International Seaways Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 9, 2023

There are 11 speakers on the call.

Operator

Hello, everyone, and welcome to International Seaways Second Quarter 2023 Results Call, and thank you for standing by. My name is Daisy, and I'll be coordinating your call today. I would now like to hand the call over to your host, James Small, General Counsel to begin. So James, please go ahead.

Speaker 1

Thank you, Daisy. Good morning, everyone, and welcome to International Seaways earnings call for the Q2 of 2023. Before we begin, I would like to start off by advising everyone with us on the call today of the following. During this call, management may make forward looking statements regarding the company or the industry in which it operates. Those statements may address without limitation the following topics: outlooks for the crude and product tanker markets and changes in trading patterns Forecasts of world and regional economic activity and of the demand for and production of oil and other petroleum products, The effects of the ongoing conflict between Russia and Ukraine, the company's strategy, Our business prospects expectations regarding revenues and expenses including vessel, charter hire and G and A expenses Estimated bookings, TCE rates and or capital expenditures during 2023

Speaker 2

or

Speaker 1

in any other period, Projected scheduled drydock and off hire days purchases and sales of vessels construction of new build vessels and other investments The company's consideration of strategic alternatives anticipated at recent financing transactions and any plans to issue dividends The company's relationships with its stakeholders, the company's ability to achieve its financing and other objectives, and other economic, political 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, which could cause actual results to differ materially from those implied or expressed by the statement. Factors, risks and uncertainties that could cause International Sewage actual results to differ from expectations include those described in our annual report on Form 10 ks for 2022, our quarterly reports on Form 10 Q for the 1st and second quarters of 2023 and in other filings that we have made or in the future may make with the U.

Speaker 1

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

Speaker 2

Thank you very much, James. Good morning, everyone. Thank you very much for joining International Seaways Earnings Call for the Q2 of 2023. Going to Slide 4 of the presentation found on the Investor Relations section of our website. Net income for the 2nd quarter was $154,000,000 3.11 dollars per diluted share, Bringing our cumulative earnings over the last 12 months to over $650,000,000 Adjusted EBITDA was $205,000,000 Based on our strong results in the second quarter and strong spot rate Thus far in the Q3, we have declared a combined dividend of $1.42 per share.

Speaker 2

Following the dividend payment in September, returns to shareholders over the last 12 months Include a cumulative $6.16 in combined dividends as well as $14,000,000 in buybacks. This equates to approximately $316,000,000 which represents a 17% yield on our average market cap over the period. We have returned to shareholders an average of about half of our net income. We have enhanced our capital structure. We have liquidity of nearly $500,000,000 Comprised of $236,000,000 in cash and an undrawn revolver of nearly $260,000,000 Our strong liquidity is net of our returns to shareholders and of our deleveraging initiatives.

Speaker 2

In the Q2, we prepaid $75,000,000 of our debt portfolio, Two loans on CLEs backed financing, dollars 46,000,000 that had an interest margin of 3.90 basis points Above bank borrowing rates and $29,000,000 under our largest senior secured facility. This unencumbered a modern Suezmax. Overall, in the last 12 months, We have prepaid nearly $390,000,000 in debt and unencumbered 30 vessels, 40% of our fleet. Our net loan to value is about 22% today and our cash breakeven for the next 12 months is under $16,000 per day. This includes about $3,500 per day From our fixed contracted revenue that in aggregate amounts to over $350,000,000 through Charter expiries.

Speaker 2

It excludes profit sharing on applicable charters. As we continue to pull all the levers With our capital allocation approach, our 3rd and final dual fuel VLCC delivered in May. These 3 VLCCs are On time charters for the next 7 years with a fixed base rate of earnings plus a profit share over the index rate on the route from the Middle East to China, TD Tree. In the Q2, the TCEs on these ships with the profit share was about $43,000 per day, providing a nice premium on the $96,000,000 per vessel invested. We just signed 2 new building commitments With 2 options for LR1 with K shipbuilding for delivery in the second half of twenty twenty five.

