International Seaways, Inc. Aktie

Thank you for standing by. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to International Seaways, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the floor over to James Small, General Counsel. James, the floor is now yours.

Thank you, and good morning, everyone. Welcome to International Seaways Earnings Call for the first quarter of 2026. Before we begin, I would like to start off by advising everyone with us today of the following. During this call and in the accompanying presentation, management may make forward-looking statements regarding the company or the industry in which it operates, which may address, without limitation, the following topics: outlooks for the crude tanker and product tanker markets; changing trading patterns, forecasts of world and regional economic activity; forecasts covering the production of and demand for oil and petroleum products; the effects of ongoing and threatened conflicts around the world, including in particular, in the Middle East; the company's strategy and business prospects; expectations around revenues and expenses, including vessel charter hire and G&A expenses; estimated future bookings, TCE rates and capital expenditures, projected dry dock and off-hire days, newbuild vessel construction, vessel sales and purchases, anticipated financing transactions and plans to issue dividends; economic, regulatory and political developments in the United States and globally, the company's ability to achieve its financing and other objectives and its consideration of strategic alternatives; and the company's relationships with its stakeholders.

Forward-looking statements take into account assumptions made by management based on various 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 and uncertainties, many of which are beyond the company's control that could cause actual results to differ materially from those implied or expressed by the statements.

Factors, risks and uncertainties that could cause the company's actual results to differ from expectations include those described in our annual report on Form 10-K for 2025, in our Form 10-Q for the first quarter of 2026 as well as 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 Lois Zabrocky, our President and Chief Executive Officer. Lois?

Thank you very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call for the first quarter of 2026. On Slide 4 of the presentation, which you can find in the Investor Relations section of our website, net income for the first quarter was a record $286 million or $5.75 per diluted share. Excluding special items, adjusted net income for the quarter was $194 million or $3.90 per diluted share and adjusted EBITDA was $244 million.

Today, we also announced another record with the declaration of our largest quarterly combined dividend of $4.55 per share, more than doubling last quarter's record of $2.15 per share. The declared dividend is comprised of two main elements: one, a new payout ratio of 85%, which you can expect from us going forward as a practice. Secondarily, a discretionary amount this quarter that we added due to the outstanding performance of the company and current market conditions, as you can see in the upper right section of the slide.

We are very proud to have passed the milestone back in March of $1 billion returned to shareholders since 2020. We are even more proud that we will reach more than 20% of that mark when we pay our dividend in June. It took 6 years to achieve the $1 billion in returns and 1 quarter to get to $1.3 billion. We continue to believe in building on our track record of returning to shareholders as part of our consistent and balanced capital allocation strategy. On the lower left part of the page, we sold 7 vessels with an average age of 17 years for $216 million as part of our ongoing fleet optimization.

We have consistently demonstrated throughout our 10-year history, we actively upgrade the portfolio throughout the cycle. Standing still in this business is effectively moving backwards. These transactions enhance our flexibility, and you should expect us to continue redeploying capital in a disciplined manner, including reinvestment in our fleet, in-line, again, with our balanced capital allocation strategy.

Our LR1 newbuilding continue to join our fleet with 2 deliveries thus far in 2026 and the remaining 2 coming in the third quarter. From our prior call, Tankers International continues to enhance its status as not only a leading VLCC pool, but has expanded into Suezmaxes. As our ships continue to integrate into the Suezmax pool, we have also gained a new pool participant. We are quite excited about the opportunities in front of us as sole owners of Tankers International.

One last comment in this section relates to our time charter coverage. We added another Suezmax onto our list for the next 3 years at $40,000 per day, which is great, and we like to have profitable long-term charters. We continue to work the time charter market with a keen eye towards the longer-term rate environment. This market opens and closes like any other arbitrage opportunity. We have $918 million in total liquidity, which includes almost $380 million in cash and $540 million in undrawn revolver capacity. Jeff is going to walk you through the cash flows of the quarter, but our vessel sales, the market environment and our disciplined balance sheet management over the last few years have all combined to put INSW where we are today.

Turning over to Slide 5. We've updated our standard set of bullets on tanker demand drivers with the subtle green up arrows next to the bullet represented as good for tankers, the black dash representing a neutral impact and a red down arrow meaning the topic is not good for tanker demand. I won't read those bullets individually, but we believe demand fundamentals are solid and continue to support a constructive outlook for seaborne transportation. The current tanker market is as volatile as it has been in some time, particularly in reaction to the conflict in the Strait of Hormuz.

Over the past few months, the market has been adapting to a new status quo, similar to what we saw during the Red Sea disruption and following Russia's invasion of Ukraine. This situation however, is even more significant. As shown in the lower left chart, roughly 15 million barrels per day of crude, nearly 40% of seaborne volumes transit through the Strait. Some of this disruption has been offset by alternative flows, including increased Red Sea exports as Saudi barrels move west to Yanbu, draws from inventories and the release of Russian barrels that have accumulated on the water.

That said, these sources have not fully replaced the volumes typically moving through the street. In the near term, the market is benefiting as it works to adjust to this dislocation. However, as the Strait remains closed for an extended period, it could have broader implications for global energy markets until a resolution is reached. As you can see on the lower right, Western markets earnings strengthened meaningfully after the onset of the conflict, so much so that MRs and VLCC rates can now be shown on the same scale, quite an exception.

Looking ahead, we believe that the longer the disruption persists, the more meaningful the eventual rebalancing could be once conditions stabilize. Particularly if inventories continue to drop, which could support tanker demand and earnings in the future.

On the supply side, on Slide 6 of the presentation, with the aging of the world fleet and the sustained strength in tanker earnings, it is natural to see that the order book is creeping up. In the graph on the left, the order book has grown since the end of 2023, rising to about 16% of today's fleet. The industry needs even more. If you look at the chart on the right-hand side that shows the ratio of removal candidates, which are 18 years or older by the time the order book is fully delivered at 3x the size of those vessels entering the fleet over the next few years. This continues to be the largest story for tanker shipping and is likely to look its way in the near term.

These fundamentals should translate into continued up-cycle over the next few years, and Seaways remains well positioned to capitalize on these market conditions. We will continue to execute our balanced capital allocation approach to renew our fleet and to adapt to industry conditions with a strong balance sheet while returning to shareholders. I'm now going to turn it over to our CFO, Jeff Pribor, to provide the financial review. Jeff?

Thanks, Lois, and good morning, everyone. On Slide 8, net income for the first quarter was approximately $286 million or $5.75 per diluted share. Excluding special items, our net income was $194 million or $3.90 per diluted share. On the upper right chart, adjusted EBITDA for the first quarter was $244 million. In the appendix, we provide a reconciliation from reported earnings to adjusted earnings.

While our revenue and expenses were largely within expectations, our G&A expenses were reduced by about $5 million in the quarter due to a commercial settlement where we were reimbursed for legal expenses incurred over the last 2 years. The lightering business in the first quarter had around $6 million in revenue and expenses.

Turning to our cash bridge on Slide 9. We began the quarter with total liquidity of $724 million, composed of $160 million in cash and $557 million in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we first had $244 million in adjusted EBITDA for the first quarter, plus $14 million of debt service, another $15 million of dry dock and capital expenditures as well as an $81 million use of working capital. We therefore achieved our definition of free cash flows of about $133 million for the first quarter.

We received $223 million in net proceeds from the sale of 7 vessels in the first quarter, of which about $6 million was paid to the pool for positioning of one of our VLCCs. We spent $28 million in LR1uilding installments, including financing proceeds and costs and $5 million to acquire the remaining ownership stake in TI. The remaining $106 million represents our second largest ever dividend of $2.15 per share paid in March and topping the $1 billion milestone in returns to shareholders.

In summary, the result of our activity this quarter yielded a net increase in cash of $210 million, roughly in line with the proceeds from our vessel sales. This equates to ending cash of $377 million, with $541 million in undrawn revolvers for total liquidity of about $918 million.

Moving now to Slide 10. We have a strong financial position detailed by the balance sheet you see on the left-hand side of the page. Liquidity is strong at $918 million. We've invested about $2 million in vessels at cost on the books, which are currently valued at nearly $4 billion. And with approximately $225 million in net debt combined with rising asset values, our net loan-to-value is below 7% at the end of the first quarter. In the lower right-hand table, we have included a summary debt profile. Gross debt at the end of the first quarter was $650 million. Mandatory debt repayments through the end of 2026 are about $21 million. Our debt is almost entirely fixed or hedged, which contributes to our total cost of debt below 6%.

We continue to enhance our balance sheet to maintain the financial flexibility necessary to facilitate growth as well as returns to shareholders. Our nearest maturity in the portfolio isn't until the next decade. We have 25 unencumbered vessels, and we have ample undrawn RCF capacity. We continue to explore ways to lower our breakeven cost even more and share in the upside with substantial returns to shareholders.

On the last slide that I'll cover, Slide 11 reflects our forward-looking guidance and booked-to-date TCE aligned with our spot cash breakeven rate. Starting with TCE fixtures for the second quarter of 2026. I'll remind you that actual TCE during our next earnings call may be different. But in the second quarter so far, we currently have a blended average spot TCE of over $100,000 per day fleet-wide on about 45% of our second quarter expected revenue. On the right-hand side, our expected breakeven for the next 12 months is about $14,900 per day. So based on our spot TCE book to date and our spot breakeven, it looks as though Seaways can continue to generate significant free cash flow during the second quarter and build on our track record of returning cash to shareholders.

On the bottom left-hand chart, we provide updated guidance for our expenses in 2026. You'll notice that we've added a few million dollars per quarter to our projected G&A. These increases represent the impact of consolidating Tankers International into INSW's financials. I would also like to note that we've added guidance for what we refer to as other revenue, which are TI commissions that offset this. We also included in the appendix our quarterly expected off-hire and CapEx. I don't plan to read each item line by line, but encourage you to use these for modeling purposes.

