International Seaways, one of the largest tanker companies worldwide providing energy transportation services for crude oil and petroleum products, reported results for the first quarter of 2022.
HIGHLIGHTS & RECENT DEVELOPMENTS
- Fleet Optimization Program:
- Purchased the Seaways Eagle, a 2011-built LR1, for effectively $3 million and the sale of a 2010-built MR. The Seaways Eagle was delivered into our niche joint venture, Panamax International (“PI”), which historically outperforms the market. The LR1 vessel was swapped with the MR into a senior debt facility with no further mandatory repayment.
- Paid final installment on our contribution toward three newbuild, dual-fuel, LNG-powered VLCCs that are due for delivery in the first quarter of 2023. The remaining contract payments are to be funded by affiliates of the Bank of Communications Limited (“BoComm”) under our financing agreement. The vessels will be employed on long term time charter contracts with Shell after delivery.
- In April 2022, the Company agreed to sell all four of its remaining Handysize vessels, built in 2006, which are expected to generate net proceeds, after debt repayment, of approximately $24 million in aggregate. One of the four vessels has already been delivered to the buyers in April 2022 with the remaining three expected to be delivered during the second quarter. The Company also agreed to sell a 2008-built MR, resulting in net proceeds of approximately $10 million and savings on upcoming third special survey and ballast water treatment costs estimated at approximately $3 million.
- Recycled two Panamax vessels with an average age of 19 years during April 2022 to capitalize on historically high recycle values. Net proceeds from the unencumbered vessels were about $16 million. All recycling was conducted in accordance with the Hong Kong Convention.
- Returns to Shareholders:
- Paid a regular quarterly cash dividend of $0.06 per share in March 2022 for the ninth consecutive quarter
- A cumulative $97.4 million has been returned to shareholders since the start of 2020 through approximately $19.2 million in regular, quarterly cash dividends, a special dividend of $31.5 million in connection with the Diamond S merger and approximately $46.7 million in shares repurchased and subsequently retired.
- Balance Sheet Enhancements:
- Refinanced one MR through sale and leaseback arrangements with Japanese leasing companies for net proceeds of approximately $6 million.
- In the second quarter, the Company agreed to refinance one additional MR on a sale and leaseback arrangement with a Japanese leasing company and expected net proceeds of approximately $5 million.
- Adjusted EBITDA(A) for first quarter was approximately $26.0 million.
- Cash(B) was $75.6 million as of March 31, 2022; total liquidity was $165.6 million, including $90.0 million of undrawn revolver capacity.
- Net loss for the first quarter was $13.0 million, or $0.26 per diluted share, compared to a net loss of $13.4 million, or $0.48 per diluted share, in the first quarter of 2021. Net loss for the quarter reflects the impact of one-time items, including the gain on disposal of vessels, net of impairments and debt modification expenses aggregating $1.4 million. Net loss excluding these items was $14.1 million, or $0.28 per diluted share.
“Following a year of significant growth, we continued to advance strategic objectives in the first quarter, further solidifying our balance sheet and optimizing our fleet by selling older tonnage in a rising price environment,” said Lois K. Zabrocky, International Seaways’ President and CEO. “With both near-term catalysts driving tanker rates higher and longer-term positive market fundamentals fully intact based on historically low inventories, growing oil demand that is anticipated to return to pre-pandemic levels, and expectations of increased oil production in the second half of the year, we remain optimistic that our expanded scale, capabilities, and substantial operating leverage will serve us well as the rate environment improves.”
Ms. Zabrocky added, “We have further strengthened Seaways’ industry position ahead of a market rebound and believe we are ideally positioned with our sizable, diversified fleet of crude and product tankers. Our financial strength has been bolstered by the success of our ongoing fleet optimization program and financing activities that have unlocked value for shareholders.”
