International Seaways Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 27, 2025

Key Takeaways

  • Q4 financial performance strong: Net income of $36 million ($0.72/share), adjusted net income of $45 million ($0.90/share), and adjusted EBITDA of $95 million.
  • Opportunistic fleet modernization via vessel swap, selling two older VLCCs for three Eco MRs to lower average fleet age and enhance efficiency.
  • Maintained a robust balance sheet with $632 million liquidity, $695 million debt (net LTV <16%), and ~$560 million pro forma revolving credit capacity, supporting a $13,700/day spot breakeven rate.
  • Returned over $300 million to shareholders in 2024, paying $5.77 in dividends (12% yield) and announced a $0.70 dividend for next quarter (77% payout), targeting ~75% payout ratio going forward.
  • Industry fundamentals remain positive with ~1% annual oil demand growth, low tanker orderbook vs ageing fleet, and geopolitical factors likely supporting a continued tanker upcycle.
AI Generated. May Contain Errors.
Earnings Conference Call
International Seaways Q4 2024
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Hello, and welcome to the International Seaways Inc. Fourth Quarter twenty twenty four Earnings Conference Call. My name is Carla, and I will be coordinating your call today. During the presentation, you will have the opportunity to register a question by pressing star followed by one on your telephone keypad. I would now like to hand you over to James Small, General Counsel, to begin. James, please go ahead when you're ready.

James Small
James Small
Chief Administrative Officer, Senior VP, General Counsel & Secretary at International Seaways

Thank you, operator. Good morning, everyone, and welcome to International Seaways' earnings call for the fourth quarter of twenty twenty four. Before we begin, I would like to start off by advising everyone with us on the call today of the following. During this call and in the accompanying presentation, management may make forward looking statements regarding the company or the industry in which it operates, which may address, without limitation, the following topics: outlooks for the crude and product tanker markets changes in trading patterns forecasts of world and regional economic activity and of the demand for and production of oil and petroleum products the company's strategy and business prospects expectations about revenues and expenses, including vessel, charter hire and G and A expenses estimated future bookings, TCE rates and capital expenditures projected drydock and off hire days vessel sales and purchases new build vessel construction, the effects of ongoing and threatened conflicts around the globe, the changing global regulatory environment, the company's ability to achieve its financing and other objectives and its consideration of strategic alternatives, anticipated financing transactions and plans to issue dividends the company's relationships with its stakeholders and other political, economic and regulatory developments globally. Any such forward looking statements take into account various assumptions made by management based on a number of factors, including management's experience and perception of historical trends, current conditions, expected and future developments and other factors that management believes are appropriate to consider in the circumstances. Forward looking statements are subject to risks, uncertainties and assumptions, many of which are beyond the company's control. Those could cause actual results to differ materially from those implied or expressed by the statements. Factors, risks and uncertainties that could cause International Sewa's actual results to differ from expectations include those described in our annual report on Form 10 ks for 2024 and in other filings we have made or in the future may make with the U.

James Small
James Small
Chief Administrative Officer, Senior VP, General Counsel & Secretary at International Seaways

S. Securities and Exchange Commission. Now let me turn the call over to Ms. Lois Abrocki, our President and Chief Executive Officer. Lois?

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Thank you very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call for the fourth quarter and the full year 2024. On Slide four of the presentation, which you can find in the Investor Relations section of our website, Net income for the fourth quarter was $36,000,000 or $0.72 per diluted share. Excluding a loss on vessel sales, adjusted net income for the fourth quarter was $45,000,000 or $0.9 per diluted share and our adjusted EBITDA was $95,000,000 We are proud to announce today that we continue to modernize our fleet during the fourth quarter with a vessel swap.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

As you can see in the upper right hand corner of the slide, we sold two of our oldest VLCCs and paid $3,000,000 in cash for three Eco MRs built in 2015. The swap is less indicative of a specific preference for any one particular class of ship, but more showcases our ability to opportunistically reduce our vessel ages across various ship classes, enhance our fleet efficiency while limiting risk compared to a full cash transaction. We have optimized earnings across our tanker segment, which gives us plenty of flexibility to execute fleet optimization. The various transactions within the swap created some temporary changes to our balance sheet in the fourth quarter and the first few months of twenty twenty five. During the fourth quarter, we paid $53,000,000 in cash for deposits and the delivery of one MR vessel.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Due to this temporary timing difference, we borrowed $70,000,000 on our revolving credit facility, which had been repaid in the first quarter following the final execution of the swap. As a result, our line of credit capacity reduced to a still quite healthy four seventy five million dollars at the end of the fourth quarter. We expect that to be around $560,000,000 on a pro form a basis. Our balance sheet highlights are strong shown in the bottom left of the slide, dollars $632,000,000 of total liquidity composed of 157,000,000 of cash and $475,000,000 on the revolving credit facility. We have $695,000,000 of debt with a net loan to value ratio of below 16% and our spot break even rates are about 13,700 per day.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