Now that concludes my remarks. I'd like to turn the call back to Lois for her closing comments.

Thanks so much, Jeff. On Slide 12, we have provided you with Seaways investment highlights and encourage you to read them in their entirety. Summarizing briefly, over the last almost 10 years, International Seaways has built a track record of returning cash to shareholders, maintaining a healthy balance sheet and growing the company. Our total shareholder return represents over 28% compounded annual return. We continue to renew our fleet so that our average age is about 10 years old and what we see as the sweet spot for tanker investments and returns.

We've invested in a range of asset classes to cast a wider net for growth opportunities and to supplement our scale in each class by operating in larger pools. We aim to keep our balance sheet fortified for any down cycle. We have nearly $1 billion in total liquidity to support our growth. Our net debt is under 7% of the fleet's current value, and we have about 40% of the fleet that is unencumbered. We only need our spot ships to earn less than $15,000 per day collectively to breakeven in 2026. At this point in the cycle, we expect to continue generating cash that we will put to work, creating value for the company and for our shareholders. We thank you very much for joining us. And with that said, operator, we would like to open the line for questions.

[Operator Instructions]

And your first question comes from the line of Liam Burke from B. Riley Securities.

You have some older MRs in the fleet and there's significant demand. Are you seeing charterers -- willing to charter the older vessels? Or are you looking at elevated asset values to maybe divest them?

Well, I would say that we have had great success in clearing out our oldest MRs. And while I was thinking about you, and I was noodling out, if you're able to earn the types of rates that we are locking in. For example, in the second quarter, your free cash flow thrown off per MR in that quarter is going to be over $5 million. So we are constantly looking at high grading, and we've had great success on that front. And having available ships and prompt positions moving oil today is worth a lot of money.

Fair enough. And if you look at spot rates, obviously, they're having elevated rates just [putting it] mildly. How much thought have you given to moving some and locking in on the time charter front?

I can -- I'll start that, and I'll flip it over to Derek. And what we're seeing is that everybody that has a time charter now is certainly eager to hold on to it. And then you can get a healthy rate for a shorter period. But as you go longer, I think the volatility starts to come in and people are a little bit anxious to fix 3-year deals. What do you think, Derek?

Lois, I agree with you. I think, like Lois said in her remarks, we're eager to look for longer-term charters. Longer than a year, certainly in this kind of spot environment. And so the 2- or 3-year numbers are considerably lower than what we're seeing for the 1-year number and in the spot market. So our preference until we see stronger rates in the longer run would be to stay where we are in the spot for a while. When we do see -- outside the market, we do see rates that we like for longer term, like Lois mentioned in her remarks, Suezmax for 3 years at a pretty healthy number.

And your next question comes from the line of Greg Lewis from BTIG.

Great quarter. I did want to talk a little bit about the dividend. I mean that was eye-popping. Lois and Jeff, over the last couple of years, you've done a good job of the balance sheet looks great. We've sold some older vessels. We've kind of positioned the company very well, realizing that we're definitely going to keep part of the special dividend as part of the return of cash to shareholders.

Are we looking or have we thought about maybe potentially increasing the kind of the small, I guess we refer to it as the permanent dividend. Has there been thoughts with the Board about potentially raising that up just given the fact that we've kind of put the fleet on a much, I don't know, firmer or better footing?

Greg, this is Jeff. We were just reflecting the other day as we got ready for this release and call that, that dividend started at $0.06 a quarter and then we raised it to $0.12. And that was in a year where there wasn't much net income, but we said, let's put out an amount that is, as you say, permanent that we're confident through the cycle. And then we've had a fortunate circumstance of being in the market that's allowed us to pay a lot more than that. And what we've really focused on this variable component where we wanted to be consistent and consistently raising it. And what you saw this time there is a message that we are at 85% of net income on a 25-year basis.

Anecdotally, that's probably close to 100% on a 20-year depreciation basis, but we're at 85% on a 25-year basis. And you should expect that. Now I think you raised a good point. That $0.12, no one is really thinking about it right now when you have such a high amount of income that 85% is way more than that, right? Obviously, $4.55 right now. But over time, I think that's something we'll look at as the company gets bigger and we feel that what we can afford permanently because there will eventually be a down cycle, right? So I think you raised a good point. It is something we think about. But this quarter, we didn't want to confuse the message. We want to stay on message, 85% is the expectation.

But because of market conditions and because of our strong balance sheet, thank you for mentioning it and then the liquidity that we have, we have the ability to pay some more. So we thought this is a market where you should share with your owners. So we want -- we didn't want to go away from the 85%. We want to be consistent there. The expectation is clear. But because we're in good market condition and excellent balance sheet liquidity, we have out of discretionary. So -- but your point is valid, all stuff we think about.

Okay. Great. And then, Lois, maybe on the market. I mean, clearly, the market is good or great. I was kind of curious, though, around kind of maybe what you're hearing or seeing regarding the dark fleet, right? I know that the U.S. removed or temporarily lifted a ban on some sanctions of like vessels that I guess were previously in the dark fleet.

Is there any way to kind of track or think about those vessels in terms of -- I guess, a couple of things. One is, as the Iran war has happened and maybe some of these vessels sanctions are lifting, have those vessels -- have we -- I mean, have there been maybe better utilization or efficiency of those vessels? And then -- and maybe it's still too early to be talking about this, but in -- eventually, this war will be resolved and when this war is resolved, just given the fact that the waived sanctions, has there been any thoughts around what happens to those vessels that have been consistently in the dark fleet?

So I'm going to start that reply, and then I'll have Derek jump in. So for sure, we put a lot of thought into the dark fleet and getting them to go away, right, from the market entirely. You're certainly seeing heightened interest from our administration on the dark fleet. And I think this temporary relief to deliver cargoes to reduce the impacts of the Hormuz closure is very temporary. We still think there's a very high inefficiency rate on those -- on the dark fleet. And Derek, correct me if I'm wrong, but most of the VLCCs, which there's more than 150 now that are sanctioned, which are largely due to the Iranian situation are over 20 years.

A good portion of them are over 20 years. So to your question on are we seeing increased utilization of the dark fleet, that answer is still no, right? One, like Lois just said, they're a lot older. So their efficiency rate -- their utilization rate is quite low. And two, now there's increased pressure from the U.S. administration on these ships. So they're not getting a lot -- even before they Iran war. So we haven't seen them -- they're active, but they're not running at the utilization that the tankers international, right?

And then what happens to them long term? It's an easy way to say they'll all quickly find their way to be recycled. That will probably take some time, but they'll run out of work. right? If the sanctions fight harder, the U.S. administration pays more attention to the VLCCs or if the EU pays more attention to sanction ships in some of the smaller fleet, smaller segments, they'll run out of work to do. So from a -- where they enter us on a competitive basis will be -- will have less impact on our markets.

Super Helpful.

And your next question comes from the line of Chris Robertson from Deutsche Bank.

Just have a question around as ships reposition and ballast from the Mid East over to the U.S. Gulf to load some cargoes here, especially the larger ships and VLCCs and such. What's your view around your own lightering business and activity prospects there? But just general thoughts about lightering operations that could be impacted here as a lot of ships come over this way and what types of inefficiencies could be brought into the system because of that?

I'll flip to Derek on that. I would say Q1 was somewhat negatively impacted by the incredible volatility and changing -- the scramble for what kind of -- where is the crude going to go, what ship is it going to go on? And we're seeing that change in Q2.

Yes, that's right. So Chris, at the start of -- the kickoff of the Iran war in March, there was this scramble for barrels, right, to replace everything that was coming out of Hormuz. So STS activity in the Gulf actually suffered a little bit because you wanted to -- the charters wanted to get oil as fast as they could onto any hole that they could. So this concept of trying to wind up several Aframaxes and the VLCC for lightering, for instance, there was no time for that in the immediate aftermath of the war.

But just like you said, as things -- hard to say they've calmed down, right? But as we're starting to get a new sense of normal in this war -- in this current war, now you're starting to see the lightering line up. In Q2, it's early May, we already have more jobs booked for Q2 than we had for Q1, right? And we still have more than half a quarter to go. So exactly to your point, we're seeing a lot more lightering inquiry and a lot more work for our lightering LLCs [ since January ].

Got it. That's helpful. And then do you have any thoughts just around -- we always talk about barrel substitution, obviously, as a starting point, but there's also congestion that happens in the system and ton mile impacts and all these types of things. So on this front, as there's more lightering business and as these larger ships get lined up and there has to be this process, what does that do in terms of removing some effective capacity from the larger system?

That's a great question. Thank you. So when we start to line things up in terms of logistics and STS, you don't want it to become too efficient or that whole process, it doesn't make sense, right? We're seeing delays in other ways, though, not necessarily just not to STS right now, but just as you said, general port congestion. And we're seeing that now, but when we're -- in terms of loading ports, when we're really going to see it in terms of congestion and utilization is when hormes opens and a lot of those ships that are laden with oil make their way to Asia, that will be ultimately a good thing for the economy and for the world.

But it's going to take a long time for all those ships to discharge. So that inefficiency that you're speaking about, I think we'll see actually a lot more post-war than we're seeing today.

And your next question comes from the line of Omar Nokta from Clarksons Securities.

Maybe just perhaps maybe to you, Derek, on this kind of you brought up that point about a reopening scenario. I did want to ask maybe just on that. How do you think in a potential reopening? And I guess it's probably not so simple to assume we'll go back to how things were, at least not initially. But as we kind of think about the reopening scenario for Hormuz and your fleet makeup, how do you see the segments kind of getting affected? Is there a clear winner in terms of vessel class? And then how do you prepare for that?

