International Seaways, Inc. (INSW) Q4 2022 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the International Seaways Fourth Quarter 2022 Earnings Conference Call. My name is Glenn and I’ll be the moderator for today’s call. [Operator Instructions] I will now hand you over to your host, James Small, General Counsel. James, please go ahead.

Thank you, Glenn. Good morning, everyone, and welcome to International Seaways earnings call for the fourth quarter and full year 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: 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; 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 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, including particular those described in our annual report on Form 10-K for 2022 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 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 for the fourth quarter and full year of 2022. We’re going to start out on Page 4. Today, International Seaways has reported our highest earnings in our history. Net income for the fourth quarter was $218 million, $4.40 per share, and $388 million are close to $8 per share for the full year of 2022. As a result, and building upon our solid track record of returning cash to shareholders, we have declared a combined dividend of $2 per share. We are continuing our disciplined capital allocation strategy. We have a demonstrated history of investing at low points in the cycle. Vessel assets on our books are at less than $2 billion that are today worth over $3 billion. With $1 billion in debt and cash of nearly $325 million, our net loan-to-value is currently under 24%. In March, we will take delivery of our first dual-fuel VLCC, the Seaways endeavor, which along with our two sister ship expected to deliver in the first half of 2023 will commence long-term time charters to sell. These ships are fully funded, creating another $172 million of debt in aggregate. We sold a 2008 built MR in the fourth quarter, and we’re delivering another to reliable buyers in the first quarter. This saves us about $4 million each from their 2023 drydocking and ballast water treatment installations We will allocate the estimated $28 million in combined net proceeds from these two vessel sales towards the $41 million net cash cost for two Aframaxes where we have exercised below market purchase options. These Aframaxes will not be further in comfort. We announced today unanimous commitment from the syndicate of our largest senior secured facility to amend terms to repay $100 million of the outstanding term loan and increase the revolver capacity to over $250 million. The amendment will also release 22 vessels from the collateral package. These 22 ships combined with the two of four mentioned Aframaxes and three LRs released as a result of repaying our Macquarie loan facility in the fourth quarter positions Seaways with one-third of our fleet unencumbered. Highlights and recent development, Slide 5. The hottest topic in tankers today is what’s happening with Russian oil exports. The chart on the left shows that while crude oil exports from Russia have been fairly consistent within a range over the last few years, Russian oil that was going to Europe is now traveling longer distances to Asia, primarily India and China, and absorbing crude tonnage for longer periods of time. On the right hand chart, our data reflected here through January, 2023 shows that self sanctioning has been limited on oil products. As much of Russian oil was still heading into the EU in the months leading up to the sanctions that were implemented on February 5. We expect that the product sanctions will create displacement. It’s early days and we have limited data set. However, the changes in trade flows are anticipated to be a positive for the busy product tanker market. Turning to Slide 6, we updated our standard set of bullets on tanker demand drivers with the subtle green up arrow next to the bullet represented as good for tankers. The black dash representing unusual impact and the red down arrows, meaning the factor is not positive for tanker demand. Pulling some highlights, in total, oil demand is expected to grow about 2% in 2023, a good portion of which is attributable to Chinese demand reopening after relaxing the zero COVID policies that had been in place. We saw increased travel at the beginning of the year for the New Year’s holiday, and this has continued with higher congestion in major Chinese cities. If you look at the chart in the lower left-hand corner, Chinese demand should increase nearly 5% or almost 700,000 barrels per day in 2023. This is especially important for the crude tanker market where Chinese imports about 10 million barrels per day. It’s also very helpful for the product carrier market as China has increased its product export quota. Crude oil production is expected to increase primarily from the Americas by around 1 million barrels per day, while OPEC announced their production cuts in 2022 using a reference point at peak production levels, there have been some noticeable cuts from Saudi, Iraq and the UAE that have been offset by some of the countries that do not have limits, such as Libya, where production has now resumed a more consistent level. The last key point that I’d like to bring up on this page is the inventory levels. On the bottom right hand chart, Slide 6, you can see that we have separated the OECD crude and product inventories, which have grown recently to above their averages from 10 years ago. We expect that some of the bills has been ahead of the sanctions on Russian oil and natural ebbs and flows around the regional oil demand refinery turnaround schedules and other geopolitical factors. These charts are commercial inventories only and they do exclude the OECD strategic reserves, which as we know are a historic low. On Slide 7, we updated our tanker supply statistics as we see them developing. Tanker supply remains constrained due to a lack of orders and a rapidly aging fleet. Yards are busy with other shipping sectors, keeping new build prices high and limiting economic decisions on ordering. The industry is expected to face more environmental regulations ahead, further limiting conventionally fueled new buildings for tankers. Alternative fuels for propulsion are still in the first generation in the tanker space, and we’re likely to see more opportunistic partnering with sponsors along the supply chain. The worldwide oil tanker fleets age is now above 12 years old with more than one-third of the fleet above 15 years old. As we show in the charts below for the crude and product sectors, vessels over 20 years old are not going to be replaced in the coming years. Based on the order book we have today. The charts reflect the millions of deadweight tons that are either 20 years old today or will be. In the given years, aligned with the millions of deadweight tons that are scheduled during those years for delivery. On the crude side, there is a more complete mismatch and dearth of orders while on the product side, we have seen some MR and LR, LR 2 ordered in recent months. The supply outlook for tankers in the near-term is incredibly positive. Combined with higher oil demand, low inventories and disrupted trade flows, the overall outlook for tankers remain strong, barring global economic slowdown. At International Seaways, we are well positioned to capture the strong rate environment with our operational leverage from our diversified fleet of 77 tankers in both crude and products. With our healthy balance sheet and our liquidity, we expect to continue our balanced capital allocation strategy, investing in the fleet opportunistically, reducing our debt, and very importantly, returning cash to shareholders. I will now turn it over to our CFO, Jeff Pribor, to provide the financial review. Jeff?