On the lower right, we are proud to have shared for a second consecutive year over $300,000,000 returned to shareholders in 2024. We paid $5.77 in dividends during 2024, representing a 12% dividend yield on our average share price over the time. We also used proceeds from that sale of an older MR to repurchase 500,000 shares for $25,000,000 during 2024. Today, we announced $0.7 in dividends that we will pay in March, representing a payout ratio of about 77%, marking our highest since we've been supplementing our regular $0.12 dividend. We believe in sharing with our shareholders during this cycle and we expect a payout ratio similar to this last two quarters of around 75 to continue into the future.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

We believe in our balanced capital allocation approach so that we can provide competitive returns to our shareholders and still position the company for the future with the opportunistic fleet renewal while maintaining a healthy balance sheet to support growth. On Slide five, we've updated our standard set of bullets on tanker demand drivers with the subtle green up arrows next to the bullets represented as good for tankers. The black dash representing a neutral impact and a red down arrow, meaning that particular topic is not good for tanker demand. Without reading these bullets individually, I will pull some highlights. Oil demand growth in the near term is still going to grow at its historical rate of about 1% per year, which on 100,000,000 barrels per day of demand is about one to 1,500,000 barrels of growth anticipated for 2025.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Oil demand growth specifically is spread across the world in 2025 with no one large outlier as China has been for many years. Cruise production growth is largely coming from The Americas, which is supported for tanker demand as much of the incremental growth will be exported. The global economy is still settling the dust from a post twenty twenty four election period. And there have always been headline grabbers, particularly from The United States. The geopolitical situation are not going away.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

They may modify, and that could have an effect on the tanker market. But with many moving parts, the markets will adjust. We expect The United States to take a stronger position with Iran and we see tanker movements shadowing that. Pun intended. The Israel Hamas conflict is still very tense and most ships are weary of their safety in the Red Sea.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Russia, Ukraine is similar. And even if there is a resolution on the horizon, we believe that the unwinding could last longer for Russian crews moving to the West. We embrace these tanker markets because we can't control them in any case. And we believe that sanctions and their enforcement can only help the legitimate commercial fleet. In the charts below on slide five, inventory in the OECD drew about 100,000,000 barrels in the second half of the year.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

This in the short term impacted tanker rates and will refill over time based on history. The United States SPR has grown in 2024 in small chunks. President Trump has indicated refilling the SPR is a priority to historic levels. This would mean around 300 plus million barrels, which may include imports of medium sour crude, which has historically been herb medium. On slide six, the order book popped in 2024, particularly in the middle of the year.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

But as seen in the lower left chart, shifts on order are still quite low relative to the size of the fleet in historical context. We added a weighted average tanker rate in the chart as an indicator that orders grow when the market is hot. But as we've shown many times, not factored into the chart on the left is the longer time horizon that many of these shifts on order are expected to deliver over the next four years. And the corresponding age of vessels on the water over this time. The chart on the right reflects that 45% of the fleet is headed towards twenty plus years.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

The age where we identify as removed from the commercial fleet compared to 14% of the fleet that exists on order. As you can see, there are about 900 ships that are already twenty years old. And there are still another 1,500 plus vessels that are turning 20 during delivery schedule that will need replacement. This is significant for the tanker industry as the limited tanker supply continues to be supportive of strong tanker earnings. We believe this should translate into a continued upcycle over the next few years.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

And Seaways remains well positioned to capitalize on these market conditions. We will continue to execute our balanced capital allocation approach to renew our fleet and adapt to industry conditions with a strong balance sheet while returning to shareholders. I'm now turning it over to our CFO, Jeff Prevor, who will provide the financial review. Jeff.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