That's a great question. So if I were to start, Omar, I'd say the start of this war has impacted every vessel class separately, right? It started on the VLCCs running up massively as soon as Hormuz closed as anybody in the Atlantic would get or anybody outside of the AG was getting any barrel that they could. Then the scramble went down to the smaller crude segments where you saw the [Aframaxes] and the Suez really start to run because nobody wanted to wait for a 2 million barrel step. And then it really hit the MRs really really well, and you see the kind of numbers that the MR market and International Seaways is putting up.

As Hormuz starts to open, I think we'll see a little bit of a saddle, right? So right now, we're in the high part of it. And then as Hormuz stays close, then we start to see fewer Atlantic Basin barrels, that can start to trend down. But when it opens back up, Omar, I think that's going to be really good for us. You've got more ships able to call AG and you've got a lot more barrels flowing out of there. That's a good thing. You've got this sort of inefficiency when all the ships start to get to Asia that we just talked about on the previous question.

And prior to the war, the kind of thing hanging over the tanker market was heavy stocks. We've eaten into that stock -- into those stock levels now because of the Hormuz closure. And given this push for supply chain resiliency, I think we'll start to see people build up stocks quickly. So I think that will benefit the crude market, most in the beginning once Hormuz opens.

I appreciate that. I know it's a very complicated dynamic, but it seemingly makes -- that makes sense. And I guess we could think about could the Middle East then be offering a premium, right, to drag those ships away from the Atlantic. I guess the other question I had is kind of on the operational or commercial performance. The MRs especially look very strong at 76,000 here in the second quarter for the first 43%. It's a bit better than what we have seen, I guess, in terms of, say, peer averages or market indexes.

How -- what would you chalk that up to? Is that a result of some kind of triangulation? Is it actually possible to triangulate in this market? Is it how your fleet is deployed? Any kind of color you can give on such a strong result so far on the MRs?

I mean Omar, it's where were you available? Where do you concentrate your trading and we were advantageously positioned.

That's right, Lois. I think a lot of it in the kickoff of the war was where were you when it started and when did you load. With our MR pools, one of them is heavily focused on the Americas trade, and that was very beneficial post Iran war to be in the Americas where the market is completely skyrocketed. I mean we had fixtures with demurrage at over $150,000 a day for an MR tanker, right?

So the Americas is where it started on the MR side that brought up the European trade as well. And funny enough, even now, Europe -- sorry, Asia is starting to come up on the MR market, which we kind of thought would just be a sink of product. Now China has approved some exports. And from an MR market standpoint, a lot of the ships left Asia to come over to the Americas. So now they're undersupplied in tonnage. So having a strong base starting in the Americas is very, very beneficial for us. I think having that diversification in our other pool will be beneficial as the months take on.

[Operator Instructions]

Your next question comes from the line of Stephanie Moore from Jefferies.

I want to -- I appreciate the color on the dividend and your priorities here, but maybe taking a step back and looking at general capital allocation priorities, I would love to get your thoughts in terms of appetite for buybacks here? And then also any thoughts on M&A? There's some movements in the space or rumor movements. So just curious, general appetite as well.

Well, first, Stephanie, we'd like -- both I and the team would like to welcome you to the research coverage universe for International Seaways. So happy to have you on board. Pun intended. So capital allocation, our favorite topic. Yes. I mean we have -- we are -- to recap, we have, over the course of this good market period, de-levered as much as we want to de-lever. -- values keep going up. So even without paying down additional debt, we de-lever a little more. Now we are taking on some really high-quality debt this year with the ECA financing for LR1. So we'll probably tick up a little bit.

But that's one of the reasons we were able to have such a high dividend with the discretionary piece this quarter was that we de-levered enough. We also found ourselves with the other pillar of capital allocation is fleet renewal. That -- the principal pillar of fleet renewal for us in 2026 is the LR1 -- the 4 LR1 -- the 6 LR1 program delivering this year. But as mentioned, they're really well financed. And so the capital allocation in the second quarter that we need for that is only $6 million. So therefore, we were able to think about and to announce today additional returns to shareholders on top of that consistent 85% that we're telling the market to expect.

Do we look at share repurchases as well? Yes, we have a share repurchase program. We use it from time to time. I would say that the levels of share price where we are, NAV keeps moving up, but we're grateful that our share price is moving up with it and perhaps beyond it. So I think that -- I know that we -- when we looked at a discretionary additional return, we lean to more dividend rather than share repurchase, although the tool is always there. So I think for the fore for right now, that's what we see is probably the consistent payout ratio and with additional cash, it's optionality.

We're high returning -- if there's a return on that cash in terms of growth, whether you call it M&A or share purchases that meets our criteria, that's an option or other additional returns to shareholders. Now I don't know if you just about M&A generally -- always looking for good M&A,

Stephanie.

And with no further questions, I'll turn the call back over to Lois Zabrocky.

We want to thank everybody for joining International Seaways call today. And I'm just going to conclude with -- in our 10-year history, our first major focus during leaner market times was getting bigger, getting more modern, and we paid down debt along our journey and focusing on that. And all of that has brought us to today where we're declaring $4.55 per share for our shareholders, and we really appreciate everybody for sticking with us. Thank you so much.

Thank you. And this does conclude today's conference call. You may now disconnect. Have a great day.

Hello, everyone. Thank you for attending today's International Seaways, Inc. Fourth Quarter 2025 Earnings Conference Call. My name is William, and I will be your moderator today. [Operator Instructions] At this time, I would now like to pass the conference over to our host, James Small, General Counsel with International Seaways. James, you may go ahead.

Thank you, and good morning, everyone. Welcome to International Seaways Earnings Call for the Fourth Quarter and Full Year 2025. Before we begin, I would like to start off by advising everyone with us today of the following. During this call and in the accompanying presentation, management may make forward-looking statements regarding the company or the industry in which it operates, which may address, without limitation, the following topics: outlooks for the crude tanker and product tanker markets; changing trading patterns, forecasts of world and regional economic activity; forecasts covering the production of and demand for oil and petroleum products; the effects of ongoing and threatened conflicts around the world, the company's strategy and business prospects, expectations about revenues and expenses, including vessel, charter hire and G&A expenses; estimated future bookings.

TCE rates and capital expenditures, projected dry dock and off-hire days, newbuild vessel construction, vessel sales and purchases, anticipated financing transactions and plans to issue dividends, economic, regulatory and political developments in the United States and globally.

The company's ability to achieve its financing and other objectives and its consideration of strategic alternatives and the company's relationships with its stakeholders. Forward-looking statements take into account assumptions made by management based on various 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 that could cause actual results to differ materially from those implied or expressed by the statements.

Factors, risks and uncertainties that could cause the company's actual results to differ from expectations include those described in our annual report on Form 10-K for 2025 as well as 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 Lois Zabrocky, our President and Chief Executive Officer. 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 2025. On Slide 4 of the presentation, which you can find in the Investor Relations section of our website, net income for the fourth quarter was $128 million or $2.56 per diluted share. Excluding special items, adjusted net income for the fourth quarter was $122 million or $2.45 per diluted share, and adjusted EBITDA was $175 million.

Today, we also announced the declaration of our largest ever quarterly dividend, which is a combined $2.15 per share to be paid in March. After this payment, Seaways will have paid over $1 billion in returns to our shareholders since 2020, a milestone that we are very proud of.

As you can see in the upper right section of the slide, the dividend represents a payout ratio of 87% of our fourth quarter adjusted net income and is our sixth consecutive quarter with a payout ratio of at least 75%. We continue to believe in building on our track record of returning to shareholders as part of our consistent and balanced capital allocation strategy.

We also have our $50 million share repurchase program in place until the end of 2026 as share repurchases remain an option for Seaways as an addendum to our payout ratio. On the lower part of the page, we are consolidating Tankers International, the leading VLCC pool by acquiring the remaining 50% interest and expanding Tankers International with a Suezmax platform.

We took delivery of the Seaways Gibbs Hill and she delivered into Tankers International at the end of December. We paid $119 million for this high-spec scrubber-fitted VLCC after disposing of 10 older vessels with an average age of 18 years for proceeds of $131 million. So far in 2026, we've continued this trend by selling another 7 older vessels for proceeds of $216 million.

Our remaining 4 LR1s will deliver in 2026, completing our newbuild program, which is fully financed. These 2 fundamental reasons are why we were able to extend our dividend beyond our 70% payout ratio. With only $30 million of Seaways cash needed to take delivery of the LR1s as well as the impeccable state of our balance sheet, which you can see on the lower right hand of the page, we believe this dividend provided great returns for our shareholders.

We review our capital allocation strategy quarterly with our Board, and we remain steadfast in our commitment to shareholders. We have $724 million in total liquidity, which includes nearly $170 million in cash and $560 million in undrawn revolver capacity. During the fourth quarter, we repaid our leases, as previously announced, of about $258 million.

This was then followed by the third quarter's bond issuance for $250 million, which unencumbered 6 VLCCs and lowered our cost of debt. Our net loan-to-value is below 13% and our spot cash breakeven rate is less than $15,000 per day.

Turning to Slide 5. We've updated our standard set of bullets on Tanker Demand Drivers with subtle green up arrows next to the bullet representing positive influences for tankers, the black dash representing a neutral impact and red down arrows, meaning the topic is not positive for tanker demand.

Without reading these bullets individually, we believe demand fundamentals are solid and continue to support a constructive outlook for seaborne tanker transportation. Oil demand growth remains healthy at more than 1 million barrels per day of growth projected for both 2026 and 2027.

OPEC+ is supplementing the 1 million barrels per day of non-OPEC production increases by unwinding their own previous cuts. In the lower left-hand chart, both the EIA and the IEA are forecasting supply to exceed demand in 2026.

We experienced some of this during the fourth quarter, where there was a substantial amount of oil on the water, much of which we understand to have done sanctioned barrels. However, as we look ahead, the market has not reacted to this projected oversupply. You would expect a contangoed structure market or at least a drop in the absolute price of oil.

