Ladies and gentlemen, good morning. Thank you for your patience, and thank you for attending today’s International Seaways' Third Quarter 2022 Earnings Call. My name is Amber and I will be your moderator for today's call. [Operator Instructions] It is now my pleasure to hand the conference over to our host James Small, General Counsel with International Seaways. James, please proceed.

Thank you, Amber. Good morning, everyone and welcome to International Seaways' earnings call for the third quarter of 2022. 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 in which it operates. Those statements may address, without limitation, the following topics: Outlooks for the crude and product tanker markets and changes in trading patterns; forecasts of world and regional economic activity and of the demand for and production of oil and other petroleum products; the effects of the ongoing conflict between Russia and Ukraine; the company's strategy; anticipated cost savings and synergies and benefits from our merger with Diamond S; the effects of the ongoing coronavirus pandemic; our business prospects; expectations regarding revenues and expenses including vessel, charter hire, and G&A expenses; estimated bookings, TCE rates and/or capital expenditures in the fourth quarter of 2022 and 2023 or any other period; projected scheduled drydock and off-hire days; purchases and sales of vessels, construction of newbuild vessels and other investments; the company's consideration of strategic alternatives; anticipated and recent financing transactions in any plans to issue dividends; the company's relationship with its stakeholders; the company's ability to achieve its financing and other objectives; and other economic, political, and regulatory developments globally. Any such forward-looking statements take 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 which 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 our quarterly report on Form 10-Q for the first, second and third quarter of 2022, and in our 2021 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. Now, let me 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 Seaways' earnings call to discuss our third quarter results. During the third quarter, we generated our highest ever quarterly income. This marks our second consecutive record quarter. Crude tanker earnings rose to follow suit with the product carriers from the second quarter, with oil demand increasing more than 1 million barrels per day in the quarter. Combined with the prioritization of energy security, tanker demand and utilization are high. International Seaways is capturing the strong rates. Our commitment to growing the company, maintaining a healthy balance sheet and returning cash to shareholders is serving Seaways well. We have built our overall liquidity, and now with strong cash flow generation, we are returning more to shareholders. We have announced a special dividend of $1 per share in addition to our regular quarterly dividend of $0.12 per share. On slide four, we summarize our third quarter highlights and recent developments. In the third quarter, we generated net income of $113.4 million or $2.28 per share, and earned adjusted EBITDA of $157.1 million as our diversified fleet operated at profitable levels across all asset classes. As you can see in the chart on the lower left of the slide, our year-to-date adjusted EBITDA in 2022 of $295 million has eclipsed all prior full year EBITDA at Seaways. We are taking advantage of the strong markets the strongest in the last 10 years. Based on our fourth quarter bookings to date, we expect to generate even stronger earnings in the fourth quarter. We maintain our strong balance sheet supporting our diversified capital structure and our financial flexibility, both of which are hallmarks of Seaways success. We ended the quarter with total liquidity at over $475 million, including $255 million of cash and…

Thanks Lois, and good morning, everyone. Let's go straight to reviewing the second quarter results in greater detail. As always, before turning to the slides, let me provide a quick summary of our financial results for the quarter. In the second quarter, we generated a record adjusted EBITDA of $157.1 million. Net income for the third quarter was $113.4 million or $2.28 per diluted share compared to a net loss of $67.4 million or $1.44 per diluted share in the third quarter of last year. Now if you turn to slide nine. I'll first discuss the results of our business segments beginning with the Crude Tanker segment. TCE revenues for the Crude Tanker segment were over $75 million for the quarter compared to $35 million in the third quarter of last year and up sequentially from $59 million last quarter. Crude Tanker revenues remained strong in the Aframax and Suezmax, and the increase in the quarter was largely due, therefore, due to higher earnings from the VLCC. Also, embedded in the Crude segment is our lightering business, which had $8 million of revenue, along with $2 million of vessel expenses, $2 million of charter hire expenses in the quarter, yielding an EBITDA contribution of about $4 million from lightering in Q2. Turning to the Product Carriers segment. TCE revenues were $159 million for the quarter compared to $38 million in the third quarter of 2021 and again, sequentially up from $126 million last quarter. These increases were primarily due to substantially higher spot rates for the LR1 and MR sectors. Looking at the right side of the page, adjusted EBITDA for Q3 was $157 million compared with $8 million in adjusted EBITDA in the third quarter last year and up sequentially from $112 million last quarter. These significant increases clearly…