Thanks, Lois, and good morning, everyone. On Slide eight, net income for the fourth quarter was $36,000,000 or 0.72 per diluted share. This includes a loss of vessel sales as as a result of timing of the vessel swap that Lois discussed earlier. Excluding this, our net income was $45,000,000 or $0.9 per diluted share. On the upper right chart, adjusted EBITDA for the fourth quarter of twenty twenty four was $95,000,000 In the appendix, we provided a reconciliation from reported earnings to adjusted earnings.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

While our revenue based on market conditions was largely within expectations in the fourth quarter, our expenses were a little higher than our guidance from last quarter. Vessel expenses were higher in the fourth quarter due to the timing of stores and spares at the end of the year and additional repairs and maintenance. G and A was higher primarily for one off legal matters. Our lightering business continues to prosper with over $9,000,000 in revenue in the quarter, mining this with about $3,000,000 in vessel expenses, $3,000,000 in charter hire and $1,000,000 of G and A, the linery business contributed nearly $3,000,000 in EBITDA in the fourth quarter as well as an annual EBITDA contribution of nearly $20,000,000 in 2024. Turning now to our cash bridge on Slide 9.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

We began the quarter with total liquidity of $694,000,000 proposed of $153,000,000 in cash, $540,000,000 in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we first add $95,000,000 in adjusted EBITDA for the fourth quarter, plus $23,000,000 in debt service and another $18,000,000 of drydock in capital expenditures, offset by working capital benefit of about $24,000,000 due to the timing of deferred revenue payables or accruals. We therefore achieved our definition of free cash flow of about $78,000,000 for the fourth quarter. This represents an annualized cash flow yield of over 17% on today's share price. We spent $53,000,000 in connection with the vessel swap due to the timing of deposits and the delivery of one of the MRs in the swap.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

Due to the temporary timing difference, we borrowed $70,000,000 on our lines of credit that we repaid in the first quarter of twenty twenty five. The remaining bars on the cash bridge reflect our capital allocation for the quarter. We repaid $20,000,000 of debt early in the fourth quarter, made $12,000,000 in installment payments for our LR1 newbuildings and also paid $59,000,000 in dividends to shareholders, including to $1.2 per share. Altogether, these components led to annual liquidity of $632,000,000 with $158,000,000 in cash and short term investments and $475,000,000 in undrawn revolving capacity. Now moving to Slide 10.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

We have a strong financial position detailed by the balance sheet on the left hand side of the page. Cash and liquidity remain strong at $632,000,000 We have invested about $2,200,000 in vessels at cost, which are not on books currently at a value of $3,500,000 And with $695,000,000 of gross debt at the end of the year, our net loan to value is below 16%. Our debt at December 31 was over 70 percent hedged or at fixed rates, equating to an all in weighted average interest rate of about six fourteen basis points or under 200 basis points above today's sulfur. Following our repayment in the first quarter of twenty twenty five, we expect our fixed rate hedge amount to be closer to 80%. We continue to enhance the balance sheet to create the financial flexibility necessary to facilitate growth and returns to shareholders.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

We have $475,000,000 in undrawn revolvers at year end, which grows to about $560,000,000 pro form a of our debt repayment following the close of the swap transaction. Our nearest maturity in the portfolio isn't until the next decade. We continue to lower our breakeven costs and we share in the upside with double digit returns to shareholders. On the last slide that I'll cover, Slide 11 reflects our forward looking guidance and book to date TCE aligned with our spot cash breakeven rate. Starting with TCE pictures for the first quarter twenty twenty five, and I'll remind you that actual TCE during our next earnings call may be different.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

Currently, we have a blended average spot TCE of about $26,500 per day fleet wide and 70% of our first quarter expected revenue base. On the right hand side of the slide, our forward spot breakeven rate is about $13,700 per day composed of a suite wide breakeven of about $16,200 per day less nearly $2,500 per day in time charter revenues. Based on our spot TCE book to date and our spot breakevens, it looks like Seaways can continue to generate significant free cash flow during the quarter and build out our track record of returning cash to shareholders. On the bottom left hand chart, we provide some updated guidance for expenses in the first quarter and our estimates for 2025. We also include in the appendix our quarterly expected off hire and CapEx.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

I won't plan to read each item line by line, but encourage you to use them for modeling purposes. That concludes my remarks. So I'd now like to turn the call back to Lois for her closing comments. Lois?

