International Seaways Reports Fourth Quarter and Full Year 2022 Results

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International Seaways, Inc. (NYSE: INSW) (the “Company” or “INSW”), one of the largest tanker companies worldwide providing energy transportation services for crude oil and petroleum products, reported results for the fourth quarter and full year of 2022.

HIGHLIGHTS & RECENT DEVELOPMENTS

  • Highest Earnings in Our History: Net income for the fourth quarter was $218.4 million, or $4.40 per diluted share, compared to a net loss of $34.0 million, or $0.68 per diluted share, in the fourth quarter of 2021. For the full year 2022, net income was $387.9 million, or $7.77 per diluted share, representing an increase of $521.4 million compared to the full year of 2021, which was a net loss of $133.5 million, or $3.48 per share.
  • Adjusted EBITDA(A) for the fourth quarter was $254.3 million and for the full year of 2022 was $549.1 million.
  • Total liquidity was $541.1 million as of December 31, 2022, which includes cash (and short-term cash investments)(B) of $323.7 million and $217.4 million of remaining undrawn revolver capacity.
  • Fleet Optimization Program:
    • Sold a 2008-built MR in the fourth quarter for net proceeds after debt repayment of approximately $14 million and has agreed to sell another 2008-built MR in the first quarter of 2023, which is expected to generate $14 million in net proceeds after debt repayment.
    • Declared purchase options on two, 2009-built Aframaxes under sale leaseback arrangement for an expected net cash outflow in March 2023 of approximately $41 million in aggregate, representing at a discount of over 45% to current market prices.
  • Balance Sheet Enhancements:
    • Received commitments from the Company’s lenders for the $750 Million Credit Facility to amend the senior secured credit facility, subject to completion of formal documentation and closing, which is expected to occur in March 2023, to among other things:
      • Increase the revolving credit facility (“RCF”) by $40 million to nearly $260 million, which remains fully undrawn.
      • Reduce the outstanding balance on the term loan by approximately $100 million, as a result of a prepayment to be made on closing.
      • Reduce the collateral package by 22 vessels, creating unencumbered vessels representing nearly one-third of the total fleet.
  • Returns to Shareholders:
    • Declared a combined dividend of $2.00 per share composed of a supplemental dividend of $1.88 per share in addition to regular quarterly cash dividend of $0.12 per share to be paid in March 2023.
    • During 2022, the Company paid a cumulative $1.42 per share in regular and supplemental dividends and repurchased 687,740 shares for approximately $20 million, representing nearly $90 million in returns to shareholders.
    • Returned to shareholders over $280 million in aggregate since the start of 2020.

“2022 was an outstanding year for Seaways, as we capitalized on our increased scale, further enhanced our financial strength, and continued to return significant capital to shareholders,” said Lois K. Zabrocky, International Seaways’ President and CEO. “We generated record earnings for the third consecutive quarter as a result of our strategy of building a diverse fleet of crude and product tankers with sizable operating leverage. In 2022, we continued to build our track record of returning cash to shareholders with nearly $90 million in cash returns by doubling our quarterly dividend, adding supplemental dividends and executing our share repurchase program. Today, we’re continuing that momentum, announcing a combined dividend of $2.00 per share, representing cumulative returns to shareholders of over $280 million since the start of 2020.”

Ms. Zabrocky added, “We are well positioned to carry our significant momentum forward and we anticipate continued market strength based on growing demand and higher tanker utilization from the shifting global energy trade, combined with the lowest orderbook in more than 30 years. We expect near-term catalysts to continue to drive tanker earnings, including sanctions on Russian oil and the reopening of China. Our operating leverage positions us well to capitalize on these trends. Our history of renewing our fleet at cyclical lows continues to serve us well, and we look forward to the delivery of three dual-fuel LNG VLCCs in the first half of 2023, which will not only reduce our carbon footprint today but are well suited to adhere to anticipated environmental regulation into the future.”

Jeff Pribor, the Company’s CFO stated, “We continue to strengthen our balance sheet, generating significant free cash flow from our diversified fleet. With ample liquidity of over $540 million at year’s end and a net loan-to-value ratio of under 24%, we remain focused on executing our disciplined capital allocation strategy, investing in the fleet opportunistically, further de-levering, and continuing to return cash to shareholders. Following the closing of the amendment to our credit facility, our cash break-even levels are expected to decrease by more than $600 per day, which further enhances our ability to generate more free cash flow and continue building our track record of returning cash to shareholders.”

