International Seaways sells ageing MRs, funds the acquisition of a 2020-built VLCC and signals continued fleet renewal strategy
International Seaways has sold or agreed to sell six of its oldest product carriers as part of a fleet renewal strategy that includes the purchase of a modern VLCC.
The company disposed of two 2007-built medium range (MR) tankers in Q2 for net proceeds of US$28M and expects to complete the sale of three 2008-built MRs and a 2006-built LR1 during Q3 for approximately US$57M.
President and chief executive of International Seaways Lois Zabrocky said in the earnings call that the vessels sold had an average age of 17.5 years, “Fleet renewal is always part of our strategy, and we expect to execute sales and purchases throughout the tanker cycle,” she said.
Proceeds from the sales will help fund the US$119M purchase of a scrubber-fitted VLCC built in 2020, which is scheduled to deliver in Q4. Ms Zabrocky said the transaction reduced the company’s average fleet age by half a year.
The company ended the quarter with total liquidity of US$709M, comprising US$149M in cash and US$560M in undrawn revolving credit capacity. Net loan-to-value stood at about 14%.
Looking ahead, Ms Zabrocky said demand fundamentals “continue to support a constructive outlook for seaborne transport,” with oil demand growth expected in the near term and inventories remaining well below historical levels.
She noted tanker supply is tightening as the orderbook is not sufficient to replace ageing vessels likely to exit the compliant trade.
Chief financial officer Jeffrey Pribor reported the company’s blended average spot time charter equivalent (TCE) rate for Q3 to date was approximately US$27,900 per day on 41% of revenue days. The forward spot break-even rate for the next 12 months is about US$13,000 per day, allowing the company to “continue to generate free cash flows during the third quarter”.
For Q2, International Seaways posted net income of US$62M, or US$1.25 per diluted share. Adjusted net income was US$50M, or US$1.02 per diluted share, on TCE revenues of US$189M and adjusted EBITDA of US$102M.
The board declared a combined dividend of US$0.77 per share, representing a payout ratio of 75% of adjusted net income, marking the company’s 23rd consecutive quarterly dividend.