However, as you can see in the middle bottom chart, the market structure remains backwardated and absolute prices remain elevated. We believe China to be stocking up as they have built substantial storage capacity as seen in the lower right-hand chart. Another element driving the oil market dynamics is the geopolitical environment. The U.S., Iran tensions remain elevated. The Russia-Ukraine conflict has not been resolved. The United States started the year with upheaval of the Venezuelan government and their oil production.

The geopolitical intensity on tankers remains strong, and we continue to work through a multitude of scenarios that constantly impact our business. On the supply side, on Slide 6 of the presentation, we're starting to see the enforcement of sanctions that are affecting our business, which provides support for the compliant fleet.

When we take into consideration sanctioned vessels, the order book remains well below replacement of the fleet. On the bottom right-hand chart, we reflect vessels turning 18 or older by the end of 2029 when a majority of the order book will have delivered. We also layered in currently sanctioned vessels into the dark bars on the chart.

These removal candidates to the compliant trade remain a multiple of those vessels that are on order, as noted in the chart as the light bar. This remains one of the most compelling cases for tanker shipping and the bottom line is that even with 15% of the fleet on order, there is simply not enough tankers to cover removal candidates for the compliant trade.

We believe these fundamentals should translate into a continued up cycle over the next few years, and Seaways remains well positioned to capitalize on these market conditions. We will continue to execute our balanced capital allocation strategy to renew our fleet as well as to adapt to industry conditions with a strong balance sheet while returning 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. On Slide 8, net income for the fourth quarter was approximately $128 million or $2.56 per diluted share. Excluding special items, our net income was $122 million or $2.45 per diluted share. On the upper right chart, adjusted EBITDA for the fourth quarter was $175 million.

In the appendix, we provided a reconciliation from reported earnings to adjusted earnings. On the lower left chart, I would point out that our TCE Revenues from crude and product have been evenly balanced over the past year, but the crude segment outperformed products in Q4 with the return of VLCCs as the leader in tanker earnings.

While our revenue and expenses were largely within expectations for the year, fourth quarter vessel expenses were higher than our guidance due to timing of stores and spares at year-end. Lightering business in the fourth quarter had around $7 million in revenue and expenses.

Turning to our cash bridge on Slide 9. We began the quarter with total liquidity of $985 million, composed of $413 million in cash and $572 million in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we had $175 million in adjusted EBITDA for the fourth quarter, plus $19 million in debt service and another $23 million of dry dock and capital expenditures.

We therefore achieved our definition of free cash flow of about $135 million for the fourth quarter. We received $36 million in proceeds from the sale of vessels in Q4, which offsets the remaining expense of $107 million for the purchase of the Seaways Gibbs Hill, a 2020-built VLCC which delivered in the fourth quarter.

We also paid about $6 million in LR1 newbuilding installments net of financing. As previously announced, we repaid the sale leasebacks on 6 VLCCs for $258 million, deploying the proceeds from last quarter's bond issuance.

The remaining $42 million represents our $0.86 per share dividend that we paid in December. The latter few bars reflect our balanced capital allocation approach where we utilize all the pillars, fleet renewal, balance sheet optimization and returns to shareholders. In summary, the result of our activity this quarter yields a net decrease in cash of $261 million. This equates to ending cash of $167 million with $557 million in undrawn revolvers for total liquidity of nearly $724 million.

Moving to Slide 10. We have a strong financial position detailed by the balance sheet on the left-hand side of the page. Our liquidity remains strong at $724 million. We have invested about $2 billion in vessels at cost on the books, which are currently valued at about $3 billion. And with under $400 million of net debt at the end of the fourth quarter, our net loan-to-value is approximately 13%.

In the lower right-hand table of the page, we have included a summary of our debt profile. Gross debt at the end of 2025 was $578 million. Mandatory debt repayments through the end of 2026 are about $30 million. Our debt is 100% fixed or hedged, which contributes to our cost of debt being below 6%.

We continue to enhance our balance sheet to maintain the financial flexibility necessary to facilitate growth as well as returns to shareholders. Our nearest maturity in the portfolio is in until next decade. We have 31 unencumbered vessels, and we have ample undrawn RCF Capacity. We continue to explore ways to lower our breakeven cost even more to share in the upside with substantial returns to shareholders.

On the last slide that I'll cover, Slide 11 reflects our forward-looking guidance and book-to-date TCE aligned with our spot cash breakeven rate. Starting with TCE fixtures for the first quarter of 2026, I'll remind you that actual TCE during our next earnings call may be different.

But in the first quarter so far, we are continuing to see the impacts of the elevated rate environment we began to see in the second half of 2025. We currently have a blended average spot TCE of about $50,900 per day on 71% of our first quarter expected revenue.

On the right-hand side, our expected 2026 breakeven rate is about $14,800 per day.

Based on our spot TCE Booked to-Date and our spot breakevens, it looks like Seaways can continue to generate significant free cash flows during the first quarter and build on our track record of returning cash to shareholders.

On the bottom left-hand chart, we provide some updated guidance for our expenses in 2026. You'll notice that we've added a few million dollars per quarter to our projected G&A. These increases represent the impact of consolidating Tankers International into INSW's financials.

I would also like to note that we've added guidance for what we are referring to as other revenues, which are TI commissions that offset this increase. We also included in the appendix our quarterly expected off-hire and CapEx. I don't plan to read each item line by line, but encourage you to use these for modeling purposes.

That concludes my remarks. I'd like to now turn the call back to Lois for her closing comments.

Thank you so much, Jeff. On Slide 12, we have provided you with Seaways investment highlights, which we encourage you to read in its entirety, and I will summarize here briefly. Over the last 10 years, International Seaways has built a strong track record of returning cash to shareholders, maintaining a healthy balance sheet and growing the company.

Our total shareholder returns represent over 25% compounded annual return. We continue to renew our fleet so that our average age is about 10 years old in what we see as a sweet spot for tanker investments and returns. We've invested in a range of asset classes to cast a wide net for growth opportunities and to supplement our scale in each class we operate in larger pools.

We aim to keep our balance sheet fortified for any downturn in the cycle. We have over $550 million in undrawn credit capacity to support our growth. Our net debt is under 13% of the fleet's current value, and we have 31 vessels that are unencumbered.

And lastly, our spot ships only need to earn collectively under $15,000 per day to breakeven in 2026. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders.

Thank you very much. And with that said, operator, we would now like to open up the lines for questions.

[Operator Instructions] Our first question comes from the line of Liam Burke with B. Riley.

Lois, I had a question on your MR partial fixtures for the first quarter '26. Your prepared comments, you mentioned that the refinery margins are at 5-year averages, but it doesn't seem that compelling to warrant the type of TCE rates that you've got fixed for first quarter. Is there anything out there in the macro that's driving up those rates?

Well, geopolitically, of course, now EU is not going to import refined Russian product. And that had previously been allowed from India. And so there's definitely a period of adjustment here that benefits the MRs versus the bigger clean LRs that normally would do that move, right? So that helps us logistically. And then Derek Solon, our Chief Commercial Officer. Derek, maybe talk about diesel spikes or the winter?

Thanks, both. I guess I would say, firstly, your main geopolitical point seems to be one of the big drivers of the MR rates being as strong as they are. Like you said, it's less refined product coming in from India that came from Russian crude. So that was previously coming in on bigger product carriers. So that's the benefit of the MRs.

And also when you see less refined products coming from Turkey, which was previously refined from Russian crude, that's all coming from Atlantic -- a lot of that's coming from Atlantic Basin. So that's U.S. Gulf exports back to Europe, which is really helping the MRs. And of course, we've had a pretty challenging winter here in the Northeast as many of the listeners will know. And so when you get these weather delays, you get a lot of ships being disutilized or stuck in ports. So that sort of exacerbated the supply issue, which has helped us.

Great. And then Lois, you have been pretty nimble moving from spot to time charters. It looks like that you're pretty comfortable that rates -- spot rates are going to be healthy for the foreseeable future.

Yes, absolutely. The spot market is just going from strength to strength. This is not to say that we wouldn't layer in some time charters as we just see these outsized numbers, but we're going to be judicious. We -- I mean, part of what we hope to value add is to remain open to -- when you see the high utilization and then the geopolitical laid on top of it, even though we can't control that, to remain open to the possibilities of this market, which has just continued to impress us.

Our next question comes from the line of Sherif Elmaghrabi with BTIG.

At this point, the VLCC fleet is looking pretty modern and you guys have refreshed a good chunk of your MRs. Just looking across your diversified fleet, there's still some older vessels maybe on the Suezmax side. Can we think about that as the next up on your renewal campaign? Or maybe more broadly, where are you seeing the most attractive opportunities right now?

Yes. I'll flip it over to you, Derek, in a second. But we would definitely say, of course, you see us taking the remaining 4 of our 6 LR1s. The first 2 are already operating in the fleet, and that was just incredibly well timed on that renewal, really critical sector for us. And you saw us bring in a modern VLCC right before the market went crazy here.

We still like the lineup of the big ships. And while recognizing that right now, the market, as I said, is going from strength to strength. I don't know if you want to add anything to that, Derek, or if that cuts it.

No, Lois. Thank you. That's the same answer, I get.

And then one for Jeff. You guys took the opportunity to exercise some repurchase options and that's all good stuff that lowers your cost of debt. Can you remind us just if there are any other repurchase options coming up on your remaining sale-leaseback vessels?

We've got flexibility on all of the remaining debt that we have that's structured as leases. So we have complete flexibility. But a real theme of 2025 was that we put our balance sheet in a place where we want to be. So I don't see us exercising those options, which is essentially additional deleveraging beyond where we are today because we like where we are, and that allows us maximum flexibility to do things like we did, which was increase our dividend.