Thanks, Lois and good morning everyone. Let’s go straight to reviewing our record earnings in greater detail. Please turn to Slide 9. Adjusted net income for the full year 2022 reflected in the upper left-hand chart was $380 million, which eclipses our next highest earnings from 2020 on an adjusted basis. We provided in the appendix reconciliation from reported net income to adjusted net income, but it’s largely familiar non-recurring items such as major loss in the vessel sales, write-off of deferred financing costs and impairments. Similarly, on the upper right chart adjusted EBITDA, which removes these items as well for the full year 2022 it was nearly $550 million. These results clearly show the significant operating leverage of our 77 vessels fleet. On the bottom of the page, you can see our TCE revenues by segment along with our spot earnings for 2022. The full year 2022 TCE revenues were $854 million, and you can really see the tremendous contribution of project makers to that record, highlighting again the benefits of the Diamond S. Overall spot earnings in all of our asset classes apart from VLCCs with the highest in five years reflected in these charts. Not only our earnings per day higher, but we have significantly more assets in each class than we had in prior years, diligence due to the successful execution of our capital allocation strategy, renewing the fleet at the bottom of the cycle. Slide 10 reflects our historical earnings sequentially over the last five quarters. In Q4, adjusted net income nearly doubled over the previous record level from Q3 we had over $200 million. Adjusted EBITDA came in at $254 million for the quarter, which was higher than any prior full year in our history. Regarding expenses, during our Q3 2022 earnings call, we advised that vessel expenses would be approximately $57 million which is at the high end of the range for Q4 of 2022. Actual vessel expenses for the quarter were approximately $62 million, the $5 million increase is primarily due to timing of stores and spares on board and higher repairs and maintenance opportunistically performed during buybacks. Total G&A was approximately $13.5 million during the fourth quarter of 2022, which is about $2 million higher than expected due to the timing of certain projects and cost for other shareholder matters. All remaining expenses fell within the guidance previously given. Now turning to our cash bridge on Slide 11. We finished the third quarter with $254 million in cash and $220 million in revolving capacity. Following the chart then from left to right the cash bridge, we added $254 million in adjusted EBITDA in the fourth quarter plus $58 million in debt service, which is composed of scheduled debt repayments, cash interest expense plus our drydock and CapEx of $16 million in the quarter, and the working capital bill, i.e., use of cash of $51 million, which gets us to free cash flow of about $130 million. Continuing on, we sold one 2008-built MR for net proceeds of $14 million and a minor reduction of $3 million in the revolving capacity related to that. During the fourth quarter, we repaid our highest margin credit facility with Macquarie loan, about $18 million, which had the effect on unencumbered with the vessels. And lastly, as announced during our last earnings call in the fourth quarter, we paid $1.12 dividend, $1 supplemental and process, amounted to approximately $55 million. These components let us – then lead us to the ending the clarity you see on the right of over $550 million with $324 million cash and short-term investments plus $217 million in our revolving capacity. Now moving to Slide 12, we talk about a balance sheet. We continued to have already strong balance sheet in 2022. Cash increased dramatically from the prior year at going from $98 million to $324 million. Vessels on the books stand at approximately $1.9 million at the end of 2022, similar to the prior year, but far less than the current market value of about $3 million. Net loan also as low as mentioned, net loan to value is under 24% and net debt to total cap is approximately 33%. One last point I’d like to make on balance sheet is the accounting treatment of the two Aframaxes, where before which we exercised our purchase offerings during the fourth quarter for delivery of those vessels and back to us in Q1 2023. The accounting treatment for these vessels up to the date of the exercise of the options was grandfathered under previous account rules as operating leases or right of use assets corresponding liability was the bareboat rate through expiry on the date of the exercise the options. The asset side these moved to [indiscernible] sorry, this is a little granular, but just important for your modeling. After delivery at payment of approximately $41 million, which will be in the first quarter of 2023 the accounting changes, again, these two vessels will move from right of use assets to the vessels supply. And that amount that we’re paying goes on the books at a 45% discount approximately to current market values. There’ll be no corresponding debt for the two more vessels added to the company. So now turning to Slide 13, the last slide that I’ll cover before turning it back to Lois. It reflects our forward-looking guidance and booked to date TCEs along with cash break even. Starting with the TCE fixtures for the first quarter of 2023. I’ll remind you as I always do that the TCEs we actually report during our next earnings call will be different one way or another. However, the important point is that the market continues to be strong in the first quarter, blended average [indiscernible] amongst various classes as you’ve seen in the chart. This segues well to the right side of the slide where you can see our cash break evens. We can show pro forma for the additional debt profile for both our new building program and the proposed amendment to our $750 million credit facility. As Lois mentioned, we expect all the dual fuel VLCCs to deliver in the first half of the year. They’re fully financed and they’re adding approximately $172 million of both assets and debt. These vessels will be on time charter, therefore decreasing the break evens from fixed revenue. In connection with the commitment from our banks to amend the $750 million credit facility, we expect to make a nearly $100 million cash repayment. In turn, the capacity of our revolving credit facility will increase by approximately $40 million. Therefore, the debt reduction of $30 million will be about $60 million in total. The scheduled debt repayment in this facility going forward for your modelling will be approximately $28 million per quarter down from $31 million, and we also expect another 22 vessels for the collateral package which along with the exercise of purchase options on the two Aframaxes and payment of Macquarie loan in Q4 means will have a total of 27 vessels unencumbered during the last six months. The net impact of the amendment is expected to reduce our cash breakeven by about $600 a day down to $17,500 per day. And this figure would actually be even lower by about $350 factored in interest income, which is percent cash to short term invest. When you compare this pro forma even – pro forma break even to our fixtures today, it certainly looks like the first quarter should be able to generate strong free cash flows. On the bottom left hand chart, we provide updated guidance for our expenses in Q1 and all of 2023, and we will continuously update them to here. We include in the appendix, our quarterly expected off hire at CapEx schedules for 2022. No need to go through them line by line, but encourage you to use them for modeling purposes and call with any questions. That concludes my remarks. I’d now like to turn the call back to Lois for her closing comments.

