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International Seaways Reports Third Quarter Net Loss of $67.4 Million

International Seaways, Inc., the largest U.S. based publicly-traded tanker company, yesterday reported results for the third quarter of 2021.

Highlights

• Completed the previously announced merger with Diamond S Shipping Inc. (NYSE: DSSI), “Diamond S”, creating one of the largest U.S.-listed diversified tanker companies. The transaction significantly enhanced INSW’s scale in both the crude and clean product markets and is expected to generate approximately $32 million in cost and revenue synergies, expected to be realized within 2022. Integrated the business and personnel of Diamond S to create a leading global maritime energy transportation platform.
• Continued our track record of returning capital to shareholders:
• Pre-merger special dividend of $31.5 million, or $1.12 per share.
• Regular quarterly cash dividend of $0.06 per share in September 2021.
• Net loss for the third quarter was $67.4 million, or $1.44 per diluted share, compared to net income of $14.0 million, or $0.50 per diluted share, in the third quarter of 2020. Net loss for the quarter reflects the impact of the disposal of vessels, including impairments, and merger related charges aggregating $38.0 million. Net loss excluding these items was $29.4 million, or $0.63 per diluted share.
• Despite the challenging tanker market environment, generated approximately $8 million in Adjusted EBITDA(A) for the quarter before the impact of the disposal of vessels, including impairments and one-time merger related charges.
• Enacted a post-merger asset optimization program which has resulted in the sale of a 2002-built VLCC, a 2002-built Panamax, a 2003-built Panamax, and seven MRs acquired in the merger, and the agreement to sell three additional 2002-built Panamaxes and a 2007-built Handysize product carrier.
• Post quarter-end, announced a liquidity enhancing refinancing of six VLCCs:
• Transaction funded in early November 2021 and resulted in gross financing of approximately $375 million.
• The capital was used to repay and terminate the current $228 million Sinosure Credit Facility, with the balance intended to generate incremental available liquidity of approximately $150 million.
• Cash(B) was $132.6 million as of September 30, 2021; total liquidity was $172.6 million, including $40 million of undrawn revolver capacity.
• Pro forma for the announced refinancing, total liquidity is over $300 million
• Demonstrated INSW’s continued commitment to industry sustainability efforts through enforcement of responsible recycling standards on the end-of-life disposed assets and the previously announced commencement of the construction of next generation fueled vessels.

“Despite the challenging tanker environment, we continue to take important steps to position Seaways as the global leader in maritime energy transportation. With our expanded footprint, we are ideally positioned to capitalize on a tanker market recovery during a time when global oil demand is growing, inventory destocking is nearing completion, refinery margins are improving and OPEC production is increasing,” said Lois K. Zabrocky, International Seaways’ President and CEO. “We are pleased to have completed our transformational and highly accretive merger with Diamond S in the third quarter and are in a strong position to draw on our enhanced scale, capabilities and operating leverage to take advantage of the recovery in tanker demand. The integration process and post-merger asset optimization program continues to proceed as planned, and we will continue to create lasting value for all of our stakeholders.”

Ms. Zabrocky concluded, “As part of our disciplined and balanced approach to capital allocation, we continue to return capital to shareholders. During the third quarter, we paid both a $31.5 million, or $1.12 per share, special dividend, as well as our regular quarterly dividend, increasing the total amount we have returned to shareholders since 2020 to $73 million. With our $50 million share repurchase authorization in place, we remain in a strong position to act opportunistically for shareholders.”

Jeff Pribor, the Company’s CFO, added, “Maintaining a strong and diverse capital structure has been a pillar of our success and we continue to make progress in this critical area. With current total liquidity of over $300 million we are positioned to operate effectively in diverse tanker markets and take advantage of attractive opportunities as they arise. As we look toward the future, following our highly accretive merger, we remain on track to achieve cost synergies in excess of $23 million and revenue synergies of $9 million in 2022 as previously reported.”

Third Quarter 2021 Results

Net loss for the third quarter of 2021 was $67.4 million, or $1.44 per diluted share, compared to net income of $14.0 million, or $0.50 per diluted share, for the third quarter of 2020. The decline in the third quarter of 2021 results primarily reflects significantly lower TCE revenues(C) and an increase in vessel expenses, which were not sufficiently covered with a corresponding increase in TCE revenues despite having a larger post-merger fleet, and increases in depreciation and amortization and interest expense, both of which reflect the Company’s increased scale after the completion of the merger. Net loss for the nine months ended September 30, 2021 was $99.5 million, or $2.90 per diluted share, compared to net income of $111.4 million, or $3.88 per share, for the nine months ended September 30, 2020.

Consolidated TCE revenues for the third quarter were $72.7 million, compared to $94.0 million for the third quarter of 2020. Shipping revenues for the third quarter were $84.8 million, compared to $99.9 million for the third quarter of 2020. Consolidated TCE revenues for the nine months ended September 30, 2021 were $162.9 million, compared to $349.1 million for the nine months ended September 30, 2020. Shipping revenues for the nine months ended September 30, 2021 were $177.9 million, compared to $364.9 million for the nine months ended September 30, 2020.

Adjusted EBITDA for the third quarter was $8.0 million, compared to $54.6 million for the third quarter of 2020. Adjusted EBITDA was $28.5 million for the nine months ended September 30, 2021, compared to $225.1 million for the nine months ended September 30, 2020.

Crude Tankers

TCE revenues for the Crude Tankers segment were $34.8 million for the third quarter, compared to $79.8 million for the third quarter of 2020. Lower average rates in the VLCC, Suezmax, and Panamax sectors, with average spot earnings declining to approximately $10,700, $10,700, and $9,800 per day, respectively accounted for $50.0 million of this decrease. Also contributing to the decrease in TCE revenues was the impact of a 429-day reduction in VLCC revenue days, aggregating $19.6 million; and a $1.0 million decrease in revenue in the Lightering business in the third quarter. Partially offsetting the decline in TCE revenues was a $25.1 million days-related increase in the Suezmax fleet, due to the acquisition of 13 Suezmaxes as a part of the Diamond S. merger. Shipping revenues for the Crude Tankers segment were $41.8 million for the third quarter of 2021, compared to $83.6 million for the third quarter of 2020. TCE revenues for the Crude Tankers segment were $101.8 million for the nine months ended September 30, 2021, compared to $274.5 million for the nine months ended September 30, 2020. Shipping revenues for the Crude Tankers segment were $111.8 million for the nine months ended September 30, 2021, compared to $287.7 million for the nine months ended September 30, 2020.

Product Carriers

TCE revenues for the Product Carriers segment were $38.2 million for the third quarter, compared to $14.2 million for the third quarter of 2020. This increase was primarily the result of a net 2,719-day increase in MR revenue days, aggregating $37.0 million, as the Company acquired 44 MRs in conjunction with the merger, seven of which were sold during the third quarter. Partially offsetting the increase in TCE revenues were lower period-over-period average daily blended rates earned by the LR1 and MR fleets, which accounted for a decrease in TCE revenues of approximately $14.7 million. Average spot rates fell during the third quarter of 2021 to approximately $12,500 and $10,000, respectively, for the LR1 and MR fleets. Shipping revenues for the Product Carriers segment were $43.1 million for the third quarter of 2021, compared to $16.2 million for the third quarter of 2020. TCE revenues for the Product Carriers segment were $61.0 million for the nine months ended September 30, 2021 compared to $74.5 million for the nine months ended September 30, 2020. Shipping revenues for the Product Carriers segment were $66.1 million for the nine months ended September 30, 2021, compared to $77.2 million for the nine months ended September 30, 2020.

Completed Liquidity Enhancing Financing

On October 26, 2021, the Company entered into lease financing arrangements with Ocean Yield ASA for the sale and leaseback of the six VLCCs that collateralized the Sinosure Credit Facility, for a net sale price of $375 million in total, which represents 90% of the fair value of the six VLCCs. This refinancing generated incremental available liquidity of approximately $150 million for the Company. The proceeds from the transactions, which were received on November 8, 2021, were used to prepay the $228 million outstanding loan balance under the Sinosure Credit Facility, with the balance intended for general corporate purposes. Under these lease financing arrangements, we continue to control the vessels. Each of the six VLCCs is subject to a 10-year bareboat charter with purchase options exercisable commencing at the end of the fourth year and purchase obligations at the end of the 10-year term. The terms and conditions, including financial covenants, of the arrangements are in-line with those of the Company’s existing debt facilities.

Completed Merger with Diamond S Shipping

The Company completed its previously announced merger with Diamond S. The Company expects to achieve cost synergies of approximately $23 million and revenue synergies of $9 million, which are expected to be fully realizable within 2022. International Seaways is now the second largest U.S.-listed tanker company by vessel count with 92 vessels and the third largest by deadweight tons (“dwt”), aggregating approximately 10.7 million dwt.

Vessel Sales

During the third quarter of 2021, the Company sold a 2002-built VLCC, a 2002-built Panamax, a 2003-built Panamax, and seven MRs acquired as part of the merger. The Company also agreed to sell three additional 2002-built Panamaxes. Subsequent to the end of the quarter, the Company agreed to sell a 2007-built Handysize product carrier acquired as part of the merger. This Handy and the Panamaxes are expected to be delivered to their buyers during the fourth quarter of 2021.

The 14 vessels sold are expected to provide aggregate net proceeds of approximately $83 million after the repayment of debt.

Charters-in

The Company has time chartered in two, 2008-built LR1s, which will be deployed in our market leading Panamax International pool, for periods ranging from 12 to 18 months, including one subsequent to quarter end.

Payment of Regular Cash Dividend

The Company’s Board of Directors declared a regular quarterly dividend of $0.06 per share of common stock on November 8, 2021. The dividend will be paid on December 23, 2021 to shareholders of record at the close of business on December 9, 2021.
Source: International Seaways, Inc.

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