Our next question comes from the line of Omar Nokta with Clarksons Securities.

Just a couple of questions on the company specifically. Obviously, seeing as low as you were just talking about, we're seeing rates go from strength to strength. And typically, when VLCCs hit this $200,000 level, it's almost like the culmination of some short squeeze, but it feels like this is a bit stickier.

Just wanted to ask in terms of the your current VLCC footprint. You have the 3 VLCCs on contract to Shell that are -- that do have a profit share element. Can you just remind us how that profit split works on those ships?

Absolutely. Derek, why don't you describe how that's rewarding INSW right now?

Okay, Omar. The profit shares that we have on the Shell VLCCs, we have a base rate that we've had since the beginning of the time charter. And then there's a market element that is added to that based on the spot market and the Baltic graph. And then from there, we split the profits above that base rate, 50-50 with our charterer. So in a market like this, it will be quite beneficial.

Okay. So there's no full upside, there's no cap at the top in terms of where the spot rate. There's no color, for instance, on that.

Great question, Omar. Thanks. But no, there's no cap on top.

Okay. And then maybe I know this is obviously a Board decision. You stepped up the dividend here to that 87% threshold. The past maybe 4 or 5 quarters, you were around that 75% level. Is this a new range for us to expect going forward, especially just given the earnings power and the liquidity and the overall leverage or low leverage you have? Is 87% something we should kind of think about as a new base level going forward?

Omar, I'll start on that one and let Jeff -- that's where he lives. But we're super excited. This is our highest dividend return to shareholders, and this follows 6 quarters of at least 75%. And that's a lot of that's testament to the balance sheet. And Jeff, do you want to add to that?

Sure. Thanks, Lois. Yes, Omar, the definition of a high-quality problem is how to keep dividend providing a really good yield when your stock price is going up steadily. So I'm -- we're super pleased to have this dividend, as we noted, the one that puts us over the top over $1 billion in dividends in total. That's number one.

Again, we -- I think you know because we've talked about it a lot, we really focus on free cash flow, right? And what we looked at was, hey, as we said, the balance sheet is in good shape. We don't need to allocate more cash to deleveraging. We had the $30 million of LR1 payments that Lois mentioned in her remarks was what we needed for fleet renewal this quarter.

So we were able to direct all the rest of the free cash flow to a dividend. And that sort of worked out to be 215 or 87%. Again, we focus first on cash, but we know we're always going to lean into increasing the dividend, and we know people want to know how that is as a payout ratio. So yes, it's the highest yet. It represents a over 12% yield on an annualized basis. We will -- it's part of the pattern. As I said, we'll lean into always being able to share as much as we can with the shareholders.

[Operator Instructions] Our next question comes from the line of Chris Robertson with Deutsche Bank.

Just in terms of the current market strength, what is your assessment around the impact that Sinokor Maritime has had on the VLCC segment in particular? And do you think that this impact is enduring or fleeting?

Yes. So we only like to opine about ourselves. But without a doubt, the -- I would call it a restructuring of the ownership base where always tanker owners are highly, highly fragmented. So the fact that you now have a major player consolidating legitimate VLCC tonnage is a true strength in our market. And that indeed, as we've combined Suezmax's now into Tankers International, that is -- offers owners also a footprint to keep that commercial exposure. And come into a position of strength.

So we really are excited about what we're seeing there. It is a fundamental shift in the ownership base and again, in a highly, highly fragmented market. Right now, you've got over 150 VLCCs on the OFAC sanctions list, players that are not maintaining the ships that are trading rogue barrels and the fact that in that market that this owner has recognized, now is the time to gather legitimate unsanctioned tonnage and really take advantage of the marketplace. It's that staying power, and it's very, very strong leadership and exciting to all the VLCC owners.

Yes. Interesting, Lois. Just kind of building on that, given the impact that it has had and owners are seeing the impact, what are your thoughts around further consolidation in the industry, either on the crude side or the refined product side? Do you think we'll see more of it now that these benefits are pretty clear?

I think so. And I also would say that our customer base recognizes this. These are -- you see a shift from the charters, the customers into recognizing and making sure that they have access to tonnage.

So this just provides more drive and demand for owners where I think when the market looks like it doesn't have as high a utilization, customers can be more relaxed. So you're seeing customers saying, "Hey, I need to make sure that I have access to vessels" And all of that structurally is super positive for tanker owners.

Thank you. At this time, I would now like to pass the conference back over to Lois for any closing remarks.

We just want to thank everyone for joining us, International Seaways for our Q4 and full year 2025, and we look forward to talking to you next quarter with strong tanker markets. Thank you.

Thank you. That will conclude today's conference call. Thank you for your participation. You may now disconnect your lines.

Hello, everyone, and welcome to the International Seaways Third Quarter 2025 Earnings Conference Call. My name is Carla, and I will be coordinating your call today.

[Operator Instructions] I would now like to hand you over to your host, the General Counsel, James Small, to begin. Please go ahead when you're ready.

Thank you, operator. Good morning, everyone, and welcome to International Seaways Earnings Call for the Third Quarter of 2025. Before we begin, I would like to start off by advising everyone with us on the call today of the following.

During this call and in the accompanying presentation, management may make forward-looking statements regarding the company or the industry in which it operates, which may address, without limitation, the following topics: outlooks for the crude and product tanker markets; changes in trading patterns; forecasts of world and regional economic activity; forecasts of the demand for and production of oil and petroleum products; the company's strategy and business prospects; expectations about revenues and expenses, including vessel, charter hire and G&A expenses; estimated future bookings, TCE rates and capital expenditures; projected dry dock and off-hire days; new build vessel construction; vessel purchases and sales; anticipated and recent financing transactions and plans to issue dividends; the effects of ongoing and threatened conflicts around the world; economic, regulatory and political developments in the United States and globally, including the impact of protectionist trade regulations; the company's ability to achieve its financing and other objectives, and its consideration of strategic alternatives; and the company's relationships with its stakeholders.

Any such forward-looking statements take into account various assumptions made by management based on a number of factors, including 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 that could cause actual results to differ materially from those implied or expressed by the statements. Factors, risks and uncertainties that could cause the company's actual results to differ from expectations, include those described in our annual report on Form 10-K for 2024 and our quarterly reports on Form 10-Q for the first 3 quarters of 2025 as well as 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, Lois Zabrocky. Lois?

Thank you so much, James. Good morning, everyone. Thank you for joining International Seaways earnings call for the third quarter of 2025. On Slide 4 of the presentation, which you can find in the Investor Relations section of our website, 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.

Today, we also announced a combined dividend of $0.86 per share to be paid in December, as you can see in the upper right section of the slide. This is our fifth consecutive quarter with a payout ratio of at least 75%. We continue to believe in building on our track record of returning to shareholders as part of our consistent and balanced capital allocation strategy. We also announced the extension of our $50 million share repurchase program to the end of 2026, as we believe repurchasing shares is an option as an addition to our payout ratio.

On the lower left part of the page, we took delivery of 2 of our 6 LR1 vessels. The Suez Alacran delivered in the second half of September and the Seaways Balboa delivered on October 30. In connection with the deliveries, we borrowed $82 million, or $41 million per vessel on our new Korean export agency-backed financing that we put in place during the quarter.

On our last call, we announced the ECA financing for up to $240 million with a blended 20-year amortization profile and a margin of 125 basis points with a 12-year maturity. The balance of the financing will be drawn upon delivery of each new building vessel in 2026, and the company has only $30 million of additional liquidity required to complete the program. During the third quarter, we sold 5 vessels with an average age above 17.5 years old for proceeds of $67 million.

Another 3 of our oldest MRs with an average age close to 19 years old have been agreed to be sold in the fourth quarter for proceeds of about $37 million. When these transactions close, we expect to record a gain on the sale. Also in the fourth quarter, we expect to date delivery of our 2020-built scrubber-fitted VLCC, which we will utilize our available liquidity to pay the remaining $107 million due since making a deposit of $12 million in the third quarter.

Overall, in 2025 through the end of October, we sold 8 vessels for proceeds of around $100 million, and we'll be purchasing this eco, modern VLCC in the fourth quarter for close to the same amount. Fleet renewal is always part of our strategy, and we expect to execute sales and purchases throughout the tanker cycle.

We continue to work through our time charter book as well. While we did not execute any fresh charters this quarter, and even though some have rolled off, we will have over $230 million in future contracted revenue with an average duration of about 1.5 years.

We continue to work with the market for opportunities as we believe generally a portion of the fleet will remain on fixed chart. On to the balance sheet in the lower right part of the page. We continue to explore and execute options to enhance our capital stack. After executing the ECA facility documents to fund our LR1 new building, the team went back to work on a knock bond opportunity as an option to pay for our upcoming purchase option that we declared on some of our sale leasebacks.

I'm very pleased with the execution to secure a coupon as one of the lowest for first-time issuers in the tanker space. Due to the strength in demand, we increased the size of the bond to $250 million, which is nearly equal to the amount needed to repay the leases. We're very grateful to welcome in our new credit investors, and quite proud of the success in the execution of the bond.

Due to the timing of the settlement of the bonds in the third quarter and repayment of the leases in the fourth quarter, we ended the third quarter with $985 million in total liquidity with $413 million in cash and $572 million in undrawn revolver capacity. Net debt at the end of the quarter was under $400 million, which on over $3 billion in fleet value, our net loan-to-value is a very low 13%.

Turning over to Slide 5. We've updated our standard set of bullets on tanker demand drivers with the subtle green up arrow next to the bullets representing positive for tankers, the black dash representing a neutral impact, and a red down arrow meaning the topic is not good for tanker demand.

Without reading each bullet individually, we believe demand fundamentals are solid and continue to support a constructive outlook for seaborne transportation. Oil demand growth remains healthy at 1 million barrels per day of growth for this year and next.