Jeff Pribor, the Company’s CFO stated, “We continue to advance initiatives that support a diversified capital structure and financial flexibility for the benefit of shareholders. Returning capital is a top priority, as evidenced by the nearly $100 million we have returned since the start of 2020, including our regular quarterly dividend in the first quarter. Going forward, we expect to pursue additional opportunities to strengthen our financial position and further implement our disciplined and accretive capital allocation strategy.”
FIRST QUARTER 2022 RESULTS
Net loss for the first quarter of 2022 was $13.0 million, or $0.26 per diluted share, compared to a net loss of $13.4 million, or $0.48 per diluted share, for the first quarter of 2021. The results in the first quarter of 2022 reflected a significant increase in revenue days as a result of the merger that were mostly offset by higher operating expenses (vessel expenses, depreciation and amortization, general and administrative expenses) and interest expense, reflecting the debt assumed in the merger that closed in the third quarter of 2021.
Consolidated TCE revenues(C) for the first quarter were $98.0 million, compared to $45.2 million for the first quarter of 2021. This increase in TCE revenue reflects an increase of approximately 3,800 revenue days of the significantly larger post-merger fleet. Shipping revenues for the first quarter were $101.5 million, compared to $46.8 million for the first quarter of 2021.
Adjusted EBITDA(A) for the first quarter was $26.0 million, compared to $10.7 million for the first quarter of 2021.
TCE revenues for the Crude Tankers segment were $36.5 million for the first quarter, compared to $35.9 million for the first quarter of 2021. This increase was primarily attributable to an increase of approximately 400 revenue days as a result of changes fleet composition from the merger and our fleet optimization program. Shipping revenues for the Crude Tankers segment were $39.6 million for the first quarter of 2022, compared to $37.5 million for the first quarter of 2021.
TCE revenues for the Product Carriers segment were $61.5 million for the first quarter, compared to $9.2 million for the first quarter of 2021. This increase is attributable to an increase of over 3,400 revenue days as a result of the merger and higher average rates earned by the LR1 and MR fleets, with average spot rates increasing to approximately $20,300 and $14,000 per day, respectively. Shipping revenues for the Product Carriers segment were $61.9 million for the first quarter, compared to $9.2 million for the first quarter of 2021.
BALANCE SHEET ENHANCEMENTS
The Company executed a number of liquidity enhancing and financial diversification initiatives during the first four months of 2022:
- In January 2022, we entered into a nine-year lease financing arrangement with Hyuga Kaiun Co., Ltd. for the sale and leaseback of a 2011-built MR that was previously encumbered under the $390 Million Facility Term Loan. The transaction generated net proceeds of $5.7 million after making the mandatory prepayment of the $390 Million Facility Term Loan; and
- In April 2022, we entered into an eight-year lease financing arrangement with Kaiyo Ltd. for the sale and leaseback of a 2010-built MR that was previously encumbered under the $390 Million Facility Term Loan. The transaction generated net proceeds of $5.4 million after making the mandatory prepayment of the $390 Million Facility Term Loan.
VESSEL SALES & RECYCLING
During the first quarter of 2022, the Company sold a 2010-built MR and purchased a 2011-built LR1 with the same counterparty. The transaction resulted in a net cost to the Company of approximately $3.0 million. The LR1 replaced the MR as collateral in the $525 million debt facility.
During 2022, the Company agreed to sell two Panamaxes, built between 2002 and 2004, delivered to the buyers in April 2022 for recycling compliant with the Hong Kong Convention. Proceeds of approximately $8.1 million on one of these vessels were received prior to the end of the first quarter.
In April 2022, the Company sold a 2006-built Handysize product carrier, which resulted in proceeds, net of debt repayment of $6.1 million. The remaining three 2006-built Handysize product carriers were agreed to be sold in the second quarter for net proceeds of approximately $17.8 million.
The Company also agreed to sell a 2008-built MR in the second quarter, which is expected to generate proceeds, net of debt repayment, of approximately $10.3 million.