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Thank you so much, Jeff. On slide 12, we have provided you with Seaways investment highlights, which we encourage you to read in its entirety. And I will summarize briefly. Over the last eight years, International Seaways has built a track record of returning cash to shareholders, maintaining and improving our healthy balance sheet and growing the company. Our total shareholder return represents around 20 compounded annual return.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

For the second consecutive year, we've returned over $300,000,000 to shareholders, which is about 25% combined return over the last two years. We continue to renew our fleet so that our average age is about 10 old in what we see as the sweet spot for tanker investments and returns. We've invested in a range of asset class to cast a wider net for growth opportunities and to supplement our scale in each class by operating in larger pools. We aim to keep our balance sheet fortified for any down cycle. We have over $500,000,000 in undrawn credit capacity to support our growth.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Our net debt is under 16% of the fleet's current value and we have 36 vessels that are unencumbered. Lastly, we only need our spot ships to collectively earn $14,000 per day to breakeven in the next twelve months. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders. Thank you very much. And with that said, operator, we'd like to open the lines for questions.

Operator

We will now begin the question and answer Our first question comes from Ben Nolan with Stifel.

Benjamin Nolan
Benjamin Nolan
Managing Director at Stifel Financial Corp

I appreciate it. Hey, good morning, Jeff, Lois and team. So I've got a couple. The first relates to sort of maybe your charter out strategy at the moment, and I think this is particularly true for some of the crude tankers. The charter market is pretty elevated relative to certainly where you've booked some of your spot vessels and generally I think spot.

Benjamin Nolan
Benjamin Nolan
Managing Director at Stifel Financial Corp

Obviously, that's pointing to an inflection up in the spot market. But I'm curious if you think about just given that dislocation maybe taking a little risk off the table and locking in some capacity just because there is a gap between the two at the moment.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Okay. Good morning. How are you? So I'm going to start to answer that question. Sorry, I didn't wait for your remaining questions. Let me answer that one and then yes, and then we'll take your second one. How's that?

Benjamin Nolan
Benjamin Nolan
Managing Director at Stifel Financial Corp

Okay. Sounds good.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

We have 14 time charters, in our books right now out of our 78 vessels that are on the water, and then we have our six new buildings that will be arriving, right. So we have nearly 20% of our, 21 time charter present. And then I would just have Derek jump in there.

Derek Solon
Derek Solon
Senior VP & Chief Commercial Officer at International Seaways

Sure, Lois. Thanks. Good morning, Ben. Further to your question, we continue to look at time charters like we always do with the right partners, the right term and the right rate. That's something that we're always evaluating.

Benjamin Nolan
Benjamin Nolan
Managing Director at Stifel Financial Corp

Okay. But there's nothing about the market at the moment that makes you more or less compelled to move in that direction, I suppose, is the answer. Oh, sorry, go ahead.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Go ahead. No, no, please.

Benjamin Nolan
Benjamin Nolan
Managing Director at Stifel Financial Corp

I was going to ask my next question. But, if you would we're going to add any more to that's fine. Well, my next question just to have it out there is, in the quarter, the MR you guys thus far in the first quarter, your MR rates were pretty decent thus far for what you already have booked. Just curious if maybe you can give a little color, like is there a specific geographic focus? Is this how should we think about the remainder of the quarter?

Benjamin Nolan
Benjamin Nolan
Managing Director at Stifel Financial Corp

Is it just, hey, things are going pretty well there at the moment?

Derek Solon
Derek Solon
Senior VP & Chief Commercial Officer at International Seaways

Ben, it's Derek again. If I can take that one. Thank you. Yes, the Q1 bookings, we're pleased with so far. I think we're doing well when we look at our peer group.

Derek Solon
Derek Solon
Senior VP & Chief Commercial Officer at International Seaways

I think the we're starting to see a little bit of dislocation in the MR rates, whereas we've been kind of carried by the Atlantic Basin over the last couple of quarters. We're seeing U. S. Gulf start to come down a little bit, but we do have a good deal of exposure. But we're seeing Asia come up.

Derek Solon
Derek Solon
Senior VP & Chief Commercial Officer at International Seaways

And luckily with an MR fleet of our size and our pool employment, we have good exposure to the East market as well. So we should be covered to capture some of that Eastern upside.