OPEC+ is supplementing 1 million barrels per day of production growth from outside the group with their own production increases that we have not seen the full scope of what could be on the water soon. Some countries in the cartel had penalties for overproduction during the cuts and others were using some production increase in country for power generation. The fourth quarter looks to be the environment where the increased production is hitting the water.

For now, it's much needed after the inventory levels have been near their historic lows, as you can see in the chart on the lower left. We are still monitoring how these increased barrels on the water can affect the tanker markets in the longer term. The geopolitical intensity on tankers remains strong with port fee discussions altering trade routes and working through a multitude of scenarios that could impact our business.

On the lower right-hand chart, sanctioned barrels out of Russia and Iran have historically been transported to India and China. Lately, we've been seeing more pressure on those exports on those 2 specific countries, in particular, along with more sanctions put on the tanker fleet.

Both effects could be positive for international tanker markets, and we expect more development in time, as we have had over the last few years. Moving on to the supply side on Slide 6 of the presentation. It remains one of the most compelling cases for tanker shipping. Orders have slowed in 2025 following a surge in 2024, as you can see on the lower left-hand chart.

Tankers on order represent 14% of the fleet that deliver over the next 4 to 5 years. Over a 25-year life of a vessel, we would expect as much with a 4% increase per year of removal candidates multiplied by the 3 to 4 years it takes to deliver a new ship. In practicality, based on actual ship deliveries, there is a significant number of removal candidates that were built in the golden age from '04 to 2010.

By the time the order book delivers fully in 2029, nearly 50% of the fleet will be over 20 years old and likely excluded from the commercial trade. There is simply not enough tankers to replace the current aging fleet, as we show in the graph on the lower right-hand side, less than 800 ships are delivering over the next 4 years, representing 1/3 of ships likely to face challenges in securing tonnage for the global trade, not to mention further sanctions or environmental regulations.

We also highlighted in dark blue as sanctioned vessels in the chart, which currently tops the number of vessels on order. We believe these fundamentals should translate into a continued up cycle over the next few years and Seaways remains well positioned to capitalize on these market conditions. We will continue to execute our balanced capital allocation approach to renew our fleet and to adapt to industry conditions with a strong balance sheet while returning to shareholders.

I'm now going to turn it over to our CFO, Jeff Pribor, to provide the financial review. Jeff?

Thanks, Lois, and good morning, everyone. On Slide 8, net income for the third quarter was $71 million or $1.42 per diluted share. Excluding gains on vessel sales, our net income was $57 million or $1.15 per diluted share. On the upper right chart, adjusted EBITDA for the third quarter was $108 million. In the appendix, we provided a reconciliation from reported earnings to adjusted earnings. On the lower left chart, I would like to point out that our TCE revenues from crude and products have been evenly balanced over the past year.

Our revenue and expenses were largely within expectations for the third quarter. We're pleased with our cost management, particularly with vessel expenses. The lightering business generated approximately $9 million in revenue in the third quarter and contributed nearly $1 million in EBITDA after $3 million in vessel expenses, less than $4 million in charter hire, just over $1 million in G&A. During the summer, the number of jobs decreased, but we're pleased that since September, activity has picked back up again.

Turning to our cash bridge on Slide 9. We began the quarter with total liquidity of $790 million, composed of $149 million in cash, $560 million in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we first had $108 million in adjusted EBITDA for the third quarter, plus $22 million of debt service and another $22 million of dry dock and capital expenditures. We therefore achieved our definition of free cash flow of about $63 million for the third quarter. This represents an annualized cash flow yield of nearly 10% on today's share price. We received $67 million proceeds from the sale of the 5 vessels Lois mentioned earlier.

We also paid a $12 million deposit for a 2020-built VLCC, which delivers in the fourth quarter. We paid about $36 million in LR1 newbuilding installments, net of the $41 million drawn down from our new ECA facility. We repaid $27 million on our revolver during the third quarter, of which $15 million offset our capacity reduction, increasing our undrawn revolver capacity to $572 million.

Net of fees, we received $247 million of proceeds from our issuance of senior unsecured NOK bonds. The remaining $38 million represents our $0.77 per share dividend that we paid in September. The latter few bars on the chart reflect our balanced capital allocation approach, where we utilize all the pillars, fleet renewal, balance sheet optimization and returns to shareholders.

In summary, the result of our activity this quarter yielded a net increase in cash of $264 million. This equates to ending cash of $413 million with $572 million in undrawn revolvers for total liquidity of nearly $1 billion. Naturally, this is impacted by the timing of the settlement of the NOK bond proceeds and the $258 million of purchase options that we will execute on the Ocean Yield leases during the fourth quarter.

Now moving to Slide 10. We have a strong financial position detailed by the balance sheet on the left-hand side of the page. Pro forma cash and liquidity remained strong at $727 million when including the impact of payment in the Ocean Yield purchase options. We have invested about $2 billion in vessels at cost on the books currently valued at about $3 billion.

And with under $400 million in net debt at the end of the third quarter, our net loan-to-value is approximately 13%. Shown on the lower right-hand table of the page, we have included the pro forma impact of our debt till the end of 2026. Gross debt at the end of September was $804 million. We'll repay the Ocean Yield leases in November and add another $200 million of debt in connection with the LR1 newbuildings in the K-SURE ECO facility.

Mandatory debt repayments through the end of 2026 are $33 million, giving us a little over $700 million in debt by the end of 2026 based on our latest balance sheet initiatives. We continue to enhance our balance sheet to maintain the financial flexibility necessary to facilitate growth as well as returns to shareholders. Our nearest maturity in the portfolio isn't until the next decade. We have 31 unencumber vessels on a fully delivered basis, and we have ample undrawn RCF capacity. We continue to explore ways to lower our breakeven cost even more and share in the upside with substantial returns to shareholders.

On the last slide that I'll cover, Slide 11 reflects our forward-looking guidance and book-to-date TCE aligned with our spot cash breakeven rate. Starting with TCE pictures for the fourth quarter of 2025, I'll remind you that actual TCE during our next earnings call may be different. But in the fourth quarter, we are now seeing the impact of the elevated rate environment we began to see in late Q3.

We currently have a blended average spot TCE of about $40,400 per day fleet-wide, 47% of our fourth quarter expected revenue days. On the right-hand side, our expected 2026 breakeven rate is about $14,500 per day compared with roughly $13,100 per day when we last presented a next 12-month view.

On a comparable next 12-month basis, the breakeven remained about $13,500 per day with that difference primarily reflecting higher operating costs and the roll-off of time charter volume. The higher -- full year 2026 figure is mainly driven by timing, specifically higher dry dock costs in the fourth quarter of 2026 compared with the fourth quarter of 2020.

Based on our spot TCE book to date and our spot breakeven, it looks like Seaways can continue to generate significant free cash flows during the fourth quarter, and build on our track record of returning significant cash to shareholders. In the bottom left-hand chart, we provide some updated guidance for our expenses for the fourth quarter and our preliminary estimates for 2026. We also included in the appendix our quarterly expected off-hire and CapEx. I don't plan to read each item line by line, but encourage you to use these for modeling purposes.

That concludes my remarks. I'd now like to turn the call back to Lois for her closing comments.

Thank you, Jeff. On Slide 12, we have provided you with Seaways' investment highlights, which I encourage you to read in its entirety and summarizing briefly here, over the last 9 years, International Seaways has built a track record of returning cash to shareholders, maintaining a healthy balance sheet and growing the company.

Our total shareholder return represents over 20% compounded annual return. We continue to renew our fleet so that our average age is about 10 years old in what we see as the sweet spot for tanker investments and returns. We've invested in a range of tanker-class to cast a wider net for growth opportunities and to supplement our scale in each class by operating in larger pools. We aim to keep our balance sheet fortified for any down cycle. We have nearly $600 million in undrawn credit capacity to support our growth. Our net debt is under 15% of the fleet's current value, and we have 31 vessels that are unencumbered. Lastly, we only have our spot ships earned under $15,000 per day to breakeven in 2026. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders.

We want to thank you very much. And with that said, operator, we'd like to open the lines for questions.

[Operator Instructions] And our first question comes from Omar Nokta with Jefferies.

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?

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.

Okay. So it's a bit more -- it's a pull basically upwards by the VLCCs, which is the old-fashioned way as you're kind of hinting at. And, I guess, maybe as we've seen this big move up in crude spot rates, products seem to have lagged and been held back. Is this normal? Do you think crude is leading the way, eventually products will get there? But here, obviously, I'm looking at your MR performance, and it's at 29,000, still fairly strong, quite a bit stronger than, say, indexes. But I guess maybe the indexes have lagged the crude. Do you think that's a lag? Or is this one of those things where maybe product fits this one out, and it's really more of a crude trade here in the next few months?

So, yes, Omar, imagine that we earned just shy of 26 a day in the third quarter on MR and earning 29 a day in the fourth quarter for days booked, and that we think that's lagging. So that is just stunning stellar outperformance continued, I think, on the MR sector. Derek, could you add on that?

On that. Sure. Look, I mean, obviously, the MR rates are very healthy. I think our third quarter is strong. Our fourth quarter to date is very strong. A lot of that has to do with where we trade here in the Americas with a substantial portion of our MR fleet. But Omar, I think it's also -- it's certainly not that the MRs are sitting it out because the market is strong, but there's just different geopolitical factors impacting the MRs on the positive side.

So you kind of talked about Russia in the bigger crude, but I talked about Russia more here on the clean sector, because a combination of things happening between stronger newer sanctions on Russian oil companies and Ukraine upping its attack on Russian oil infrastructure, we see a lot less diesel exports from Russia. So that void is being filled by the U.S., by some Latin American stuff. And the benefit to us, and a lot of our peers, is also that those are barrels that the compliant fleet can move, not the dark fleet, not the gray fleet, but the combined fleet. So that's part of why you see -- where we see the MRs pretty helped.

Okay. Yes. And certainly, you can see from your results, definitely a fairly strong, I would say, outperformance in that segment.

The next question comes from Chris Robertson with Deutsche Bank.

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?

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.

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?

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.

[Operator Instructions] And as we have no further questions, I will hand back over to Lois for any final comments.

Thank you very much. We appreciate it, Carla, and I want to thank everyone for tuning into International Seaways' quarterly conference call as we continue strong rates into the winter. Thank you.

Thank you, everyone. This concludes today's call. You may now disconnect. Have a great rest of your day.

Good morning, everyone, and welcome to the International Seaways, Inc. Second Quarter 2025 Earnings Conference Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I would now like to hand you over to your host, James Small, General Counsel, to begin. Please go ahead when you're ready.

Thank you, operator. Good morning, everyone, and welcome to International Seaways Earnings Call for the Second Quarter of 2025. Before we begin, I would like to start off by advising everyone with us on the call today of the following.

During this call and in the accompanying presentation, management may make forward-looking statements regarding the company or the industry in which it operates, which may address, without limitation, the following topics: outlooks for the crude and product tanker markets, changes in trading patterns, forecast of world and regional economic activity, forecasts of the demand for and production of oil and petroleum products, the company's strategy and business prospects, expectations about revenues and expenses, including vessel, charter hire and G&A expenses; estimated future bookings, TCE rates and capital expenditures; projected dry dock and off-hire days, newbuild vessel construction, vessel purchases and sales, anticipated financing transactions and plans to issue dividends, the effects of ongoing and threatening conflicts around the globe, economic, regulatory and political developments in the United States and globally; the company's ability to achieve its financing and other objectives and its consideration of strategic alternatives; and the company's relationships with its stakeholders.

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; that could cause actual results to differ materially from those implied or expressed by the statements.

Factors, risks and uncertainties that could cause the company's actual results to differ from expectations include those described in our annual report on Form 10-K for 2024 and our quarterly reports on Form 10-Q for the first and second quarters of 2025, as well as 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, Lois Zabrocky. Lois?

Thank you, James. Good morning, everyone. Thank you all for joining International Seaways earnings call for the second quarter of 2025. On Slide 4 of the presentation found in the Investor Relations section of our website, net income for the second quarter was $62 million or $1.25 per diluted share. Excluding gains on vessel sales, adjusted net income for the second quarter was $50 million or $1.02 per diluted share, and adjusted EBITDA was $102 million.

Today, we also announced a combined dividend of $0.77 per share to be paid in September, as you can see in the lower left section of the slide. This is our fourth consecutive quarter of a payout ratio of at least 75%. We continue to believe in building on our track record of returning to shareholders as part of our consistent and balanced capital allocation strategy.

Since we started supplementing our regular $0.12 per share dividend in the fourth quarter of 2022, we have paid combined dividends of $15.25 per share, which equates to a dividend yield of about 14% per year on our average market cap. Share repurchases remain an option for Seaway, and this would be additive to our payout ratio.

On the upper right-hand side, we have sold or agreed to sell 6 of our oldest vessels with an average age of 17.5 years. 2 were sold within the second quarter for proceeds of $28 million, with the other 4 delivering during the third quarter for proceeds of around $57 million.

We have also taken steps to utilize those proceeds with our agreement to purchase a 2020-built scrubber-fitted VLCC, delivering in the fourth quarter. The impact of these sales and purchase reduced our age by half a year. Fleet renewal is always part of our strategy, and we expect to execute sales and purchases throughout the tanker cycle.

We continue to work through our time charter book as well. We still have over $260 million in future contracted revenues on 12 vessels with an average duration of around 2 years. The first of our 6 LR1 newbuildings is set to be delivered in September.

We are very pleased to share our expected financing for up to $240 million of the $300 million in outstanding payments. We have received secured commitments for export agency financing with K-SURE and DNB across 2 tranches. On a blended basis, the agreement carries a 20-year amortization profile, bearing interest of SOFR plus 125 basis points over the 12-year maturity.

Funds will be drawn upon delivery of each vessel starting in the third quarter through September of 2026. All of this is subject to final documentation and closing expected later this month, with the remaining funding for these vessels to be sourced through cash on hand.

We ended Q2 with over $700 million in total liquidity, with $149 million in cash and $560 million in undrawn revolver capacity. Our gross debt was $553 million on over $3 billion in fleet value. Our net loan-to-value is comfortably under 15%.

We are proud of the strength of our balance sheet. With ample liquidity, debt below our recycle values and low cash breakeven, we are able to grow the company and create further enhancements like our most recent financing. With breakeven levels where our spot ships only need to make $13,000 per day, we expect to continue executing our balanced strategy.

Turning to Slide 5. We've updated our standard set of bullets on tanker demand drivers, with the green up arrows next to the bullets representing good for tankers, the blank dash representing neutral impact and a red down arrow meaning the topic is not positive for tanker demand. Without reading these bullets individually, we do believe demand fundamentals are solid and continue to support a constructive outlook for seaborne transportation.

Recent upward revisions to forecasted GDP may increase oil demand forecast. The OECD has maintained crude storage at historically low levels that are slowly rising in 2025, as you can see in the chart on the lower left-hand side. Product inventories are also at historically low levels. Specifically, we are short on middle distillates, whose growing demand worldwide has increased the refinery margins and is currently pushing up refinery utilization. We've noted in the bottom right chart that over the next 5 years, refining capacity is growing east of Suez and largely for export purposes, while we have seen more capacity shutting down in the West. This is very supportive of the refined product ton-mile demand.

The release of these barrels [ production ] as these areas may be more sensitive to price fluctuations if prices decline significantly. The geopolitical environment remains fluid, making sustained trends in new trade routes more difficult to identify. This quarter alone saw an escalation within the Strait of Hormuz that grabbed headlines and were short-lived in the escalation of VLCC rates. Many vessels on subjects in late June were failed within the week.

There are scenarios for an uptick in rates if there is sustained escalation of tensions. And there are scenarios for full de-escalation and peace, which could also rationalize the aging tanker fleet. This brings us to the supply side of Slide 6 in the presentation. It remains one of the most compelling cases for tanker shipping.

Tankers are currently on order, representing 15% of the existing fleet, with this 15% delivering over the next 4 to 5 years. Over a 25-year life of a vessel, we would expect as much with a 4% increase per year of removal candidates multiplied by the 4 years it takes to deliver the new vessels. In practicality, based on actual ship deliveries, there is a significant number of removal candidates that were built in the golden age 204 to 210.

In the graph on the lower left of the page, we note the relationship of older vessels to the order book. Since 2021, the fleet over 20 years, which are removal candidates, exceeds the ships on order. By the time the order book delivers in 2029, nearly 50% of this fleet will be over 20 years old and likely excluded from the commercial trade. There is simply not enough ships on order to replace the current aging fleet.

We show this in the graph in the lower right. 800-plus ships shall deliver over the next 4 years, representing only 1/3 of the likely tonnage to face trading challenges during the same period, not to mention ever-tightening regulations and either further environmental pressures.

We believe this should translate into a combined up cycle over the next few years, and Seaways is capitalizing on these market conditions. We will continue to execute our balanced capital allocation approach to renew our fleet and to adapt to industry conditions with a strong balance sheet while returning to shareholders.

Now I'm going to turn it over to our CFO, Jeff Pribor, to share the financial review. Jeff?

Thanks, Lois, and good morning, everyone. On Slide 8, net income for the second quarter was $62 million or $1.25 per diluted share. Excluding gains on vessel sales, our net income was $50 million or $1.02 per diluted share. On the upper right chart, adjusted EBITDA for the second quarter was $102 million. In the appendix, we provided a reconciliation from reported earnings to adjusted earnings.

Our revenue and expenses were largely within expectations in the second quarter, and we are pleased with our cost management this quarter. Our VLCC rates were impacted by a long-haul strategy that didn't allow us to fully capture short spikes during the quarter.

MRs were more heavily weighted to the weaker Western market and positioning for a significant number of dry dockings for ships in the CPTA pool operating in the Americas. We're seeing the benefits of those already as our third quarter bookings, which I'll talk about later, have strengthened.

Our Lightering business had over $9 million in revenue in the quarter. Combined with less than $3 million in vessel expenses, just under $4 million in charter hire and $1 million of G&A, the Lightering business contributed about $2 million in EBITDA in the second quarter.

Turning to our cash bridge on Slide 9, we began the quarter with total liquidity of $673 million, composed of $133 million in cash and $540 million in undrawn revolving capacity.

Following along the chart from left to right on the cash bridge, we had $102 million in adjusted EBITDA in the second quarter plus $22 million in debt service and another $29 million of drydock and capital expenditures, offset by a working capital benefit of $20 million due to the timing of payables and receivables.

We, therefore, achieved our definition of free cash flows of just about $71 million for the second quarter. This represents an annualized cash flow yield of nearly 15% on today's share price.

We received $28 million in proceeds from the 2 vessel sales at the end of the quarter. We paid about $16 million in LR1 newbuilding installments. As previously announced on the last call, we repaid $36 million down on our revolver during the second quarter, of which $16 million offsets our capacity [ reduction ]. The remaining $30 million represents our $0.60 per share dividend that we paid in June.

The latter few bars on the chart reflect our balanced capital allocation approach, where we utilized all the pillars, fleet renewal, deleveraging and returns to shareholders.

In summary, $71 million of free cash flow plus $28 million in vessel sales, plus $82 million in capital allocation gives us a net positive change in cash of $15 million and an increase in undrawn RCF of $20 million. This equates to ending cash of $149 million with $560 million in undrawn revolvers for total liquidity of over $700 million.

Moving to Slide 10, we have a strong financial position detailed by the balance sheet on the left-hand side of the page. Cash and liquidity remained strong at $709 million. We have invested about [ $2 ] million in vessels at cost, which are currently valued at about [ $3 million ]. And with $553 million of gross debt at the end of the second quarter, our net loan-to-value is below 14%.

An important highlight to also mention, as we previously announced, is our intention to repay the Ocean Yield loans in November. Under the accounting guidelines, we are required to classify the outstanding debt of $268 million as current debt, which impacts our current ratio.

I want to be clear that this does not affect our financial covenants or our ability to fund our current liabilities. While we continue to evaluate numerous financing alternatives for this refinancing, we can simply draw on the RCF to fully fund the repayment. We expect that this refinancing should lower our breakeven costs.

On the lower right-hand table, we have detailed our debt portfolio as of June 30. Since then, we repaid the remaining $27 million outstanding on the RCF during the third quarter. By the time of our next earnings call, we expect to have completed documentation and drawn down on our new export agency-backed facility that Lois described.

We'd like to thank our partners at K-SURE and DNB for their efforts in financing of up to $240 million on our LR1 newbuildings that effectively achieves a 20-year amortization profile and a margin of 125 basis points over the next 12 years. We've been excited about our dual-fuel-ready LR1 newbuilding. And today, we're very proud to be in the final stages of financing before our scheduled deliveries.

We continue to enhance our balance sheet to maintain the financial flexibility necessary to facilitate growth as well as return to shareholders. Our nearest maturity in the portfolio isn't until the next decade. We have 32 unencumbered vessels, and we have ample undrawn revolving credit facility capacity. We continue to explore ways to lower our breakeven cost even more and share the upside with continued double-digit returns to shareholders.

And the last slide that I'll cover, Slide 11 reflects our forward-looking guidance and book-to-date TCE aligned with our spot cash breakeven rate.

Starting with TCE pictures for the third quarter of 2005, I'll remind you, as I always do, that actual TCE during our next earnings call may be different. But as of today, we currently have a blended average spot TCE of about $28,000 per day fleet-wide at 40% of our third quarter expected revenue.

On the right-hand side, our forward spot breakeven rate is about $13,000 per day, composed of a fleet-wide breakeven of about $15,700 per day, plus around $2,600 per day in profit from time charter revenues. Based on our spot TCE book to date and our spot breakeven, it looks like Seaways can continue to generate significant free cash flows during the third quarter and build on our track record of returning cash to shareholders.

On the bottom left-hand chart, we provide some updated guidance for our expenses in the third quarter and our estimates for 2025. We also included in the appendix our quarterly expected off-hire and CapEx. I don't plan to read each item line by line, but encourage you to use these for modeling purposes.

That concludes my remarks, and I'd like to now turn the call back to Lois for her closing comments.

Thank you so much, Jeff. On Slide 12, we have provided you with detailed Seaways investment highlights. I will summarize briefly.

Over the last 8 years, International Seaways has built a track record of returning cash to shareholders, maintaining a healthy balance sheet and growing the company. Our total shareholder return represents around 20% compounded annual return. We continue to renew our fleet so that our average age is close to 10 years old in what we see as a sweet spot for tanker investments and returns.

We have invested in a range of asset classes, casting a wider net for growth opportunities and supplementing our scale in each class by operating in larger pools. We aim to keep our balance sheet fortified for any down cycle. We have nearly $600 million in undrawn credit capacity to support our growth. Our net debt is under 15% of the fleet's current value, and we have 32 vessels that are unencumbered.

Lastly, our spot ships only need to earn $13,000 per day to breakeven in the next 12 months. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders.

Thank you very much. And with that said, operator, we'd like to open up the lines for questions.

[Operator Instructions] And our first question comes from the line of Chris Robertson with Deutsche Bank.

I have just one simple modeling-type question and then a market question. The first is, Jeff, could you clarify on the 4 vessels expected to be delivered in the third quarter here for $57 million, is that $57 million of net proceeds or is that prior to debt repayment?

Chris, I think those -- that should be considered to be net proceeds because they're part of our unencumbered fleet.

Got it. Yes. Second question then on the recent sanctions package and then kind of some of the more recent threats by President Trump with regards to India taking Russian crude volumes.

I guess, could you provide some color on your thoughts around what impact the sanctions package will have? And then if there are an increase in sanctions, U.S. sanctions against India or certain refiners there, something like that, what do you expect to happen in the market with regards to trade patterns?

Chris, it's Lois. It's definitely never a dull day. And we're already seeing India only take compliant tonnage for exports. They certainly have enjoyed a massive discount on copious volumes of Russian imports. So I think this is in the midst of negotiations likely behind the scene.

You have seen India take more U.S. Gulf crude in the last 6 months than what we had seen previously. So this administration, they seem to be highly tactical in their trading. So we're going to see how this is all going to cook over this -- probably the next 30 days.

Agreed with that.

So the next question comes from Sherif Elmaghrabi with BTIG.

So OPEC+ announced that they're going to finish unwinding those voluntary production cuts roughly a year ahead of schedule. That's a lot of crude, and a lot will probably flow on Bs. But can you speak to where we may see a benefit for smaller tankers?

Yes, absolutely. I'm going to turn that over to Derek Solon, our Chief Commercial Officer.

Thanks, Lois. Sherif, thanks for the question. I mean I think you hit the nail on the head. The easy answer is a lot of that will move on VLCCs. So that should be beneficial to the B market. We're seeing already an uptick in activity out of the Arabian Gulf over the last day or so on the back of this news.

And then to your question specifically, the VLCCs being much more engaged in moving crude out of the Arabian Gulf will be beneficial to the smaller segments because there's less cannibalization of the VLCCs and the Suezmax routes and the Aframax routes. So all in should be very beneficial for crude tankers as a whole.

And sticking with that vessel mix thematic, I guess, you guys are buying that modern V at the end of the year. Opportunities like that don't come around often. But how are you thinking about the balance of crude versus product in your own fleet, particularly given product tanker rates seem resurgent thus far in Q3?

So Chris, we brought in 9 more modern MRs throughout 2024. And those vessels, as you see with our days booked in the third quarter of $23,800 per day, even though we're selling, and it pains me to sell those older MRs because they're earning incredibly, we have shored up with more modern fleet profile across our MR space.

And as you know, we will be taking in September our first LR1 of our 6 newbuilding delivery built in Korea in a sector where there's been 5 recycles, which for this year is a lot, and there's been no deliveries in 3.5 years. So if you look at the smaller part of our fleet and the product carriers and as we bubble up, it's time.

[Operator Instructions] The next question comes from Omar Nokta with Jefferies.

Just a couple of questions and maybe just a little bit of a follow-up to start with Sherif's last question. Clearly, earlier in the year, you rolled those older VLCCs into modern MRs. And then recently, you did the reverse by kind of rolling the older MRs into a new modern V. Do you see yourselves doing more of this type of action within those specific segments? Or are there any other segments you need or have a desire to tweak in a similar fashion?

No. Thank you, Omar. Definitely, the prices we received on those 15-year-old VLCs were really strongly above mid-cycle levels. So we look very opportunistically at constantly improving our fleet profile. We're very deliberate with the moves that we're making. And we do see upside on the VLCCs. It's -- people have been waiting for that and kind of maybe move prematurely, where we have a more balanced fleet. We think that the opportunity is coming on the horizon there.

Okay. And then maybe, Jeff, for you, just sort of on the financing that you just announced, you secured the new $260 million for the LR1s. That gives you, it looks like, about 2/3 of the order cost, and the facility is repaid over 12 years.

Can you talk a little bit about how you think the 6 VLCCs would be refinanced that are coming off those leases later in the year? I figure they may not be able to get the same type of package, given they're not new buildings. But do you have an idea of what that type of financing package could look like?

Omar, well, first of all, we're pleased about this K-SURE financing for the LR1 newbuilds. I think marrying up new buildings in Korea with financing that's backed by government agencies, there is a good way to do things and a good new avenue to open up for us. So it was really appropriate for those ships in particular.

Regarding the 6 ships that will be freed up or unencumbered by paying off Ocean Yield, there's numerous options. We really are in the middle of evaluating all that. First of all, we can just -- we have enough revolver to simply stroke a check, right? But we'll use this as an opportunity to see whether or not we can -- could get a further tweak in our balance sheet to lower our breakeven.

So we're evaluating sort of everything. So I really can't tell you much more than that, but we feel very fortunate that there will be a lot of good opportunities for that.

Okay. And maybe just a quick follow-up to that. We've generally seen whenever a refinancing takes place of vessels on the water tends to be maybe a 5-year term, and we're seeing these newbuildings get 12 years. Is 5 years still the more kind of -- is that what can be expected? Or do you see that extending?

Look, I think that there's usually trade-offs involved, like you can certainly, possibly get 6 or 7 years. But depending upon the age, you may -- of the vessels securing, it may or may not make a trade-off for that.

If you look at the age of the vessels that are coming off, it's certainly not going to be a 12-year term on those vessels that are relatively minor but closer to 10 years old. But I think that is one of the factors.

The other things that go into it are obviously margin. Everyone looks at margin, that's important, and they've been coming down. But it's also a profile, like we have a 20-year profile on this ECA financing and a lot of our other financing sales. That's really helpful in terms of reducing the amortization, therefore, lowering your daily cash breakeven.

So we, as a company, kind of look at all of these factors as part of the fabric of what's the right choice. So any one of them is relevant, but you kind of look at them all together and make the best choice. So I hope that kind of answers your question, Omar.

All right. We want to thank everyone for joining us for our earnings call today. And as we sit here in the middle of August, we're starting to see a synchronized uptick in the spot market on both crude and products. So we look forward to having you join us on the next quarter. Thank you so very much.

Thank you, everyone. This concludes today's call. You may now disconnect.