All right. Thank you so much, Jeff. On Slide 14, we provide you with Seaways investment highlights, which I encourage you to read in its entirety. Summarizing briefly, International Seaways in our history as a public company has grown a proven track record of building value without sacrificing the balance sheet. With good stewards of capital, balancing our consistent returns to shareholders with future forward fleet growth and healthy financial metrics. We have a focus and flexible operating model that has allowed us to expand and contract at appropriate moments in the cycle under a disciplined approach. The company is positioned today with 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 consumer creating seaborne demand, while the supply of vessels remain limited and likely to shrink as vessels age and eventually are removed from the commercial trading fleet. We’re staying in front of the growing ESG mandate, investing in the fleet to reduce our carbon footprint, keeping our seafarers safe, and building a corporate culture of diversity with appropriate checks and balances. And we’re willing to back this message up with transparent ESG reporting and sustainability linked incentives in our debt portfolio. We strive to continue to evolve these principles and to provide a meaningful platform for all of our stakeholders. Thank you very much. And with that said, Glen, we’d like to open it up for questions.

Thank you. [Operator Instructions] Our first question comes from Chris Robertson from Deutsche Bank. Chris, your line is now open.

Thank you, operator. Good morning, Lois and Jeff. How are you?

Good. Thank you. Good morning.

