International Seaways, Inc. Q3 FY2025 earnings call

• Announced a combined dividend of $0.86 per share to be paid in December, fifth consecutive quarter with payout ratio at least 75%. • Extended $50 million share repurchase program to end of 2026. • Took delivery of 2 of 6 LR1 vessels, borrowed $82 million via new Korean export agency-backed financing. • Sold 5 vessels in third quarter for $67 million, and 3 oldest MRs agreed to be sold in fourth quarter for ~$37 million. • Lightering business had $9 million revenue in Q3, activity picked up again since September. • Ended third quarter with total liquidity $985 million, net debt under $400 million, net loan-to-value 13%.

Net income for the third quarter was $71 million or $1.42 per diluted share. Excluding gains on vessel sales, adjusted net income for the third quarter was $57 million, or $1.15 per diluted share with adjusted EBITDA $108 million. The lightering business generated approximately $9 million in revenue in the third quarter and contributed nearly $1 million in EBITDA after expenses. TCE revenues from crude and products have been evenly balanced over the past year.

• Fourth quarter blended average spot TCE fleet-wide about $40,400 per day. • 2026 expected breakeven rate about $14,500 per day, higher than last 12-month view due to timing and higher costs. • Expected to generate significant free cash flows in fourth quarter and continue returning cash to shareholders.

• Factors causing actual results to differ from expectations include those in annual report on Form 10-K for 2024 and quarterly reports on Form 10-Q for first 3 quarters of 2025. • Geopolitical intensity affecting tanker business, port fee discussions altering trade routes. • Sanctions on tanker fleet and environmental regulations posing challenges.

Q: Obviously, it looks like things are continuing to work out quite nicely for you guys, and you're doing a bit of everything. You're growing, rejuvenating the fleet, strengthened balance sheet, lowering your breakevens and obviously paying out capital. I wanted to just ask a couple of questions, more market-related, just based on what we've been seeing here recently. And I like your slide, on Slide 4, you showed the table of your achieved rates so far in the fourth quarter. There's quite a bit of a step-up, you'd say, across all the different segments from what you've earned during the prior 4 quarters. And I think in general, when people have been thinking about this market with OPEC and all that, it's been viewed that the VLCCs are going to lead the way, and certainly, we're seeing that. But we're also seeing some strength in the other classes, especially the Suezes and the Afras. And just wanted to get a sense from you, given your vantage point, is the midsized tankers, are they benefiting from what's going on with the VLCC? Are they getting pulled into those trades? Or is this a shift in cargo flows for those vessels that maybe has to do with Russia?

A: So I'm going to have Derek Solon, our Chief Commercial Officer, attempt to tackle that one. Great. Thanks, Lois. Omar, this is Derek. Thanks for the question. I mean you're, of course, right. The fourth quarter has been a lot stronger than the prior quarters. And a lot of that is OPEC+ sort of removing some of their voluntary cuts and kind of returning to a tanker market, a more normal tanker market where the VLCCs would lead the way on the big crude. So when the Vs are strengthening, what we see is they're doing a lot less of the business that they have done since post Russia, meaning fewer transatlantic cargoes that were really cannibalizing off the Suez and the Aframax. So now that we've got the VLCCs with healthy rates back in more of their normal trades, that naturally benefits the Suez and the Afras. To the point now where we're seeing, the Suezmaxes try to start to cannibalize back on the VLCC trade, right? So with that healthy V market, you're going to have a healthy midsized crude sector.

Q: Just wanted to turn to the current crude inventory levels and get your thoughts around how that inventory building cycle will play out here? And do you think given the current forward oil curve, will this incentivize any offshore storage opportunities in the coming quarters? Or is the curve not steep enough yet to kind of incentivize that?

A: It's interesting for sure. What we're seeing at the moment is that there's a lot of oil on the water. We don't really see heightened inventories yet onshore. So we speculate that some of these barrels that are on the water are not sure where they're going to land yet as a home. So it may be somewhat sanctions-impacted. And we're watching the forward oil curve very carefully. It's pretty flat. So this is definitely not a steep contango situation that we are involved in right now. So it seems a little bit more, you've got a lot of oil on the water, disagreements between IEA and OPEC and on just how much production is out there. So it's really interesting times for us.

Q: Just turning to the S&P market, given the recent momentum in rates and things, as part of your normal fleet renewal strategy, are you seeing an increase in opportunities here to potentially divest further older assets? Or are rates sufficiently high at the moment that you might want to slow down on divesting assets at the moment?

A: Well, on those older MRs, we've had a high degree of success, and we are starting to see asset values pick up, reflecting increased rates. We will continue to judiciously upgrade the fleet going forward. So in 2026, it will be more of the same of some disposals of the older vessels, and then we want to high-grade the fleet so that we really improve our earnings capability.