Thank you very much, Jeff. On slide 15, we provide you with Seaways' investment highlights. I encourage you to read these fully. However, I will summarize them briefly. Key ways in our history as a public company, have a proven track record of building value while maintaining the balance sheet throughout the cycle. We are disciplined stewards of capital, balancing consistent returns to shareholders with the fleet growth and healthy financial metrics. We have a focused and flexible operating model that has allowed for us to expand and contract at appropriate moments in the cycle under a disciplined approach. The company today has significant operating leverage to capitalize in what we expect to be a robust tanker cycle over the next few years. Regional imbalances of oil are expected to continue and to grow in distance from sources to consumers, creating higher seaborne your mile demand, while the supply of vessels remain limited and likely will shrink as vessels age and eventually are removed from the commercial trading fleet. We are staying in front of the growing ESG priorities, investing in the fleet to reduce our carbon footprint, keep our [indiscernible] safe and build a corporate culture of diversity with appropriate checks and balances. We are willing to back this message up with transparent ESG reporting and sustainability metrics. We have sustainability linked incentives in our debt portfolio. We strive to continue to evolve these principles and to provide a meaningful platform for all stakeholders. Thank you very much. And with that said, Amber, we would like to open up the lines for questions.

Of course. Thank you. We will now begin the Q&A session. [Operator Instructions] Our first question comes from the line of Chris Robertson with Deutsche Bank. Chris, your line is now open.

Hi, Lois and Jeff, good morning and thanks for taking our questions.

Yes. Good morning.

Welcome to the group, Chris.

Yeah. Thank you. I just wanted to talk about leverage for a moment. Jeff, how are you thinking about just leverage overall your kind of methodology here? Are you looking at certain leverage ratios that you're targeting? Are you aiming for a specific total cash breakeven level eventually? And can you just walk us through your philosophy around that?

Sure, Chris. I think that our feeling is, whether it's leverage levels or other capital allocation policies they need to be responsive to the cycle. It's not a one-size-fits-all situation. So, we don't have any one say loan-to-value target when values change so dramatically. Rather, it's more to us instead of about points in time, it's about a process. So, at this time, when we're in the now second quarter plus of an upcycle, generating significant cash, one of the things that we want to make sure happens is that we are continuing to dealer. We fully believe that deleveraging and returning cash to shareholders is not mutually exclusive. And hence, our announcement today of dividends. But what we're doing is not heading for any one particular target, Chris, but just making sure that we are appropriately leveraging through the cycle. And for us, it all starts with the scheduled amortization we have in our debt, which I mentioned in my remarks, it's about $180 million a year. And we think that does the job pretty well.

Okay. Yeah. I got it. I guess, following up on that, you mentioned the special dividend. Can you walk us through how that special dividend was calculated the decision to go with a special dividend rather than increasing the normal quarterly dividend. Is that going to be supplemental to the quarterly dividend? Or should we think about this as more of an annual occurrence?

First of all, you should think about the special dividend as supplemental to the quarterly dividend. Our commitment to capital allocation debt goes across all parts of the cycle without any other change that ever changing is the quarterly dividend, which we put in place at an amount, which we doubled this year, but it's not that we feel we'll never have to change for any part of the cycle. That's our view on that. And then, whatever we do, last quarter it was share repurchasing. This quarter, we've announced at this point, a special dividend, which is in large part reflective of the increase in our share price and closing the gap to NAV, which we're very happy about. And that is a separate special dividend. As you'll see in the press release, the record date and the payment date are the same, but it would be two dividends to make the point that we'll always have our regular dividend. And then at times like this, at this point in cycle, our policy will be to pay a substantial portion of our free cash flow out. It's not a formula, but don't -- we don't do that other than our regular dividends if you want to call that a formula. But it's a substantial portion of free cash flow, we think can appropriately paid out to our shareholders with the adequate liquidity -- with the more than adequate liquidity we have at this point in the cycle. Hope that's clear.