Good. Yes, Lois, you mentioned the potential for having partners or sponsors, I guess, for new buildings in the future, not just as it relates to Seaways, but also others as well. So as you think about the future of the tanker market here, do you think that the new building order future is going to happen when ships are being de-risked to some degree with these medium to long-term time charters? And I guess, the point of my question is that I’m trying to figure out how will the next ordering cycle be different compared to the 2007, 2008 periods?

Yes. No, I think that we have – the industry has an opportunity and trying to work more closely with customers so that together we can decarbonize and de-risk some of the new technology that’s on the horizon. I do think there will be some conventional orders placed, but I think there will be many owners like ourselves that are going to be very reluctant to order a conventional engine in the market today.

Okay. Yes, that makes a lot of sense. Jeff, this might be a question for you. But I guess going over to the dividend, which looks like the shares are up today, so the market’s responding well to that announcement. But as – I know you guys don’t have a formula driven approach, but looking at the combined dividend here, roughly 45% of adjusted net income, when thinking about it, are you coming at that from the perspective of looking at adjusted net income? Or are you assessing it based on free cash flow after debt repayment? And is there a minimum cash balance that you’re trying to target and kind of in order to hold back enough cash to fund potential growth in the future? And kind of how do you think about balancing all that?

Chris, what if I just said?

I know, I was going to say yes.

So yes, you hit points there. We do always look at, do we have what we consider to be a sufficient cash and liquidity balance to be able to make capital allocations that we’ve done. So there’s not a specific target published number, but yes, we make sure, first of all, that we have a good cash cushion. And then I say we look at all metrics. But it’s clear that if you look at this quarter, so what we’re declaring is our allocation in Q1 based on Q4 results, and also look at what we did in Q4 based on Q3 results, it’s in the neighborhood of just below 50% of net income and 75% of free cash flow, which is laid out there for you. So I think it’s a pretty consistent allocation of the combined supplemental and regular dividend. So we kind of look at everything and it’s up to the Board based on recommendations for management, but that’s how we’re looking at. I hope that’s clear.

All right. Yes, it’s very clear. I’ll turn it over. Thank you.

Thanks, Chris.

Thank you. Thank you, Chris. With our next question comes from Omar Nokta from Jefferies. Omar, your line is now open.

Thank you. Hey, guys, good morning. Congrats on obviously another record result. Good morning, Lois. Yes, so between the VLCCs, the mid-size crude business and your MRs, I think you’ve got all your bases covered here in this market. Wanted to ask maybe just about the fleet and how it is now. You sold an MR here recently, followed another one back in the fourth quarter. If I heard you correctly, Lois, you’re going to take the proceeds from those two sales and use those to exercise the option on the Afras. What are you thinking – yes, so what are you thinking kind of going forward with the fleet because clearly, you’ve got the critical map across the main segments. But do you look to sell more ships here? More of the older ones in the MR fleet, are you looking to replace sales with acquisitions? How are you thinking about that big picture wise?

No, absolutely, Omar. So thank you for giving me that opportunity. These three VLCCs that we’re going to take in the first half of the year, and then combine with those two Aframaxes brings onto our balance sheet $500 million worth of assets at today’s market level. So that represents a couple of years of depreciation, amortization, CapEx. So that’s a nice tenant of our growth. On the MRs, we’ve been pretty judicious. The reason that we are targeting the MRs for sales is truly just because those are the 2008 built vessels and we are earning a lot of money on them, and you make a lot of money when you sell them. So we’re just – we’re really being very prudent and just doing that very judiciously, not in a big movement. So I guess that’s how I would respond to that. At present, every one of the ship sets on the water earning is, earning very impressively, but we’re still going to be disciplined with making sure we are keeping that fleet competitive for the future.

Yes, that makes sense, Lois. Thanks for that. And maybe one of the themes that we’ve noticed here over the past maybe year is, at least on the bigger ships that go into drydock looking to install scrubbers, not a substantial amount, but there are a few companies that are doing one or two here or there. How are you thinking about that? I know you – I think just looking at the grid in your appendix, you’ve got a few ships going into drydock. Any interest in just taking maybe a flyer on a handful of scrubbers when those go in?

Yes. So, of course, 10 VLCCs that are on the water have scrubbers. We have two of our Suezmaxes that have scrubbers. Well, one of those scrubbers we put on last year. And it is providing a good return. We don’t – we like to target the largest vessel that’s where you’re going to get your biggest alpha from. We don’t have any of the Suezmaxes going into dock this year, but we are constantly – that’s a argument that I have with Bill all the time we go back and forth on whether or not we would put in more at this juncture. But definitely the scrubber investment that we’ve done, we’re very happy with that.

