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International Seaways Reports Third-quarter Net Loss of $11.1 Million

International Seaways, Inc., one of the largest tanker companies worldwide providing energy transportation services for crude oil and petroleum products in International Flag markets, yesterday reported results for the third quarter 2019.

Highlights

– Net loss for the third quarter was $11.1 million, or $0.38 per share, compared to a net loss of $47.8 million, or $1.64 per share, in the third quarter of 2018. Net loss for the quarter reflects the impact of a gain on vessel sales of $1.5 million and $0.4 million of charges related to a $10 million prepayment on the 2017 Term Loan Facility. Net loss excluding these items was $12.1 million, or $0.41 per share
– Time charter equivalent (TCE) revenues(A) for the third quarter were $65.8 million, compared to $51.3 million in the third quarter of 2018.
– Adjusted EBITDA(B) for the third quarter was $23.8 million, compared to $6.3 million in the same period of 2018.
– Cash(C) was $124.2 million as of September 30, 2019; total liquidity was $174.2 million, including $50.0 million undrawn revolver, compared to cash of $117.6 million and total liquidity of $167.6 million as of December 31, 2018.
– Sold 49.9% ownership interest in our LNG joint venture with Qatar Gas Transport Company Ltd. (Nakilat) for $123 million in cash in October.
– Made prepayments of $10 million in July and $100 million in October on the 2017 Term Loan Facility using restricted cash set aside from the proceeds of vessel sales and a portion of the proceeds from the sale of the stake in the Company’s LNG joint venture.
– Completed the program to dispose of our six 2004-built MRs with the sale of the final vessel in the series, which was delivered to the buyer in July.
– Subsequent to quarter end, agreed to sell a 2002-built Aframax, the Seaways Portland.
– Agreed to charter-in a 2006-built Panamax for a two-year period commencing in August.
– Tankers International expanded its global presence with the opening of an office within the New York offices of International Seaways to meet the needs of an increasing volume of U.S. customers.

“Towards the end of the third quarter, the tanker market reached an inflection point, as we realized initial benefits from the IMO 2020 low sulfur regulations, which together with geopolitical and broader macro factors led to significantly higher crude tanker rates on fixtures in September and October,” said Lois K. Zabrocky, International Seaways’ President and CEO. “As we progress in the fourth quarter, we expect the rate environment to remain robust, supported by factors such as seasonal demand strength, incremental IMO 2020 demand, and decreased vessel supply. With a sizeable fleet and significant operating leverage, we expect to continue capitalizing on favorable tanker prospects into 2020, as overall tanker fundamentals are anticipated to remain attractive and the impact of IMO 2020 becomes more pronounced.”

Ms. Zabrocky continued, “We have recently completed a number of initiatives that have led to INSW unlocking significant value for shareholders and strengthening our commercial prospects. Drawing on our successful and ongoing relationship with Nakilat, we monetized our interest in our LNG joint venture. This transaction marked an important accomplishment that enabled us to significantly enhance our balance sheet and furthers our disciplined and accretive capital allocation strategy. We facilitated Tankers International’s expansion of its footprint with the opening of an office in our New York headquarters, which is expected to further Tankers International’s leadership and strengthen INSW’s ability to take advantage of increasing U.S. Gulf exports.”

Jeff Pribor, the Company’s CFO, added, “We used a substantial portion of our LNG joint venture sale proceeds to prepay $100 million of the 2017 Term Loan facility, which has a current interest rate in excess of 8%, enabling us to decrease interest expense on an annual basis by approximately $8.2 million and reduce net loan to value from approximately 45% at September 30 to below 37% on a proforma basis. Going forward, we will continue to seek opportunities to optimize our balance sheet and lower our cost of capital. We remain well positioned to further implement our capital allocation strategy in a strengthening market.”

Third Quarter 2019 Results

Net loss for the third quarter of 2019 was $11.1 million, or $0.38 per diluted share, compared to a net loss of $47.8 million, or $1.64 per diluted share, in the third quarter of 2018. The decreased loss in the third quarter of 2019 primarily reflects higher TCE revenues, lower vessel expenses, and a $18.8 million decrease in losses on disposal of vessels and other property, including impairments. Net loss for the nine months ended September 30, 2019 was $16.7 million, or $0.57 per share, compared to a net loss of $95.9 million, or $3.29 per share, for the nine months ended September 30, 2018.

Consolidated TCE revenues for the third quarter of 2019 were $65.8 million, compared to $51.3 million in the third quarter of 2018. Shipping revenues for the third quarter of 2019 were $71.3 million, compared to $60.9 million in the third quarter of 2018. Consolidated TCE revenues for the nine months ended September 30, 2019 were $222.3 million, compared to $150.1 million in the prior year period. Shipping revenues for the nine months ended September 30, 2019 were $242.2 million, compared to $169.8 million in the prior year period.

Adjusted EBITDA was $23.8 million for the quarter, compared to $6.3 million in the third quarter of 2018. Adjusted EBITDA was $92.5 million for the nine months ended September 30, 2019, compared to $22.1 million for the nine months ended September 30, 2018.

Crude Tankers

TCE revenues for the Crude Tankers segment were $49.4 million for the current quarter compared to $40.3 million in the third quarter of 2018. This increase primarily resulted from the impact of higher average rates in the VLCC, Suezmax and Aframax sectors, with spots rates climbing to approximately $22,400, $18,500, and $15,300 per day, respectively, aggregating approximately $10.5 million. The balance of the increase in TCE revenues was substantially attributable to higher activity in the Company’s Lightering business in the third quarter 2019, which accounted for an increase of $1.3 million in TCE revenues. Partially offsetting the TCE revenue increase was a $3.9 million decrease in TCE revenue due to a 316-day reduction in VLCC and Aframax revenue days, which was driven primarily by the sales of a 2001-built VLCC and a 2001-built Aframax in October 2018, the re-deployment of the Company’s 2002-built Aframax into its Crude Tankers Lightering business and 52 incremental drydock and repairs days in these fleets in the current quarter. Shipping revenues for the Crude Tankers segment were $54.9 million for the third quarter of 2019 compared to $49.9 million in the third quarter of 2018. TCE revenues for the Crude Tankers segment were $167.0 million for the nine months ended September 30, 2019, compared to $104.0 million for the same period last year. Shipping revenues for the Crude Tankers segment were $186.7 million for the nine months ended September 30, 2019, compared to $123.4 million for the same period last year.

Product Carriers

TCE revenues for the Product Tankers segment were $16.4 million for the current quarter, compared to $10.9 million in the third quarter of 2018. This increase primarily resulted from the impact of higher average daily blended rates earned by the LR1, LR2 and MR fleets, with spot rates rising to approximately $15,500, $17,300 and $11,400 per day, respectively, increasing TCE revenues by approximately $6.6 million in the aggregate compared to the third quarter of 2018. This was partially offset by a decline in revenue days accounting for $1.1 million arising from the net impact of (i) a 371-day decrease in MR revenue days in the current period, resulting primarily from the sales of four MRs between the fourth quarter of 2018 and the third quarter of 2019 and the redelivery of one MR to its owner during the third quarter of 2019, partially offset by (ii) a 161-day increase in LR1 revenue days in the current period primarily driven by the commencements of a six-month time charter-in of a 2010-built LR1 in May 2019 and a two-year time charter-in of a 2006-built LR1 in August 2019. Shipping revenues for the Product Carriers segment were $16.4 million for the third quarter of 2019, compared to $11.0 million in the third quarter of 2018. TCE revenues for the Product Carriers segment were $55.3 million for the nine months ended September 30, 2019, compared to $46.1 million in the 2018 nine-month period. Shipping revenues for the Product Carriers segment were $55.4 million for the nine months ended September 30, 2019, compared to $46.4 million for the same period last year.

Vessel Sales and Charters-in of Vessels

During the third quarter, the Company sold and delivered a 2004-built MR to its buyer.

Subsequent to quarter end, agreed to sell a 2002-built Aframax, the Seaways Portland, for delivery to buyers sometime between December 2019 and January 2020.

Additionally, the Company exercised an option to extend the charter-in on a 2006-built MR for an additional 6-month period expiring in February 2020; and agreed to charter-in a 2006-built Panamax for a two-year period.

Sale of Ownership Interest in LNG Joint Venture

On October 7, 2019 the Company sold its 49.9% ownership interest in its joint venture with Qatar Gas Transport Company Ltd. (Nakilat) (“Nakilat”), which owns four liquefied natural gas (“LNG”) carriers, to Nakilat for $123 million in cash.

Debt Prepayment

On July 31, 2019, the Company made a prepayment of $10 million on the 2017 Term Loan Facility, together with a 1% prepayment fee. On October 8, 2019, the Company made a further prepayment of $100 million on the outstanding balance of its 2017 Term Loan Facility, together with a 1% prepayment fee. These prepayments used restricted cash set aside from the proceeds of vessel sales and a portion of the proceeds from the sale of the interest in the LNG joint venture. These prepayments will result in a $9.0 million decrease in cash interest expense on an annual basis and $1.9 million in the fourth quarter of 2019, compared with the third quarter of 2019, based on current interest rates, as well as a reduction in future quarterly amortization payments from $6.1 million to $4.6 million.

Full Report

Source: International Seaways, Inc.

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