Yeah. Thanks for the color, Jeff. And I will turn it over.

Thank you. Our next question comes from the line of Omar Nokta with Jefferies. Omar, your line is now open.

Thank you. Hey, Lois. Hi Jeff. Good morning.

Hey Omar.

Nice strong results, obviously and very good figures ahead, it looks like. Maybe just -- maybe touching on the topic you were just having with Chris. The share price has been trending nicely all year. And in fact, I think INSW has been the best performer in terms of gains since maybe the middle part of -- maybe since the beginning of the third quarter. How are you thinking about valuation today, which I think basically looks like you're at the closest to NAV? You've been -- since you guys took the helm. How do you view that? And does that change anything in terms of how you look at allocating capital, whether it's returning capital to shareholders or investing in the business?

So, Omar, indeed, we -- our asset values, our net asset value continues to improve and increase. And we think that, that will continue as you see the extremely high rates that are projected that we've already earned in the fourth quarter. So, you're building on strength. The -- if you look at vessel values, the MRs of around 2, 8, 9, 10 have improved in valuation by over 50% this year. If you look at big crude, it's been something like 33%. So, just overall, in making the pie bigger, we believe that we will continue to earn these strong cash flows and see increased vessel value. So, you see that the overall tanker market, both crude and products, strengthening into itself.

I'd just add that Omar, we're very confident that we have a strategy that works, investing in fleet renewal at the bottom of the cycle and focus on returns to shareholders and new leveraging in the up part of the cycle. And we've done that over the last six years. We're grateful that it's being recognized in our share price now. It’s -- and so I think we just continue to stay the course and follow the strategy.

Yeah. And I agree, it makes sense. Nice to see the stock price performed so well. And maybe just wanted to ask then about the fleet makeup. And Jeff, you just mentioned acquiring assets at the bottom and returning capital on the higher end of the cycle. Just in terms of where you are with the fleet, you obviously have critical mass in the VLCCs, the Suezmaxes and the MRs. Not so much a big presence, I'd say, in the Afras and the LR2. In the past, you've sold the FSO business, the LNG vessels. I think it may be the handies that you got from Diamond S. Basically you've been selling a lot of the non-core pieces. What do you think of where you are today with the Aframax LR2 segment? Do you perhaps maybe look to monetize that and maybe take that capital and boost your presence elsewhere? Or what do you think just generally on that?

Well, Omar, I would say you did a really good job of recapping those non-core businesses that we did move out of, including the handy tankers, especially due to the Russian exposure that we saw in that sector of the market. On the middle part of the fleet, as you can see with earnings booked in the quarter to date, well up in the 50s per day, it's a very strong piece of our portfolio. We are not looking to divest the Aframaxes or LR2 at this point. Thanks Omar.

Okay. Thanks Lois. And thanks Jeff. Congrats on the strong quarter.

Thanks Omar.

Thank you. Our next question comes from Greg Lewis with BTIG. Greg, your line is now open.

Yeah. Hi. Thank you. And good morning everybody. And thanks for taking my question. Lois, realizing that would be you kind of walk through how you're thinking about the capital allocation, I'll move on. As I think about the timing of the sanctions or the embargoes around crude and then following products, is there any way that the industry can kind of position their fleets around that? And I say that specifically to you guys because you do have that blend of crude and products, i.e., are there things that are going to happen in the crude market from the embargo that we should see similar things happen in the product? Or is there any way -- yeah, I'm just trying to -- I'm trying to wrap my head around how INSW should be able to take advantage of that.