Yes, definitely. All right, Lois, well, thanks. I’ll do one more if you don’t mind.

Not at all.

Just as you think about the VLCC new building. Yes. So those VLCCs that come on here in the next several months, obviously you bought those at the absolute right time, if we look back at the price level. And yet, even though they’re on time charter, they do have the profit share component, if I remember correctly. How should we – can’t remember exactly. How should we think about the profit share? Should we just simply assume is it 50% of the upside above, like prevailing market spot rate averages, or is there an LNG price component to that? Or how should we just model those profit shares?

I – basically, I don’t think we’ve ever gone out with what the actual base was, but you can assume that the base is – it has a three in front of it, but not a lot more. And then just run a calculation on the monthly TD3, which is east and 50% above that run on low sulfur bunkers will come to the owner and half will go to a shell.

Okay. And is there a cap?

No.

There is no cap. Sorry.

No.

Okay. Thank you. All right, well, I’ll turn it over.

Thank you.

Thanks, Omar.

Thank you, Omar. With our next question comes from Ben Nolan from Stifel. Ben, your line is now open.

Thank you. Hey, Jeff, Lois. You guys, once again crushed on the LR1s or Panamaxes that’s a pretty nice sweet spot for you. But I did notice in the appendix that I think three of the charter in vessels are coming up for renewal. How should we think about sort of your position there? I mean, obviously it costs more to charter in vessels today, so you’d be taking a long position, but you’d make a lot of money. Simply put, should we model in that you’ll continue to be chartering and vessels for the LR1 trade?

We’re working on it, but I almost would model them falling off and then let us surprise you, when we manage to cure some renewals. It’s a frothy market out there, Ben, but we’re working it.

Yes. I am sure it is. Okay. Well, to the extent that it’s a frothy market, I mean, do you put any of your other assets on longer? I know you have a handful, but take advantage of the froth in the other direction.

Yes. No, absolutely. And as the market has increased, the team is starting to layer that in. In Q1 we put out one Suezmax for a couple of years, and it’s just building on itself. So yes, we will – we don’t have a huge target somewhere between 10%, 15% at the moment that we would look to put on time charter.

Okay. And then lastly, for me to sort of keeping with the charter in aspect of things on, again, I think it was Page 21 of the presentation, there was a note about charter in or the work boats for lightering. I’m just curious, maybe think a little bit about sort of where – how you think about the lightering business. It’s always been this little sort of quiet addon. Where does that fit into the profile for you guys going forward?

Well, basically, the lightering is a very low cost base. It takes a small amount of capital and it’s essentially a very high touch business. So it keeps us very close to customers, and they really outdid themselves to the upside in 2022. Now, a piece of that, the SPR released a tremendous amount of barrels and that also created a lot of activity that when we’re looking at the lightering and we see, okay, how does that fit into everything? In Q1, if you were to put $1.5 million of EBITDA in Q1 for lightering and try to keep that steady, that could be a potential plug number. I think trying to build it up from the work boats is really very fraught because the lightering business is, responds to the tanker market as well, right. So when you have a tremendous amount of exports/imports, not only in U.S. Gulf, but in Panama and the U.S. West Coast, it’s really been a little gem for International Seaways and it’s a team that’s really pulling more than their weight. But that would be my plug number if you wanted to model that.

Okay. Very helpful. I appreciate it. Thanks both.

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

Hi, good morning. Thank you everybody. Hey, Lois, I was hoping you could talk a little bit about EEXI, realizing that I guess, it’s kind of, this is more of a data year than an actual execution year. As we think about the outlook and the potential impact for what that has on the fleet. Any thoughts you can share with us about vessel efficiency as really EEXI kind of flows through the crude tanker fleet?

Yes, absolutely. In fact, I’m going to, Greg, I’m going to throw that one to Bill Nugent, who is the head of our technical department.

Hi, how are you today?

I’m doing great. Thanks Bill.

