Third-Quarter Financial Results and Dividend Declaration
International Seaways (NYSE:INSW) reported strong third-quarter earnings and declared a $5.05-per-share dividend as tanker rates surged, according to Watch List News. The newly declared dividend matches the company’s previous record quarterly payment.
Chief Financial Officer Jeff Pribor said third-quarter net income was $344 million, or $6.90 per share. Adjusted net income was approximately $291 million, or $5.84 per diluted share. Adjusted earnings before interest, taxes, depreciation and amortization were $345 million.
President and Chief Executive Officer Lois Zabrocky described third-quarter net income as $290 million, a figure close to the adjusted net income cited by Pribor; the transcript did not explain the difference.
Zabrocky said International Seaways remains committed to paying out at least 85% of adjusted net income, allowing shareholders to participate in the strong tanker market. Pribor noted that the latest quarter was the fourth consecutive quarter in which the company paid at least 85% of adjusted net income to shareholders.
Surging Rates and Fourth-Quarter Outlook
Management stated that more than half of expected fourth-quarter spot revenue days had been booked at substantially higher rates. Pribor said the company had booked more than half of its expected fourth-quarter spot revenue days at a blended time charter equivalent rate of more than $172,000 per day across the fleet.
This compares with a blended spot TCE of $67,700 per day in the third quarter and $29,400 a year earlier. The CFO cautioned that the fourth-quarter figure reflects fixtures booked as of the call and that the reported rate could change as additional voyages are fixed.
Asked whether the company might retain more cash given the strength of fourth-quarter rates, Pribor said investors should expect that practice to continue.
Revenue Drivers and Market Dynamics
Third-quarter crude tanker revenue reached $321 million, including about $77 million in profit sharing from dual-fuel very large crude carriers. Pribor said those arrangements lifted blended VLCC earnings across spot and time-charter vessels to more than $200,000 per day.
Asked about product tanker rates, Zabrocky pointed to high U.S. refinery utilization and exports from the U.S. Gulf, as well as Russian refinery outages and rerouting of vessels. She described the company’s medium-range tanker rate of close to $56,000 per day as “super strong.”
Zabrocky said geopolitics remained a major influence on tanker markets, but she also pointed to underlying demand from oil production growth in the Americas and consumption growth in the East. She said rebuilding low OECD oil inventories could support tanker demand even if the current conflict eases.
Fleet Strategy and Liquidity Position
Zabrocky discussed the recently announced transaction to add four newbuild VLCCs, saying the company is using shares as its primary currency to preserve financial resources. She said International Seaways had sold four older VLCCs over the past two years and was working to complete the remaining steps of the transaction.
Chief Commercial Officer Derek Solon said the company had sold six ships so far this year, including a 2012-built Suezmax, and would continue to consider selling older vessels into the firm market. Pribor said the Suezmax sale generated $74 million in proceeds during the third quarter.
On vessel supply, Zabrocky acknowledged that the tanker order book has grown. She said a large number of older vessels remain in operation, however, and that some aging tonnage serving sanctioned trades could leave the fleet if geopolitical tensions ease.
International Seaways ended the third quarter with $454 million in cash and $510 million in undrawn revolving credit capacity, for total liquidity of about $964 million. Gross debt was $716 million, and net debt was approximately $250 million, Pribor said.