New York City headquartered International Seaways, Inc. (NYSE: INSW), one of the world’s largest tanker operators, reported net income for the first quarter of $33.0 million, compared to a net income of $10.9 million in the first quarter of 2019. Net income for the quarter reflects the impact of a $2.8 million gain on sale of vessels, a $12.5 million write-off of deferred financing costs, and a $1.0 million loss from the extinguishment of debt. Net income excluding these items was $43.7 million.
Time charter equivalent (TCE) revenues for the first quarter were $119.7 million, compared to $94.0 million in the first quarter of 2019.
Adjusted EBITDA for the first quarter was $74.2 million, compared to $47.3 million in the same period of 2019.
“Our substantial operating leverage and earnings power were evident in our first quarter results, as we posted our highest quarterly EPS as a public company,” said Lois K. Zabrocky, International Seaways’ President and CEO. “The rate environment strengthened in the second quarter with low oil prices, excess oil supply and the increasing demand for floating storage pushing rates higher. With our sizeable fleet and significant exposure to the VLCC market, we have captured this market strength, which will positively impact our earnings. In addition to strong second quarter bookings to date, we capitalized on the robust rate environment by entering into a number of very favorable time charters. Specifically, we locked-in four time charters for periods ranging from seven to 36 months with major oil producing and trading companies at very attractive rates.”
Commenting on the impact of the COVID-19 pandemic, Zabrocky said the company had taken a number of precautionary steps across its offices and fleet to protect its shore-based employees and its seafarers and contractors.
“Although we have faced many disruptions, to date our operations have not been materially affected,” she said.
Jeff Pribor, the Company’s CFO, added, “With the successful completion of our refinancing in January, which reduced annual interest expense significantly and further strengthened our capital structure, we ended the quarter with over $150 million in total liquidity. At a time when our net loan to asset value of our conventional tanker fleet is 42%, which is one of the lowest leverage profiles in the public company shipping sector, our balance sheet strength enabled us to return capital to shareholders, paying a $0.06 dividend and repurchasing $10.0 million of shares during the quarter.”
The company reports that it has completed the scrubber installations on five of its modern VLCCs. Scrubber installations on two additional VLCCs are scheduled for completion during the second quarter of 2020. However, it says that the the scrubber installations on the final three modern VLCCs have been rescheduled to 2021 in part because of COVID-19 impacts and to take advantage of current strong market conditions and to align with the natural drydocking dates for the vessels.
International Seaways says it currently believe that the second and third quarters of 2020 will likely be a stronger rate environment for tankers, due to excess crude supply and the resulting need for seaborne storage of crude oil and products, than 2021.
The company says tanker rates in the second quarter thus far have been “highly volatile.” Despite the OPEC+ agreement in early April 2020 to cut production substantially beginning in May/June 2020, the total oil being produced is still substantially greater than global demand. This excess production continues the need for tankers to be used as floating storage, and, coupled with increased delays offloading cargoes as shore-based storage fills up, has supported a robust tanker rate environment. This implies significant cash generation in the near term. When supply and demand eventually come back into balance, this could have negative repercussions for tankers as the oil held in inventory will supplant oil tanker transportation demand.
In an effort to take advantage of the dynamic oil tanker markets and reduce risk, International Seaways says, it has “opportunistically put four of our VLCCs on time charters for periods ranging from seven months to 36 months at current high rates with major oil producing and trading companies.”