Speaker 2

These ships will be scrubber fitted and class certified for LNG conversion. The aggregate price of $115,000,000 For the 2 vessels includes strengthened decks, oversized generators and equipment considerations. Upon delivery, these ships will deliver into our niche Panamax International joint venture, which has consistently earned a premium to the LR1 broader market. The average age of the LR1 in our fleet is about 14 years old And the overall LR1 Panamax sector has a very aged fleet profile. Even our vessels at this age, they have earned $67,000 per day year to date.

Speaker 2

We are supporting our presence in this critical strategic joint venture. On Slide 5, we pull highlights. Oil demand is expected to surpass 102,000,000 barrels per day On average for the second half of the year, increasing by 2,000,000 barrels per day year over year. Growth in oil supply mostly comes from the West in North America, Guyana and Brazil. In the chart on the lower left of the slide, the average of the EIA, the IEA and OPEC forecast For oil supply and demand, a line projecting a supply deficit in the second half of twenty twenty three.

Speaker 2

On the lower right chart, oil inventories. We are showing commercial stocks in the OECD Have increased in the first half of the year as expected. We now expect that these inventories will rapidly draw Early in the second half of the year as OPEC plus cuts are felt. Sentiment from these expected cuts Have largely been priced into the spot tanker rates. It will be interesting to watch now in the tanker market As the impact due to the tightening of Urals crude to Brent pricing, which may impact the price cap part of the fleet That has been trading in accordance with sanctions rules.

Speaker 2

These ships may come back into the commercial fleet and affect daily earnings. It is still very early to tell how this will unfold and we remain observant. On Slide 6, The tanker supply side. Despite some new ordering activity, this remains a compelling component to the story of our fundamentals. As you can see on the lower left hand chart, vessels on order make up less than 15% of the fleet That is over 15 years old that should be replaced over the next few years and it represents less than 5% of the overall fleet.

Speaker 2

These orders are also spread over the next 3 to 4 years. Owners cannot easily rush To start replacing tonnage today because lead times are longer as yards continue to build in other shipping sectors. As you can see in the lower right hand chart, environmental regulations continue evolving, creating uncertainty towards building new vessels and selecting engine types. Flipping the presentation to Slide 7. Since the IEA recently updated their oil outlook Through 2028, we reiterate our stance that near term fundamentals in this map of the world, We wanted to simply show that oil supply growth is coming largely from the Americas.

Speaker 2

As you see on the blue bars, Wet oil demand growth shown in the green bars is mostly driven by Asia. These dynamics create an incredible investment case for seaborne transportation in the near term. Layer on top of this geographical changes A constrained supply side that is aging compounded with trade flow inefficiencies as a result of the Russian invasion and subsequent Sanctions, it sets the stage for a solid tanker environment. At Seaways, we continue capturing The strength of the tanker markets today and we are building our future As a leading tanker owner listed on the New York Stock Exchange, with our comprehensive capital allocation approach, We are utilizing all the possible levers that build upon our track record of returning shareholders, cash to shareholders, Maintaining healthy balance sheet and growing the company. Now I'll turn it over to our CFO, Jeff Prevor for the financial review.

Speaker 2

Jeff?

Speaker 3

Thanks, Lois, and good morning, everyone. On Slide 9, net income for the 2nd quarter was $154,000,000 or $3.11 per share. On the upper right chart, adjusted EBITDA for the Q2 of 2023 was $205,000,000 In the appendix, we provided reconciliation from reported earnings to adjusted earnings. While our expense guidance for the Q2 mostly fell within the range of expectations, I'd like to point out a few items Note within our income statement, vessel expenses were higher than our prior guidance for the quarter. The majority of the increased spend is due to the timing of Purchases of spares, which is unavoidably lumpy as it relates is related to when a ship is in dry dock or off hire.

Speaker 3

Charter hire including the profit share is in line with expectations given elevated rates. Other income for the quarter was over $3,000,000 which consisted largely of interest income on our specific cash balances and we've been working hard to maximize this income. On the revenue side, our lightering business had another strong quarter, earning $11,000,000 of revenue. With $2,000,000 in vessel expenses, $4,000,000 in charter hire and $1,000,000 of G and A, the lightering business contributed about $4,000,000 in EBITDA in the 2nd quarter and almost $10,000,000 in EBITDA year to date. Now turning to our cash bridge on Slide 10.