FOURTH QUARTER 2022 RESULTS

Net income for the fourth quarter of 2022 was $218.4 million, or $4.40 per diluted share, compared to a net loss of $34.0 million, or $0.68 per diluted share, for the fourth quarter of 2021. Net income for the quarter reflects the impact of the disposal of older vessels and the write-off of deferred finance costs aggregating $9.7 million. Net income excluding these items was $208.8 million, or $4.21 per diluted share. The increase in the fourth quarter of 2022 was primarily driven by a $242.7 million increase in TCE revenues(C) as a result of higher demand for tankers due to seasonality, restocking of historically low global inventories and the effects of sanctions on Russian oil that disrupted trading patterns leading to longer voyages and higher tanker utilization.

Consolidated TCE revenues for the fourth quarter were $335.7 million, compared to $93.0 million for the fourth quarter of 2021. Shipping revenues for the fourth quarter were $338.2 million, compared to $94.7 million for the fourth quarter of 2021.

Adjusted EBITDA for the fourth quarter was $254.3 million, compared to $11.9 million for the fourth quarter of 2021.

Crude Tankers

TCE revenues for the Crude Tankers segment were $150.7 million for the fourth quarter, compared to $42.4 million for the fourth quarter of 2021. This increase was primarily attributable to an increase in spot rates as the average spot earnings of the VLCC, Suezmax and Aframax sectors were approximately $64,600, $59,100 and $62,000 per day, respectively, compared with approximately $14,300, $13,100 and $11,500 per day, respectively, during the fourth quarter of 2021. Shipping revenues for the Crude Tankers segment were $152.9 million for the fourth quarter of 2022, compared to $44.5 million for the fourth quarter of 2021.

Product Carriers

TCE revenues for the Product Carriers segment were $184.9 million for the fourth quarter, compared to $50.5 million for the fourth quarter of 2021. This significant increase is attributable to substantially higher spot rates with average spot earnings for the LR1 and MR sectors of approximately $64,000 and $39,700 per day, respectively, in the fourth quarter of 2022 compared with approximately $17,400 and $11,300 per day, respectively, in the fourth quarter of 2021. Shipping revenues for the Product Carriers segment were $185.2 million for the fourth quarter, compared to $50.2 million for the fourth quarter of 2021.

FULL YEAR 2022 RESULTS

Net income for the year ended December 31, 2022, was $387.9 million, or $7.77 per diluted share, compared to a net loss of $133.5 million, or $3.48 per diluted share, for the year ended December 31, 2021. The reported net income for 2022 includes the impact of one-time items, consisting of the gain on disposal of vessels, vessel impairments, net loss on sale of investments in affiliated companies, debt modification expenses and write-off of deferred financing costs, which aggregated $7.8 million. Excluding these items, net income for 2022 was $380 million, or $7.62 per diluted share.

Consolidated TCE revenuesfor the year ended December 31, 2022, were $853.7 million, compared to $255.9 million for the year ended December 31, 2021. Shipping revenues for the year ended December 31, 2022, were $864.7 million, compared to $272.5 million for the year ended December 31, 2021.

Adjusted EBITDA for the year ended December 31, 2022 was $549.1 million, compared to $40.4 million for the year ended December 31, 2021.

Crude Tankers

TCE revenues for the Crude Tankers segment were $321.9 million for the year ended December 31, 2022, compared to $144.3 million for the year ended December 31, 2021. Shipping revenues for the Crude Tankers segment were $331.7 million for the year ended December 31, 2022, compared to $156.3 million for the year ended December 31, 2021.

Product Carriers

TCE revenues for the Product Carriers segment were $531.9 million for the year ended December 31, 2022, compared to $111.6 million for the year ended December 31, 2021. Shipping revenues for the Product Carriers segment were $533.0 million for the year ended December 31, 2022, compared to $116.3 million for the year ended December 31, 2021.

DELEVERAGING INITIATIVES

In August 2022, the Company redeemed the $25 million aggregate principal outstanding of the 8.5% senior notes due June 2023.