Benjamin Nolan
Benjamin Nolan
Managing Director at Stifel Financial Corp

Okay. I appreciate it. Thank you, guys.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Thank you.

Operator

Our next question comes from Omar Nakhta with Jefferies.

Omar Nokta
Managing Director at Jefferies LLC

Thank you. Hey guys, good morning. Good update. Just wanted to ask a couple of questions. Clearly, over the past few years, you've done a lot in terms of strengthening the balance sheet.

Omar Nokta
Managing Director at Jefferies LLC

Debt is now, as you say, below 16%. We have plenty of liquidity, fleet renewals been consistent, capital returns whether buyback dividends. Just in terms of the dividend at the moment, the 4Q payout is 77% of earnings. That's up from 75% previously in that 50% to 60% you were doing kind of going back to the beginning and say in 2022. How should we think about this ratio going forward?

Omar Nokta
Managing Director at Jefferies LLC

I know it's moving, it's been moving upwards. But just in general, 77% what we should be expecting going forward? And then how do we think about what that payout looks like as earnings kind of move up and down? As in if rates strengthen materially and kind of go back to where they were in 2023, should we expect kind of a more normal payout kind of coming down closer to that 50% threshold again? Any kind of color you can give on what you're thinking of the payout ratio, especially in terms of earnings swinging? Sorry for the question.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

No. Good morning and excellent tee up for us, Omar, because we do want to highlight that. And as you know, we have steadily increased the percentage of adjusted net income that we have been returning to shareholders. And we have to have, Jeff has his thunder here on what you should expect going forward.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

Yes. Hi, Alarm. You recapped it well. We raised the payout ratio gradually from 2022 until the end of last year as we were allocating free cash flow capital to delever. Having reached a level of leverage which is sufficiently low, 50% ish net loan to value, 20% loan growth, we were able to move up the payout ratio to 75% or a little more last quarter and again, this quarter, as you noticed, so it's 77%.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

I think what I hear from shareholders or we hear from shareholders most or potential shareholders most often is clarity and consistency around this return of capital to shareholders program. And I think we can say clearly that shareholders should expect 75% or minimum 75% payout ratio. I mean, it's helpful to have a round number like $0.7 per share, but I think that's the clear message. And to the second part of your question, I think if rates were to moderate or go up, net income will go up and the payout ratio still works. The payout will go up or down depending on how the year develops.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

So I think it's fair to say that we put ourselves in a position to have a payout ratio of a minimum of 75%. And that's the message.

Omar Nokta
Managing Director at Jefferies LLC

Okay. That's clear. Appreciate that. And, no, that's really helpful. And maybe just second question, the VLCC MR swap, certainly a bit innovative and we've been hearing about that for a while, at least in the shipping circles as something that was in the hopper.

Omar Nokta
Managing Director at Jefferies LLC

Just in general, as we think about that transaction, how should we think about it in terms of what your plan has been? Is it deemphasizing the VLCCs in favor of products or is it really deemphasizing older tankers? And then that's one sort of part one. And then part two, I guess, would be as you think about further transactions from here, what part of the fleet profile do you look to, try to increase the ratio of? Thank you.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Yes. Omar, it would be the latter of your what you were opining. Essentially, we really want to drive down the age of the fleet going forward. And because we're in each of these sectors and we have a very broad network, we were able to, come up with what I think was a pretty creative deal from the team and execute that pretty flawlessly here. And you know, our overall, age on the fleet is right around ten years.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

And, you know, selling ships that are, you know, two ten and then bringing in two fifteen, you know, you just, you're buying yourself that longer horizon for it to capture that outside. I think that would kind of do the summation. And then when you, we're not deemphasizing crude at all. It simply happens to be an opportunity for us to shed some older inefficient ships.

Omar Nokta
Managing Director at Jefferies LLC

Okay. Thanks, Lois. And just quickly, in terms of is it in thinking about expansion or adding vessels or fine tuning further, is there any part of the fleet that you want to bolster or is it just kind of it'll depend on what the opportunity set is at the time?

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

It certainly will depend upon the opportunity set at the time. And over time, you should look for us to add to the big crude side, which is where we've had a little bit of attrition now, right? So, that will be a focus as and when that suits.

Omar Nokta
Managing Director at Jefferies LLC

Very good. All right. Thanks, Lois. And thanks, Jeff. I'll pass it back.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

Thanks, Oliver.

Operator

Our next question comes from Chris Robertson with Deutsche Bank.

Chris Robertson
Chris Robertson
Analyst at Deutsche Bank

Hey, good morning, Louis and Jeff. Thank you for taking my questions. Jeff, just a slight B, a question for you. Just turning to the breakeven, just broadly speaking and looking at what makes that up. As you look forward and there's maybe a bit of a de emphasis here on further delevering, so maybe there's not more savings with regards to the breakeven there.

Chris Robertson
Chris Robertson
Analyst at Deutsche Bank

But as you look at OpEx and other components to it, where do you see kind of the floor that you could theoretically get to?

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

Hi, Chris. That's a good how are you?

Chris Robertson
Chris Robertson
Analyst at Deutsche Bank

Good. Thank you.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

That's a good question. I think that we're always working on keeping costs in line and from going up too much. I don't think you'd expect us to be driving down OpEx. It will be good to hold it as well as we can. G and A, we're always working on that to make sure it's on a per ship basis.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

That's a good number. And if we were if we find ourselves growing as we have done in the past at the right time, that does bring you a little lower per day cost on G and A. In terms of interest, I think we're interested in the debt cost. I think there's a little bit that you can look forward to in the future without necessarily deleveraging further, just as we have a little bit of debt that's higher price that will roll off. We have the ability to think about more revolvers as opposed to more advertising debt as we look out towards the end of this year and into next year.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

So it's kind of incremental. I think we feel good about our breakevens right now, right? So I think when you look at a fleet that has everything from DLCCs down to MRs to have a breakeven maintenance, 16,000 before taking into account time charters and under $14,000 when taking into account time charters. Feel good about that. But we'll always like to find incremental ways to lower even more if we can.

Chris Robertson
Chris Robertson
Analyst at Deutsche Bank

Okay, great. Yes, that's what

Chris Robertson
Chris Robertson
Analyst at Deutsche Bank

I like to hear on that. Turning to the LR1 segment, I know this is a segment that you guys have outperformed historically speaking. So I was wondering if you could just talk about that particular segment for a moment, what the current market dynamics there are and do you still have kind of a competitive advantage there?

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

I'll leave that at Flowitz and then I'll turn to Derek. I think you can see, when you stack up the LR1 Panamax sector against the competition in the fourth quarter, we continue to outearn our competition. And that market, continues to be a strong niche.

Derek Solon
Derek Solon
Senior VP & Chief Commercial Officer at International Seaways

Thanks, Lois. Yes, as you said, it continues to be a strong niche. And Chris, I think you're probably raising the question because the rates from sort of the start of the year to the end of the year have come down a good deal. Like you said, like you said, Lois is still a good beach for us. A lot of the decreasing rates have to do with just the overall market, but also a little bit from Ecuador. We're seeing a little bit of Ecuador sending more of their barrels out to China, so that will be in bigger shifts.

Derek Solon
Derek Solon
Senior VP & Chief Commercial Officer at International Seaways

When that dynamic shifts to come back to sort of the West Coast Of The Americas, we expect that market to pick up even more again. Hope that answers your question, Chris.

Chris Robertson
Chris Robertson
Analyst at Deutsche Bank

Yes. Thank you very much. I'll turn it over.

Operator

Our next question comes from Liam Burke with B. Riley.

Liam Burke
Liam Burke
Managing Director at B. Riley Securities

Thank you. Good morning, Lois. Good morning, Jaffin.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Good morning, Liam. Hi.

Liam Burke
Liam Burke
Managing Director at B. Riley Securities

Lois, there's lots of puts and takes out there in terms of sanctions, redistribution of production. And most of the discussion has been on the effect on VLCCs. Specifically, how are you looking at the outlook for the Suezmaxes?

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

So the Suezmaxes had prior to, I would say, the last three years had a very tight correlation, pretty systematically with VLCCs with something along 85% to 90% correlation with the Versus And I think that as you see the components of strength coming into place, piece by piece with a lot of the political news that we read every day and the over four fifty ships or like hundreds of these on, OFAC list. As you see those components start to build and the bees can hopefully get a little bit more of a ground scrawl here and continue to improve, you're going to see the Suezmaxes come along for that dry.

Liam Burke
Liam Burke
Managing Director at B. Riley Securities

Great. Thank you. Jeff, on the, with your liquidity situation, you have a tremendous amount of flexibility. Are opportunistic buybacks in the mix or is the payout ratio your primary method of returning cash to shareholders?

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

Liam, the simple answer not to be cute as both. You're right. I mean, the payout ratio is the primary method that we anticipate that we have been returning and expect to continue returning cash. However, as you asked, share repurchases are in the mix in the sense that we have a $50,000,000 share repurchase program. We did $25,000,000 of share repurchasing right after we sold the shipper roughly the same amount in last year, third quarter.

Jeffrey Pribor
Jeffrey Pribor
CFO, Senior VP & Treasurer at International Seaways

So we have the ability to look at that again. But I'd say the primary plan is dividend, so focus on a payout ratio, but we have the flexibility to do share repurchase as well.

Liam Burke
Liam Burke
Managing Director at B. Riley Securities

Great. Thank you, Louis. Thank you, Jeff.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Thank you. Thanks, Liam.

Operator

Our next question comes from Shariff Almegravi with BTIG.

Sherif Elmaghrabi
Sherif Elmaghrabi
Equity Research Associate at BTIG

Hey, good morning. Thanks for taking my questions. So a couple on, I guess, charter sentiment. You highlighted that nearly 20% of the tanker fleet is over twenty years old. But given that newbuild deliveries aren't going to replace those older vessels at the same rate, do you think we could see charters relaxing their specification requirements if there isn't as much modern tonnage available?

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

I would say that you do see a bit of flex on the margin from charters depending upon, what the tonnage availability is and what the strength of the overall markets are, right. So, very well maintained vessels, I think, could retain their ability to trade and their efficiency. On the other hand, the OFAC list of the 100 Bs, the boat vessels, there's some rare exception that there's one under a few there that are under 20 years old, right. So, you do tend to see the ships that are, on the water and, yes, highly inefficient and really marginalized being older and certainly controlled by those that are not doing a high level maintenance. So I think it will be incremental from the charters. It's never going to be wholesale.

Sherif Elmaghrabi
Sherif Elmaghrabi
Equity Research Associate at BTIG

And then on, on Red Sea transit, I appreciate nobody wants to be the first mover in the Red Sea, and everyone has a different opinion on when changes could resume. But is this something that charters are pushing for at this time?

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

I'm going to turn it over to, our head of ops, Bill Nugent, and just have him give a little bit of an opinion there.

William Nugent
William Nugent
Senior VP & Chief Technical and Sustainability Officer at International Seaways

Thank you, Lois. The we don't talk about our specific security measures or policies. What I can say I think is that the whole market is looking for a bit more of a sustained stability in the region and de escalation. So to answer your question, I'm not aware of any pressure or inquiries from charterers to go through and grateful for their support and like thinking.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

Thank you.

Sherif Elmaghrabi
Sherif Elmaghrabi
Equity Research Associate at BTIG

Got it. Thanks, Lois and thanks, Bill.

Operator

And that was our final question. So I will hand back over to you, Lois, for any final remarks.

Lois Zabrocky
Lois Zabrocky
President and Chief Executive Officer at International Seaways

No, I would just like to thank everyone for joining us today. And we live in very interesting times and are watching the news frequently, right? So we see an overall construction in the tanker market to be really rather robust. And we hope to hear from you next quarter. Thank you very much.

Operator

So this concludes today's call. Thank you everyone for joining and for participating. Have a great day. You may now disconnect.

Executives
    • James Small
      James Small
      Chief Administrative Officer, Senior VP, General Counsel & Secretary
    • Lois Zabrocky
      Lois Zabrocky
      President and Chief Executive Officer
    • Jeffrey Pribor
      Jeffrey Pribor
      CFO, Senior VP & Treasurer
    • Derek Solon
      Derek Solon
      Senior VP & Chief Commercial Officer
    • William Nugent
      William Nugent
      Senior VP & Chief Technical and Sustainability Officer
Analysts
    • Benjamin Nolan
      Managing Director at Stifel Financial Corp
    • Omar Nokta
      Managing Director at Jefferies LLC
    • Chris Robertson
      Analyst at Deutsche Bank
    • Liam Burke
      Managing Director at B. Riley Securities
    • Sherif Elmaghrabi
      Equity Research Associate at BTIG
Powered by Quartr