Speaker 3

We began the quarter with liquidity of $519,000,000 composed of $261,000,000 in cash $257,000,000 in undrawn revolving capacity. Following all the chart from left to right on the cash bridge, we had $205,000,000 in adjusted EBITDA in the 2nd quarter, Less, dollars 56,000,000 in debt service, which is composed of scheduled debt repayments and cash interest expense. Less, Our drydocking capital expenditures of $14,000,000 in the quarter and a working capital benefit of $11,000,000 We therefore achieved free cash flows of about $146,000,000 for the 2nd quarter. The remaining bars of the cash bridge demonstrate the execution of the capital allocation that we announced on the 1st quarter earnings call. As a reminder, in Q1, we had $169,000,000 of free cash flow and here you can see exactly how we used it.

Speaker 3

First, as we committed to at the time of the call, we repaid $75,000,000 of debt in this quarter, of which $29,000,000 went to unencumbered a modern Suezmax vessel and $46,000,000 was to terminate 2 sale leasebacks that had an interest margin of 3.90 basis points over Thank you, borrowing rates. Secondly, we paid $79,000,000 in combined dividends of $1.62 per share. And finally, we repurchased approximately 366,000 shares of our stock for $14,000,000 These components let them us an annual liquidity of over $493,000,000 with $236,000,000 in cash and short term investments $257,000,000 in undrawn revolving capacity. Now moving to Slide 11, we have a strong financial position detailed by the balance sheet on the left hand side of the page, cash remains strong at $236,000,000 Vessels on a book stand at approximately $2,000,000,000 book value versus current Market values of over $3,000,000,000 and with about $947,000,000 in gross debt that equates to a net loan to value of just about 22%, Also illustrated in the bottom right hand chart.

Speaker 4

I want

Speaker 3

to point out one last element of the balance sheet that is more of a timing issue. In the 3rd line down from the top under assets, you see that we separated advanced payment of debt of $46,000,000 Which is related to the prepayment of the 2 sale backs I just mentioned. There is a corresponding $46,000,000 of debt embedded in the current portion of debt. Both of these are eliminated or were eliminated with the transaction when it closed in July 3rd, just after the quarter close. On the upper right hand side, we have recapped the debt details to reflect these payments, these prepayments.

Speaker 3

Because 73% of our debt portfolio is hedged or fixed, our weighted average all in interest rate using current bank borrowing rates It's 6.36%, which at current rates is effectively a margin of about 1.25 basis points above today's So for a live order reference race. As we mentioned in our press release this morning, we expect to continue on this trajectory of a balanced capital allocation We intend to use some of our cash to repay existing debt. Currently, we're exploring options on which facilities in the portfolio We would do, but we expect total repayment maybe around $50,000,000 We also have announced our combined dividend of $1.42 share, which consists of a regular dividend of $0.12 $1.30 of a supplemental dividend. These payments will be made in the Q3 as we continue to build on our track record of executing our capital allocation strategy. Turning now to the last slide that I'll cover, Slide 12, reflects our forward looking guidance and book to date Starting with TCE Pictures for the Q3 of 2023, Which I'll remind you as I always do that actual TCE, which we'll tell you during our next earnings call, may be different.

Speaker 3

But here you see we have a budget average TCE across all the sectors of $38,000 today so far this quarter. On the right hand side of the slide, you can see our cash breakevens, which we've shown for the next 12 months Reflective of the delivery of the last vessel in our newbuilding program and related payments on principal and interest as well as the new fixed revenues Excluding any profit share on our increased long term time charters. Overall, we've reduced our breakevens by $1,000 a day from the Q2 of last year. When you compare this breakeven to our fixtures to date, it certainly looks like the Q3 can be another strong quarter for International Seaways. On the bottom left hand chart for the modelers out there, we provide some updated guidance for expenses in Q3 in a total of the year.

Speaker 3

You also included in the appendix our quarterly expected off hire and CapEx schedule from 2023. We don't plan to read each item line by line, but encourage you to use these for modeling purposes. That concludes my remarks. I'd now like to turn the call back to Lois for closing comments.