In November 2022, the Company repaid the outstanding balance of $17.8 million on the term loan facility with Macquarie Bank, which unencumbered three vessels.

In February 2023, the lending syndicate for the $750 Million Credit Facility unanimously committed to amend the facility whereby the Company will make a prepayment of approximately $100 million on the term loan, the revolving credit facility will increase by $40 million and 22 vessels will be removed from the collateral package. The amendment is subject to formal documentation and signing, which is expected to occur in March 2023.

FLEET OPTIMIZATION PROGRAM

During 2022, the Company sold or recycled eight vessels with an average age of over 16.5 years. Two of the eight vessels were Panamaxes built between 2002 and 2004 that were sold to be recycled in compliance with the Hong Kong Convention. The Company sold all four of its remaining Handysize vessels with an average age of approximately 16 years and two 2008-built MRs, which saved approximately $4 million per vessel on upcoming drydock and ballast water treatment installation expenditures. In total, net proceeds after debt repayments from vessel sales and recycling were approximately $68 million.

In the first quarter of 2023, the Company has also agreed to sell another 2008-built MR, the High Mercury, which is expected to generate approximately $14 million in net proceeds after debt repayment.

In March 2022, the Company also completed the sale of a 2010-built MR and the purchase of a 2011-built LR1 with the same counterparty for a net cost of approximately $3 million. The LR1 was delivered into our niche commercial pool, Panamax International.

In December 2022, the Company exercised its purchase options on two 2009-built Aframax vessels under sale leaseback arrangement, which were accounted for as operating leases prior to declaration of the options. The vessels are expected to deliver in March 2023 at a net purchase price payable at exercise of approximately $41 million, representing a discount of approximately 45% to the current market value of these vessels.

During 2022, the Company completed the installation of a scrubber on a 2012-built Suezmax, increasing the total count of the fleet fitted with scrubbers to 12, of which ten are VLCCs and two are Suezmaxes. Drydockings for 15 vessels were completed during 2022.

The newbuilding program, composed of three dual-fuel VLCCs, continues to progress with one vessel scheduled for March 2023 delivery and the remaining two scheduled for delivery in the first half of 2023. The vessels were ordered for an aggregate contract price of $288 million and have approximately $172 million in remaining payments as of December 31, 2022, which are fully financed under a sale leaseback arrangement. Upon delivery, the vessels will commence long term time charters with an oil major for the next seven years.

RETURNING CASH TO SHAREHOLDERS

During 2022, the Company doubled its regular quarterly dividend from $0.06 per share to $0.12 per share. The Company also paid a supplemental dividend of $1.00 per share in December 2022. In total, the Company paid $69.8 million in dividends during 2022.

In August 2022, the Company repurchased 687,740 shares of its common stock in open market purchases, at an average price of $29.08 per share, for a total cost of approximately $20.0 million. The Company’s current share repurchase program has approximately $40.0 million remaining and extends through the end of 2023.

The Company’s Board of Directors declared a regular quarterly dividend of $0.12 per share of common stock and a supplemental dividend of $1.88 per share of common stock on February 27, 2023. Both dividends will be paid on March 28, 2023, to shareholders with a record date at the close of business on March 14, 2023.

BALANCE SHEET ENHANCEMENTS

In May 2022, the Company refinanced three existing credit facilities into a senior secured credit facility with an aggregate capacity of $750 million (the “$750 Million Credit Facility”), composed of a term loan with an aggregate principal amount of $530 million and a revolving credit facility of $220 million. The five-year agreement, which was nearly two times oversubscribed, extended the Company’s debt maturities, reduced the average margin and lowered quarterly amortization payments. The Company also enhanced its sustainability-linked features in the covenant structure of the $750 Million Credit Facility to include a target expenditure on energy efficiency improvements, decarbonization and other environmental related initiatives and a safety target (lost time injury frequency performance) in addition to reduction in carbon emissions outlined in the Poseidon Principles.

In June 2022, the Company sold its 50% stake in two floating storage and offshore (“FSO”) vessels to its joint venture partner. The Company received proceeds, net of adjustments for working capital and expenses, of $140 million.

In the first half of 2022, the Company refinanced three MRs through sale and leaseback arrangements with Japanese leasing companies, which generated approximately $21.7 million after debt repayment.

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