Great. EEXI is really interesting. It is a one-time measure, right. So all ships are measured this year against that benchmark and have to implement, most ships have to implement some sort of power limitation on the engines. And I could say for our fleet, the impact of that on current trade speeds and profiles, minor if nonexistent, right. So it’s something we have to do. It’s a good thing to do. It’s going to affect other shipping segments more than it’s going to impact tankers. Efficiency, which goes every dollar we spend on trying to save a fuel goes right back to the bottom line in terms of fuel costs and everything else that comes back. That’s been an ongoing focus for us for a long time that really carries forward in the form of the CII measures, which is the carbon intensity measures. And I think we’re in a good place for that. We’re working closely with our commercial partners. We’re working with our technical partners to make sure that every day we’re focused on all the little bits that add up to, that ton of fuel that gets saved me and the three tons of emissions that get saved as a result of that. I hope that that answered your question.

Yes, absolutely. Great. And then Lois, I did want to talk – follow up on Ben’s question around the chartered in vessels and your West Coast, Panamax trade, in the event, INSW does not opt the charter in those vessels, those vessels, then just given that relationship with what is it, flow pack, those vessels then are kind of pushed out of that trade. Is that the right way to think about that i.e. someone else just can’t throw them into that trade and run them?

Well, let’s put it this way, in Panamax International, which is a joint venture with Ultra of Chile and Flopec of Ecuador and International Seaways that is not a – that’s a joint venture we don’t look to grow that pool in particular, per se. However, there are many vessels, Panamaxes and Aframaxes that trade on the West Coast and with cargos in and out of Ecuador. So it’s an open trade, that’s for sure. If some of our charter ends are for some European based owners, so those vessels may trade here, but they were also trading clean before we chartered them in. So there’s a real strength in LR 1s right now, and that’s whether they’re being traded clean or dirty with a lot of opportunity. In particular, I’ve mentioned before United States was importing 600,000 barrels a day from Russia. A lot of that was heavy, BGO fuel oil that was going into the refineries. And so that’s really helped keep not only the Afras and the Suezmax is very strong, but the Panamaxes as well.

Okay. And then just following up on that, I know in the past we’ve talked about – there’s always that balance between the chartered in vessels and the ability to buy vessels. I mean, clearly the balance sheet is in a good position at this – great position at this point. You did mention that whether you’re chartering it or buying, maybe the market’s a little bit frothy. And I guess, it’s going to stay that way for the foreseeable future. But I’m kind of wondering as we look farther ahead. I mean, are we kind of agnostic, maybe whether we’re going to for that trade, whether we decide to charter in or buy.

Yes, agnostic. Yes. Just look for the opportunity.

Okay, great. Thank you for the question. Thank you for the answers.

No, thank you, Greg.

Thank you, Greg. [Operator Instructions] We have our next question comes from Liam Burke from B. Riley. Liam, your line is now open.

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

Hey Liam.

Lois, very interest as some of these vessels or classes start getting frothy rates to start time chartering certain ones out, or do you like, prefer to ride them into the spot market?

We’d love having that spot market presence at the moment, obviously. We will opportunistically look to lay in some of these time charters. Remembering that the 3Ds that are coming into the fleet. Yes, they have a profit share, but they do have a base time charter rate. So we sort of put those in the time charter bucket, and then we look to add some other vessel classes into that, some MRs, potentially some Suezmaxes, that’s sort of our approach at the moment. And I was saying, probably 10% to 15% we would look to put on, one-year time charter doesn’t really do a lot at the moment, maybe multi-year time charter as provided we can get enough alpha in that to make that look very good on our balance sheet.

Great, thank you. And Jeff, on the variable component of the dividend, I mean, you don’t have to share with us, but do you have any percentage of cash flow that you’d allocate to that variable dividend, or how do you think about that internally?

Yes. Hi Liam. So we’ll stick with the terminology of a regular dividend with a supplemental dividend quarter by quarter as board sees fit for a combined total. And what I would point out from our presentation is that, we had free cash flow of about $130 million that’s in that cash bridge in the deck. And if you look at the combined dividend, it’s just right around 75% of that so substantial portion of free cash flow. And that’s very similar to what we did in Q – the prior quarter. Everyone’s net income is a little different relative to their cash flow based on their balancing and their depreciation. So, I also think we look at this as a percentage of the share price and we find it as very competitive that way as well. So, but I think mainly look at the free cash flow, Liam, that’s a good guide to what we’ve done in the last two quarters.

Great. Thank you, Lois. Thank you, Jeff.

Thank you, Liam.

Thank you, Liam. We have no further questions on the line. I’ll now hand back to Lois for closing remarks.

Thank you very much, Glenn. Thank you everyone for your interest in International Seaways, the tanker company for today and tomorrow. Thank you very much.

Thank you. Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines.