New York - 4 May 2018
International Seaways, Inc. (NYSE: INSW) (the “Company” or “INSW”), one of the largest tanker companies worldwide providing energy transportation services for crude oil and petroleum products in International Flag markets, today reported results for the first quarter 2018.
• Net loss for the first quarter was $29.3 million, or $1.01 per share, compared to net income of $18.1 million, or $0.62 per share, in the first quarter of 2017. The net loss for the first quarter includes a $6.6 million loss from the sale of four vessels. Net loss excluding the loss from vessel sales was $22.7 million, or $0.78 per share.
• Time charter equivalent (TCE) revenues(A) for the first quarter were $48.8 million, compared to $84.1 million in the first quarter of 2017.
• Adjusted EBITDA(B) for the first quarter was $6.5 million, compared to $46.6 million in the same period of 2017.
• Cash(C) was $91.2 million as of March 31, 2018; total liquidity was $141.2 million, including $50 million undrawn revolver.
• The Company’s FSO joint ventures closed on a credit facility in April 2018; International Seaways received $110 million in proceeds from the drawdown of the facility.
• Delivered a 2002-built MR and a 2004-built MR to buyers in January and February, respectively.
• Agreed to sell an older VLCC during the first quarter, which delivered to buyers in April.
• Completed sale and leaseback transactions for two 2009-built Aframaxes in March.
• Subsequent to the end of the quarter, agreed to sell a 2001-built Aframax, a 2004-built MR and a 2003-built ULCC. The MR delivered to buyers in April.
“During the first quarter, we maintained our lean and scalable model with low breakevens, continued to benefit from our contracted fixed-rate charters, and increased our cash position to $91.2 million,” said Lois K. Zabrocky, International Seaways’ president and CEO. “We also continued to execute on our fleet growth and renewal strategy in 2018 year to date, highlighted by the sale of four vessels with an average age of 15.4 years. We also have taken important steps to enhance our financial flexibility ahead of the anticipated second quarter closing of the acquisition of six VLCCS, which is expected to increase the size of the Company’s fleet by 23% on a deadweight ton basis, following the recent sale of older vessels. While preparing these vessels for sale resulted in a reduction in revenue and increased costs in the near term, the sales generated substantial additional liquidity for the acquisition and balance sheet. We are pleased to add highly-efficient modern sister ships to our fleet, positioning the Company to significantly reduce its fleet’s age and enhance its earnings power.”
Ms. Zabrocky continued, “We are pleased to have recently closed on an attractive credit facility for our FSO joint ventures, which provides the Company with $110 million in proceeds and underscores the sizable contracted cash flows these vessels generate and the significant value of these assets. We believe we are well-positioned to complete the six-vessel acquisition based on our success increasing the Company’s liquidity position, combined with the expected assumption of the debt currently secured by the vessels. Going forward, we expect our balanced fleet deployment strategy and moderate level of predictable cash flows to enable International Seaways to both optimize revenue through the current tanker cycle and capitalize on the market recovery in both the crude and the product tanker sectors.”
Agreement to Acquire Six VLCCs
On April 18, 2018, the Company entered into a stock purchase and sale agreement to acquire the holding companies for six VLCCs from Euronav NV in connection with the closing of Euronav’s announced acquisition of Gener8 Maritime. The $434 million transaction is inclusive of assumed debt, and includes five 2016-built VLCCs and one 2015-built VLCC, each constructed at Shanghai Waigaoqiao Shipbuilding Co. The Company intends to fund the transaction, which is expected to close in the second quarter of 2018, with a combination of available liquidity, the assumption of all or part of the debt that is currently secured by the vessels, which will have an expected outstanding balance of $311 million (as of March 31, 2018), maturing between 2027 and 2028 and carrying a fixed annual interest rate of LIBOR plus 2.0%, and other incremental third-party financing. The transaction is subject to a number of closing conditions, including (i) consummation of Euronav’s announced acquisition of Gener8 Maritime, (ii) amendment of the Company’s existing credit facility as required to consummate the transaction, on terms and conditions reasonably acceptable to us, (iii) accuracy in all material respects of the representations and warranties, and compliance in all material respects with the covenants and agreements, made by Euronav in the agreement, and (iv) receipt of all required third-party consents, third-party approvals and regulatory approvals. If the Company is unable to receive the necessary consents from the lenders of its existing term loan with respect to the transaction, the Company has agreed, if Euronav so elects, to purchase the holding companies for the six vessels for the same $434 million purchase price and may or may not assume the debt secured by the vessels. Euronav would then be expected to repurchase two of the 2016-built vessels from the Company for aggregate consideration of $143 million. Such repurchase may also involve prepayment of all or part of the outstanding debt obligations associated with the vessels and would be subject to certain other conditions.
First Quarter 2018 Results
Net loss for the first quarter was $29.3 million, or $1.01 per share, compared to net income of $18.1 million, or $0.62 per share, in the first quarter of 2017. The net loss in the first quarter of 2018 reflects a decline of $35.3 million in TCE revenues compared with the first quarter of 2017, a reduction in equity in income of affiliated companies of $5.3 million, a net loss on vessel disposals during the 2018 period of $6.6 million and the effect of positioning vessels for sale as part of our fleet renewal strategy.
Consolidated TCE revenues for the first quarter of 2018 were $48.8 million, compared to $84.1 million in the first quarter of 2017. Shipping revenues for the first quarter of 2018 were $52.0 million, compared to $88.8 million in the first quarter of 2017.
The reduction in equity in income of affiliated companies was principally attributable to decreases in earnings from the two FSO joint ventures as charter rates in the five-year service contracts that commenced in the third quarter of 2017 are lower than the charter rates included in the service contracts under which the FSO joint ventures operated during the first quarter of 2017.
Adjusted EBITDA was $6.5 million for the quarter, compared to $46.6 million in the first quarter of 2017, principally driven by TCE revenues.
TCE revenues for the Crude Tankers segment were $29.2 million for the quarter, compared to $56.0 million in the first quarter of 2017. This decrease resulted primarily from the impact of lower average blended rates in all of the Crude Tanker fleet sectors, aggregating approximately $28.0 million. VLCC, Aframax and Panamax spot rates declined to approximately $12,900, $10,000 and $12,700 per day, respectively. Approximately $3.9 million of the reduction in TCE revenues represents the impact of the Company’s only ULCC being idle for the entirety of the current quarter. The decline in TCE revenues also reflects a $3.5 million decrease in revenue in the Crude Tankers Lightering business during the current quarter. These declines were tempered by the impact of 234 additional revenue days, reflecting the two Suezmaxes and one VLCC that were acquired in the second half of 2017, aggregating $4.6 million. Shipping revenues for the Crude Tankers segment were $32.4 million for the quarter, compared to $59.9 million in the first quarter of 2017.
TCE revenues for the Product Carriers segment were $19.6 million for the quarter, compared to $28.1 million in the first quarter of 2017. This decrease was primarily due to a decline in average daily blended rates earned by the MR, LR1 and LR2 fleets, with spot rates declining to approximately $11,200, $11,600 and $13,900 per day, respectively, accounting for $4.6 million of the decline in TCE revenues. Additionally, the impact of 324 fewer revenue days due to the sale of four MRs between August 2017 and February 2018 and the redelivery of a bareboat vessel late in December 2017 contributed to the lower TCE revenues, partially offset by 95 fewer MR drydocking days in the first quarter of 2017, as compared to the prior year period. Shipping revenues for the Product Carriers segment were $19.6 million for the quarter, compared to $28.9 million in the first quarter of 2017.
During the quarter, the Company delivered a 2002-built MR and a 2004-built MR to buyers in January and February, respectively. The Company also completed sale and leaseback transactions for two 2009-built Aframaxes during the quarter. The associated bareboat charters are for periods ranging from 70 to 73 months and contain purchase options executable by the Company, commencing at the end of the third year.
The Company also agreed to sell a 2000-built VLCC, which was classified as held for sale at March 31, 2018 and delivered to its buyer in April. In April, the Company agreed to sell a 2001-built Aframax, a 2004-built MR and a 2003-built ULCC, which is conditional on the closing of the agreement to acquire the six VLCCs from Euronav NV. The 2004-built MR was delivered to the buyer in April and the other vessels are expected to be delivered to their buyers during the second quarter of 2018.
Closing of Credit Facility by FSO Joint Ventures
In April, the Company announced that its joint ventures with Euronav NV, which own the FSO Africa and FSO Asia floating storage and offloading service vessels, closed on a $220 million credit facility. Based on INSW’s 50% ownership in the joint ventures, the Company has received $110 million in proceeds from the drawdown of the facility, which it expects to use for general corporate purposes, including to partially fund the previously announced agreement to acquire six VLCCs. The joint venture facility has an interest rate of LIBOR plus 2% and amortizes over the remaining terms of the five-year contracts with North Oil Company (NOC), in July 2022 and September 2022, for the FSO Asia and FSO Africa, respectively. ING Bank Belgium SA/NV and ABN AMRO Bank N.V. acted as joint lead arrangers for the credit facility.
About International Seaways, Inc.
International Seaways, Inc. (NYSE:INSW) is one of the largest tanker companies worldwide providing energy transportation services for crude oil and petroleum products in International Flag markets. International Seaways owned and operated a fleet of 53 vessels as of March 31, 2018, including one ULCC, nine VLCCs, two Suezmaxes, eight Aframaxes/LR2s, 12 Panamaxes/LR1s and 15 MR tankers. Through joint ventures, it has ownership interests in four liquefied natural gas carriers and two floating storage and offloading service vessels. Additionally, the Company has signed a stock purchase and sale agreement to acquire six modern VLCCs, subject to certain financing and other conditions, expected to close during the 2nd quarter of 2018. International Seaways has an experienced team committed to the very best operating practices and the highest levels of customer service and operational efficiency. International Seaways is headquartered in New York City, NY. Additional information is available at www.intlseas.com.
International Seaways, Inc. press release