Good morning. And welcome to the International Seaways Second Quarter 2021 Earnings Conference Call. Participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. 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 the second quarter of 2021. Before we begin, I would like to start off by advising everyone with us on the call today of the following. During this call, management may make forward-looking statements regarding the company or the industry which it operates. These statements may address, without limitation, the following topics: outlooks for the crude and product tanker markets; changes in oil trading patterns; forecast of world and regional economic activity and of the demand for and production of oil and other petroleum products; the effects of the ongoing Coronavirus pandemic, the company’s strategy, anticipated cost savings and synergies and benefits from our merger with Diamond S shipping; any plans to issue dividends; our prospects, purchases and sales of vessels; construction of newbuild vessels and other investments; anticipated financing transactions; expectations regarding revenues and expenses including vessel charter hire and G&A expenses; estimated bookings and TCE rates in the second quarter of 2021 or other periods; estimated capital expenditures in 2021 or other periods; projected scheduled drydock and off-hire days; the company’s consideration of strategic alternatives; the company’s ability to achieve its financing and other objectives; and other economic, political and regulatory developments around the world. Any such forward looking statements taken into account various assumptions made by management based on a number of factors including management’s experience and perception of historical trends, current 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 that could cause actual results to differ materially from those implied or expressed by the statements. Factors, risks and uncertainties that could cause International Seaways’ actual results to differ from expectations, include those described in its quarterly report on Form 10-Q for the first quarter of 2021, our 2020 annual report on Form 10-K, 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 2021 results. During the second quarter, we maintained an unrelenting focus to strengthen our industry position and to enhance our ability to create long-term value for our stakeholders. On slide four, we review our transformational in accretive merger. We detail our fleet optimization and recap our return of capital to our shareholders. Starting with the first bullet, we’re excited to have completed a merger with Diamond S last month. The merger solidified Seaways status as an industry bellwether, with enhanced scale and capabilities, as well as significant financial strength. Combining the two leading U.S. based diversified tanker owners, with long-term customer relationships and a shared deep culture of achieve -- achieving stringent, safety and operational standards. We’re now poised to deliver compelling strategic and financial benefits to our shareholders and to our stakeholders, as the tanker market moves into its recovery stage. The merger doubles our net asset value and triples the size of our fleet to 100 ships. We have created the largest U.S. listed diversified tanker company. Among other benefits, we expect the merger to be accretive to both earnings and cash flow per share. We estimate we will realize annual cost savings of $23 million and revenue synergies of $9 million. Importantly, we expect these synergies to be fully realized in 2022. We have increased our equity market capitalization and our trading liquidity, which we anticipate will provide opportunities for a rewriting of our equity valuation going forward. We have preserved our financial strength and we maintain one of the lowest net leverage ratios in the tank for shipping. The next bullet, our second quarter net loss was $14.3 million, $0.51 per share, excluding vessel impairment…

Thanks, Lois, and good morning, everyone. Let’s move directly to reviewing the second quarter results in more detail. Before turning to the slides, let me just quickly summarize our consolidated results. In the second quarter we had EBITDA of $10 million. The net loss for the quarter was $18.8 million or $0.67 per diluted share, compared to net income of $64.4 million or $2.24 per diluted share in the second quarter 2020. When we exclude the impact of vessel impairment charges and merger and integration related costs, the net loss narrows to $14.3 million or $0.51 per diluted share. Now if I could ask you to turn to slide 11. I’ll first discuss the results of our business segments beginning with a Crude Tanker segment. TCE’s or time charter equivalent for the Crude Tanker segment were $31 million for the quarter, compared to $106 million in the second quarter of last year. The decrease primarily resulted from the impact of lower average daily rates in each of the VLCC, Suezmax, Aframax and Panamax sectors. Turning to the Product Carrier segment, TCE revenues were $14 million for the quarter, compared to $29 million in the second quarter of last year. This was also due to lower period-over-period average daily blended rates earned by our LR2, LR1 and MR fleets fleets. Overall, as reflected in the chart top left, consolidated TCE revenues for INSW for the second quarter 2021 were $45 million, compared to $135 million in the second quarter of 2020. The decrease was principally driven by substantially lower average daily rates across the fleet for this quarter compared to last year second quarter. Looking to turn in the top right of the page, adjusted EBITDA was $10 million in the quarter, compared to adjusted EBITDA of $96 million in second…

Thank you so much, Jeff. On slide 18, I want to conclude our call by detailing the strategic vision of the new International Seaways. We’re focused on capitalizing on our position as a tanker sector leader, executing on our discipline and balanced capital allocation strategy, and taking further steps to maximize shareholder value. With enhanced scale and capability combined with the best-in-class ESG track record and focus, we’re ideally suited to continue achieving the highest operational standards and to meet the evolving needs of leading energy companies and customers. Based on our diversified fleet, and crude and products power alleys, we are poised to benefit from positive long-term industry fundamentals. We will benefit as global oil demand recovers, as inventory destocking completes and as OPEC+ production increases as per their plan. Based upon the accretive nature of our merger, we expect costs and revenue synergies of $30 million -- $32 million to be fully realized back in 2022. Complementing our sizable operating platform, we have maintained our balance sheet strength, following the close of the merger, positioning Seaways to capitalize on attractive opportunities for our shareholders in the diverse rate environment. As part of our strategic focus, we’ll continue to remain true to preserving our financial strength, which has served us well at this point in the cycle and to execute in accretive and balanced capital allocation strategy. We will prioritize returning capital to shareholders, as highlighted by our recent merger related $31.5 million dividend, representing $1.12 per share, a regular quarterly dividends, as well as our outstanding $50 million share repurchase authorization. To reiterate, we’ve returned over $70 million dollars to shareholders in the form of special and quarterly dividends and share buybacks since the beginning of 2020. Finally, creating enduring shareholder value remains of upmost importance to Seaways. Based on an industry leadership increased upside to the crude and product tanker market recovery over both the near and longer term, as well as the larger market capitalization, we believe we have the potential to have our equity rerated and close the NAV gap. Thank you very much and we will now open it to questions.

Thank you. And the first question will come from Omar Nokta with Clarksons. Please go ahead.

Thank you. Hi, Lois. Hi, Jeff. Good morning and congratulations on officially closing the Diamond S deal last month.

Thank you very much.

Hi, Omar.

Yeah. I’ve just had a question. Obviously, you mentioned getting to the 100 vessel mark, which is obviously gives you critical mass and a significant footprint. You are selling some older ships and which is something you telegraphed. So it’s not a surprise. But I do want to ask maybe just about the Panamaxes is in particular, you sold for those and take away a big chunk of your fleet capacity in that segment. I know those vessels have been involved in the South America niche trade and so just wondering…

Yeah.

… kind of about those, are those to be replaced or is that trade changing in the future?

No. No. Definitely, Omar, those vessels, unfortunately, will turn 20 in early 2022 and it’s not part of our strategy to operate the tankers past the 20-year mark. And what we have done is sold some of those for green recycling or consistent with the Hong Kong convention and we’re taking advantage of what are really strong recycling prices right now. And then, indeed, our trading in Panamax International is really a critical niche component where we earn a premium in trade and we will be supplementing in Panamax International. In fact, we have just recently chartered in a vessel for a couple of years. So we will look in that Panamax pool to sort of bulk back up our presence there. And the sale of the Panamax is simply strategic, because those vessels are going to turn 20 years old and then tactical, because we wanted to take advantage of where the very strong recycling prices are today.

Got it. Thanks, Lois. It’s pretty clear. And you’re -- and it’s a good point, the -- we have seen scrap prices increase significantly this year. Just sort of on the -- maybe the question regarding, overall, you’re looking at potentially other non-core assets to sell. Any color you can give on what you would deem as non-core at the moment, any specifics you can share?

Well, we always say that, we have a constant calculation going on the vessels in all of our fleet on their discounted cash flow versus where their prices are in the market. And so, we will continue to look to prune, it is just a part of our ongoing strategy, the vessels that are older and where we can take advantage of capital preservation.

Okay. Got it. And Lois, maybe just one final follow up, I wanted to ask just about the 12 ships you’ve agreed to sell. You are going to be bringing in $125 million and netting over -- you have talked about $75 million after debt repayment. Obviously nice to get that cash cushion. But generally speaking, the $125 seems a little low relative to at least what I had assessed a vessel that. Is there anything you can share there on that or am I just being too aggressive on the valuation?

What I would say is that we’re happy with the prices that we’ve achieved, Omar, and as you go through the fleet list and sort of detail it out, some of these vessels are older heritage Seaways ships that do not have mortgages on them, such as the Tanabe and some of these Panamaxes, as I mentioned, are being sold for recycle. So you may have had a different secondhand value on those ships. And -- but as I said, those prices are -- the secondhand recycle prices are very strong and the secondhand value have held up really even though the spot market has not. So we feel that we’re quite happy with the prices that we’re achieving across the fleet. And in particular, I think, the factoid that we shared where we’ll be saving on drydocks in ballast waters. So some of the vessels that we’re saving are imminently drydock due and do not have ballast water treatment systems on Board. So we’re saving that expense and that off-hire, as well as those capital outlay and some of those prices reflect that.

Okay. That makes sense. Well, thank you for that. Appreciate the color overall. I will turn it over.

Thank you so much, Omar.

Yeah. Thanks.

And the next question will be from Randy Giveans with Jefferies. Please go ahead.

Howdy, Lois and Jeff, what is going.

Hey. How are you Randy? We’re good.

Good. Yeah.

Hi, Randy.

Congrats. Congrats on the merger, consolidation is certainly a hot topic in the industry. So glad to see INSW actually making something happen here. So I guess looking at the benefits of the merger. You mentioned the $23 million in cost synergies will be in 2022. Just curious if those cost savings ramp over time or kind of the timing of it and where exactly should we look for the cost savings to flow through the income statement?

So really, of course, some of these costs are fairly quickly to be realized, for example, the cost of being a publicly traded company, immediately fall away, for example, having to seated boards, having to insurance dirt, D&O policies, having to external auditors, having to rent low -- facilities. So those types of structural costs and that’s where you will look for those will fall away more quickly. On additional costs, we have a very structured integration plan and we will be realizing additional savings over time. And from the revenue perspective, the vessels that we are have taken over and we are shifting the vessels from capital to manage commercial pools on the product areas, such as, Norient and CPTA, which is our ultra gas pool and on the Suezmaxes to Penfield. And so those revenue synergies we believe will start to accrue immediately.

Perfect. Okay. And then looking kind of industry-wide you operate, clearly, both crude and product tankers. There’s been a debate on to kind of the strength of both in terms of outlook. So I guess which sub-sector do you expect to improve first and which is likely to outperform the other, let’s call it, in 2022?

So really as we speak, I would simply look at where the market is today and the MR sector, in particular, in the Far East, has strengthened over the last week and then that is flowing through even LRs and LR2s and now into the Western Basin. And by strengthening -- everything is relative, we’re still talking low double-digit time charter equivalent returns. However, you can see the Product Carrier fundamentals being more closely balanced at the moment then on the crude side.

Got it. Okay.

So we expect the crude side, as China’s adjusting right now, from what we observe. They really have a COVID zero tolerance policy, so they’re locking down with this Delta variant. So that’s affecting things. But we -- China has been out in the lead in recovery of demand post-COVID or we’re not through it yet, but more very resilient. So we do expect the crude side to also strengthen in 2022.

Okay. That’s it for me. Thanks so much.

Thank you, Randy.

Thanks, Randy.

And the next question will be from Ben Nolan with Stifel. Please go ahead.

All right. Thank you. Good morning, Lois, Jeff. So I’ve got a couple, I want to start with something that you are talking about at the end there, well, long and short of it is, you’re selling older assets that free up liquidity, asset values have appreciated. You’ve done share, I think, you did $30 million a share repurchase of last year. How do you think about closing the value, proactively closing the value gap using share repurchases or you kind of need to just bet down the hatches and wait for things to get a little bit better first?

So, how are you, Ben? And I’ll take my first stab and then I’ll give it to Jeff. So, I do think that it is imperative that, we watch very closely the developments in the spot market recovery, Ben. The rates that have been experienced, due to lower demands have been and continue to be below cash breakeven level. So that is priority number one. And then beyond that, clearly, we do still have a $15 million repurchase program. And I’ll turn it over to Jeff to kind of talk about balancing things.

Yeah. It’s amazing, but it’s really only been six quarters since we began to return cash to shareholders anyway, with the redo of our balance sheet where we put in more flexible debt that allowed for that and instituted the fixed dividend -- quarterly dividend that we mentioned on the call. And so, I think, the answer to your question is, we -- what we are going to do, both what we’re going to do and how that’s going to help we raise the stock and just keep doing it. It’s just a quarter-over-quarter we have to be patient and continue to execute with numbers like, last year 8% total, however, you want to call it, return to shareholders, shareholder yield, something like that. Those are -- those high single-digit numbers, if you look at other industries, I think, those are good benchmarks, right? So we’re at 8% so far this year and we got some more time to go. So, yeah, Lois said, we balancing, of course, with an eye to it’s a crummy market, to say the least, but how can we do some more of that and just continue to do it quarter-by-quarter. And I think that over time that the capital allocation track record is what earns a better valuation. And the only other factor I’ll say is that, we’ve been kind of busy with this, to say the least, with preparing for the merger, which is now done and put that in quotes, because everyone on, Lois and the whole rest of team know, the day the closing is not done. I mean, it’s legally closed. But there’s so much work to do. And it’s great welcoming all the new Seaways team members, as well as Lois said, but there’s a whole lot of work been going on and continuing to go on. But I think we’re -- as we get to the end of summer here, we’re going to just tell the story. So we just need to talk to investors and say, hey, look, this is now the largest diversified publicly traded tanker company that there is, go ahead. We have got around 100 ships, we have got $2 -- over $2 billion of assets and a growing track record, six quarters and going of actively returning cash to shareholders. So miracles don’t happen overnight. But we’ll just be patient and keep doing -- walking the walk and then we’ll talk to talk about walking the walk. So I hope that’s going to do it over time, Ben.

Yeah. So a little bit sort of in that vein still, I guess, the -- you sold 12 ships, I guess, right? They’re all older ships. It looks like there -- obviously, just doing -- just running down the list, but it looks like there’s 12 more that are 15 years old or older. Is it fair to assume that you’re still high grading the fleet and as that the -- as those sales happen and the leverage falls and you’re sort of increased, you have an increased level of flexibility, did -- whatever do things like share repurchases or have you kind of done what you need to do with that assets?

So, Ben, no, I would say, we will continue, just as you say, and we’ll take into account and balance everything like, what is the pace of the recovery? And we’re not in a half to situation. These are opportunistic and purposeful moves that we’re making and we want to see what -- how quickly will that market come back? And then we expect both our earnings to go up and those seconds value -- secondhand values to go up. So, we’ll be careful and judicious, but indeed we will continue to turn the fleet going forward.

Okay. And then shifting gears and for my last question here. I’m curious, we don’t talk a lot about the lightering business, it’s been this nice sort of asset light cash flow generator. I am curious now that sort of we’re hopefully closing in on the latter part of all this COVID stuff. How do you think about that business going forward, are things fundamentally different in the Gulf Coast or how does that fit strategically in with what you’re doing and what are the long-term prospects there?

Ben, I think, that the lightering fits quite strategically with a fleet, a spot fleet of our size and it brings us very close to the customers, it’s a high touch business, it’s in service intensive. And so it really allows you to deepen the relationships. The trading patterns have been affected by COVID, just like everything else, right? So fewer barrels coming in, fewer vowels coming out of, particularly the U.S. Gulf, but we have a pretty diversified base. So we see Panama is having strength. We’re lighting on the U.S. West Coast in the Bahamas. So, we think that it fits well with us. And in particular, we saw a strong month in June, where you start to see these underlying volumes of oil have increased a lot, even though we haven’t seen a spot resurgence in race. The volume of trade has increased. And lightering will come along with that. I don’t know if you wanted to add anything, Jeff.

No. It did recap.

Yeah. All right. Appreciate it. Thanks, guys.

Thank you.

Thanks, Ben.

And the next question comes from Magnus Fyhr with H.C. Wainwright. Please go ahead.

Yeah. Good morning, Lois. Good morning, Jeff.

Hi, Magnus.

Just I have a question on the liquidity. I mean, you have a strong balance sheet. You’ve sold some assets and you have some more assets probably left to sell. With the merger, it looks like the amortization picks up, I guess, there’s about $30 million plus from the Diamond side. You paid a dividend this quarter? What do you guys have left in the toolbox here to address to extend the liquidity runway and to deal with some of the uncertainty with a delayed recovery and potential for this to run a couple more quarters?

Do you want to jump in there, Jeff?

Oh! Sure. Yeah. Magnus, we -- we first of all, we start in a really good place and if I back it up a couple of quarters, the fact that we started the year or ended last year with the positive COVID bump from floating storage and all the rest, with well over $200 million liquidity, gave us the opportunity to execute on the Diamond S merger, right? So that, yeah, as far as the stock deal, there were cash costs associated with it and approaching that with a good really strong balance sheet and a lot of clarity was super helpful. As we said now, we’re at $200 of liquidity plus, even after the merger is completed with most of those asset sales, as we listed in the press release and the slide deck and in the script, still to be completed, right? So we’re really in a strong position. So they don’t need to do much else. But there’s other things that that for the tools and the toolkit, we have a number of unencumbered vessels from the INSW core facilities or kind of what was the transition facility fleet, sorry, I didn’t say that correctly, that we paid off last year. So, those are vessels that, if we don’t want to sell them, like some of those older Panamax that are still not at the recycling day, so very valuable to us. You can always look at putting leverage on those. So, there’s a number of tools that we have, but I think we feel really good about where we stand right now and even allowing for, if it turns out to be a couple more quarters of this rate environment. So I hope that answers your question, Magnus, but.

Yeah. I mean, any thoughts on consolidating some of that debt, maybe to extend the amortization or increase the revolver, I mean, with the increased size for the company?

I just put this -- I mean, yes, I mean, I would put this way, we will look at it was really good that we didn’t need to do anything around the balance sheet in order to close the transaction, as Lois and I both been saying, it’s a lot going on. And if we had to do a lot of balance sheet gymnastics, that just would have made it that much more complicated. So we’re really grateful that, with the bank group that we have significant overlap with the former legacy Diamond S bank group really was seamless. Now that said, there’s absolutely, you’ve got a pretty robust amortization, which we gave you there in the -- on the charts of like $47 million a quarter. We know near-term maturities. But, sure, there’s probably some low hanging fruit there in terms of smoothing out that or pushing out that or evaluating optimization of the balance sheet. So no urgency to it. But, yeah, we will -- we always look at things we can do to optimize the balance sheet. So we’ll do that.

Great. Well, thank. Thank you.

Thank you.

Thanks, Magnus.

The next question will be from Greg Lewis with BTIG. Please go ahead.

Hey. Thank you, and good morning, everybody. Lois, I kind of wanted to dive in and talk a little bit more about what Omar was talking about the fleet. I guess, I’ll ask, in terms of as we were selling some of the vessels, not for the retirement, but just kind of, hey, they’re no longer fitting our profile, we pick them up and…

Yeah.

… then Diamond S acquisition, what was the type of appetite in the market? And really what I’m wondering is, as I think a lot of us are looking at ship prices for secondhand vessels going higher and whether it’s -- your -- how you’re talking about rates or we look in the rate market, rates are -- rates haven’t been doing that well for a while. So just kind of trying to understand, we’re seeing that upward asset price inflation, without that rate follow through and we’re early in this environment, are there multiple buyers of assets? I mean, as you saw that was there, was there more -- was there a lot of interest or was that kind of like a one-off where somebody was willing to kind of plant the flag to pick some tonnage?

Yes. Right. Combination of individual asset sales and some in a group, and that secondhand market has -- it’s not extraordinarily deep. It will be deeper when you see that the rates have recovered. But it has really held in there and that -- that’s definitely a reflection of newbuilding prices, steel having gone up and kind of holding up. The new piece of the market and then the recycle price is holding up the other side of the market. So there is interest from multiple buyers on each one of the ships that we have transacted MOAs on.

Okay. Great. And then just I’m sure this is a question that you’ll be getting probably until you do another one. You successfully won those three dual fuel LNG VLCC contracts. I mean could you talk a little bit about the state of that market? I mean every day it’s seems somebody is talking about ESG and the migration towards a maybe LNG or some other type of alternative fuel. Is -- what is -- is there ongoing tenders right now for dual fuel LNG contracted tonnage?

There are still a couple of open inquiries, very bespoke and specific, right? So again that is not an incredibly deep market, definitely the most that you’ve seen has really been Aframaxes and VLCC. I do believe we will continue to see inquiry for dual fuel. Certainly, if you look at the LPG market, they’re building vessels that burn LPG, right? So, you’re seeing some Product Carrier newbuildings be methanol burning, right? So this…

Okay.

…this is for us a -- obviously, we’re following everything, we are watching everything and keeping up with all of the innovation that’s going on, because this is going to be something we talk about every call for the foreseeable future.

Yeah. Okay. All right. Thank you very much, everybody.

Thank you.

Thanks. Thanks, Greg.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over the Lois Zabrocky for any closing remarks.

I’d just really want to thank everyone for joining Seaways on our second quarter 2021 earnings call. And we really look forward to tanker market recovery and being able to close our price to our net asset value gap going into end of 2021 and into 2022. So thank you very much.

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