Okay. So, we believe that there is about 1 million barrels per day of seaborne crude still going into the EU. And Bulgaria has an exemption, so that's like 200,000 barrels a day. So, there's about 800,000 barrels a day that has to find a home. Certainly, India and China have been the biggest takers of Russian crude to date. And that 800,000 barrels has to find a home either working under the price cap, or with vessels that are in the gray fleet. And I think Russia is going to scramble to December 5th, the date, but now it's January 19 as you would have to have your crude off your ship by then to be compliant. So that 800,000 barrels a day, we're going to see where Russia can put that. And then Russia is -- the EU is starting to import more barrels from the Americas, both North and South America as well as the Middle East. So, as far as vessels, going outside insurance theme, there may be some ways, but it is very tricky with the reinsurance market for a robust strong owner to with -- concerned about their reputation in the market to go ahead and employed over the coming regulation. So, we see -- that's step one, and then that's going to be followed by the product carriers, and I think the product carrier deadline will be modified potentially based upon the success of the crude deadline and these regulations. But the bottom line is that we're watching to see, okay, so where does that mean that Russia is able to gain more market share to put their barrels into the market and then the EU pull-in from alternate markets. So that's -- we think it's dislocation, it's inefficiency and good for the tanker market.

And then I did -- okay. And then I did want to follow-up on that because of the February timing. We're already at least -- if you pick up a newspaper in the Northeast, which is where I am, you're already starting to hear concerns about heating oil and if it's an unseasonably cold winter. I guess, what I would say is, could you walk us through a little bit around the heating oil market? And I guess, really could we see -- in a cold winter, does that typically last? I mean I imagine it lasts longer than we think. And really, what -- I mean it just seems like the product market seems like it's in a tremendous spot here heading into the winter.

Yeah. Thanks a lot Greg. So, the middle of the barrel, the diesel, this is the lowest inventories that we've had on the East Coast since 2007. And in the United States, I mean, there's really -- it's a pretty small diesel market. The Northeast is really the principal market that's still heat with diesel gasoline -- I mean, gas oil. And one of the things we're seeing is PBF even with the East Coast has restarted the unit making 100,000 barrels a day. So, when you see the refining margins very, very strong, all of a sudden, the market used to respond to that and to close that gap. So, we understand there's some Jones Act movements, bringing diesel from the U.S. Gulf to the East Coast. Like I said, you see some of that PBF cranking up a little bit on the East Coast, which, of course, will bring in some foreign crude. And you see the market responds. But I think the key overall is the very strong refining margin puts the signal out, hey, money to be made and the market moves into -- take advantage of that and then narrow that margin.

Okay. Super helpful. Okay.

Thank you. Our next question comes from the line of Liam Burke with B. Riley. Liam, your line is now open.

Thank you. Good morning, Lois. Good morning, Jeff.

Hey, how are you Liam?

Good. Thank you. Just touching back on Omar's question on the fleet management. Not that you would need the cash, but is there any thought of lightening up on some of the older MRs with the asset value so high here?

We have -- you'll notice in our press release, we have one vessel that is under contract for sale at present. And we're very judiciously looking at it because these vessels are earning very strong returns, right? So, very carefully, we are okay, under contract for sale for one. So that's just a continuation of that pruning that vessel will avoid the drydock and ballast water treatment installation in 2023. And you should expect us to continue with selective sales like that.

Okay. Fair enough. And I guess, is there any thought with spot rates so high to move any more of the vessels over to the time charters?

Yeah. The team looks at that, and we executed a couple of time charters. We continue to look at as that market builds into itself, and you can get more length at a healthy rate.

Great.

Apparently not longer than one year.

Thank you.

Thanks.

Thank you. This will now conclude the question-and-answer session. I will also hand the conference back over to Lois for any additional or closing remarks. End of Q&A:

Thank you very much everyone for joining International Seaways' third quarter call. We look forward to a strong performance in the coming quarter. Thank you very much.

This concludes today's International Seaways' third quarter 2022 earnings call. Thank you for your participation. You may now disconnect your line.