, and there was more inquiry in the last quarter. So we were able to realize some of that benefit.

Okay. And Jeff, you're talking about deleveraging. You prepaid $10 million in debt. You've got a slug of high-cost debt. I know it's due in 2023, but is there any thought on prepaying that? Or how do you look at that?

Well, thanks, Liam. First of all, the $10 million was applied to that. So yes, we're definitely -- that's a start, right? So I would say this, that that debt which you called high-cost, if you mean the Term Loan B, that was really put into place or amended for the acquisition last year, as was some of the other debt, some of the unsecured debt we have, as well. And they have the ability, especially the unsecured, the ability to call it next year, and the Term Loan B can be called at any time, although there's a slight premium until December 31 of this year. So really the best way to say it is that as we enter this period of time where we're generating a little bit of additional cash, as we discussed, we'll be looking at the entire balance sheet and seeing what's the right thing for us to do as we head into this recovery. So it will -- we're evaluating it sort of top to bottom.

[Operator Instructions]. This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Lois Zabrocky, CEO, for any closing remarks.

We just want to thank everyone for joining us for our second quarter earnings call. And enjoy the rest of your summer. We're looking forward to that tanker market recovering. Thank you very much.

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