Speaker 2

Thanks a lot, Jeff. I'll now summarize the details laid out on the Slide 13, where you can see our investment highlights. Over the last six and a half years, International Seaways has a track record of returning to shareholders, Constantly improving our healthy balance sheet and growing our company. Our total shareholder return over this time is over 2 90% and surpasses our peers. Over the last 12 months through regular quarterly dividend, Supplemental dividends and opportunistic share repurchasing, we have returned $316,000,000 in cash returns With earnings of $658,000,000 this very consistent payout represents a 17% yield.

Speaker 2

We have improved our balance sheet over this time. With 75 vessels in the crude and product tanker markets, We had $2,000,000,000 in assets on the books that are worth over $3,000,000,000 in the market today. We prepaid debt And unencumbered 30 vessels representing 40% of our fleet. Importantly, our cash breakeven level Is now below $16,000 per day. We have strategically positioned this company for a sustained robust tanker market With a growing need for seaborne transportation created by regional imbalances, we're focused on safety, Reliability with our transportation in an industry that will have evolving environmental regulations And we remain focused on being a leader in ESG.

Speaker 2

Collectively, we strive to continue to evolve these principles and provide meaningful platform for all of our stakeholders. Thank you very much. Operator, Daisy, if you would please open it up for questions.

Operator

Of course. When preparing to ask your question, please ensure you are unmuted locally. Our first question today comes from Chris Robertson from Deutsche Bank. Chris, please go ahead. Your line is open.

Speaker 5

Hey, good morning, Lois and Jeff. Thanks for taking the time to take our questions. This is around the 2023 off hire day guidance for Q3. It looks like it ticked up just slightly since the last update. So I was wondering if this is due to pulling forward any dry docking into the 3rd quarter Or if this is due to just some delays that are out there?

Speaker 2

Some of our dry docking From the Q2 got pushed into the Q3. That I think is our only change, isn't it Bill?

Speaker 6

I have to go back and look, Lois. But we have looked at moving some forward and we've looked also from 2024 to the end of 2023 And then also some

Speaker 7

have moved in later in the year. We've got

Speaker 3

a bit of both.

Speaker 2

In the Q3, we anticipate hopefully this will mark So the low point of the year and we expect pickup in rates in the Q4. So that's the a bit of the concentration there.

Speaker 5

Yes, that makes sense. Thanks for that. My second question is just around the Corpus Christi Ship Channel dredging project. Do you think this will have any Impact on the lightering business or could it be offset by maybe some more positive impact on VLCC demand?

Speaker 2

I think the project has moved forward very successfully. It is still the case that You can now load a Suezmax and then top up to a VLCC that has been the case for the last Couple of years, you still need an under keel clearance that the channel dredging allows for Nice safety levels. So we don't really see a big impact on the lightering business except for the fact that Corpus Christi is Just increasingly busier and that actually increases the amount of exports from that port And consequently, some of the lighterings.

Speaker 5

Yes. It seems like it's good all around for all segments. Okay. Yes. Thank you very much.

Speaker 5

I'll turn it over.

Speaker 2

Thank you, Chris.

Operator

Thank you very much. Our next question today comes from Omar Nochtar from Jefferies. Omar, please go ahead. Your line is open.

Speaker 8

Hi, Lois and Jess. Good morning. Wanted to ask about I feel like a lot of times I'm asking you about the Panamaxes, but clearly you've ordered the 2 LR1s that got a pretty Attractive delivery schedule, I'd say, for 2025. Clearly, that piece of your business has done really well and Doesn't really seem to be feeling the effect of seasonality or the OPEC cuts. And just looking at your averages so far this year of $68,000 in the first half, It seems like that's probably at least perhaps double what the broad LR1 market average has been.

Speaker 8

So across your fleet, let's say $50,000,000 If we calculate that, just over $1 a share. So pretty meaningful outperformance, especially for you guys. My question is, Are there risks that owners start to bring vessels into this niche market and crowd out the premium, you've been able to consistently achieve here over the past several quarters?

Speaker 2

Well, I would say, Omar, that I think the base trade In the Americas, on these vessels and in this class, has also benefited from what the overall tanker Market, especially the mid sector of the fleet, enhanced ton miles with all of the sanctions and the trade That has benefited us, but there are lots of Panamaxes engaged in this trade. It's an aging sector. The overall trade is strong and we're supporting our joint venture and making sure that She weighs going forward. We're nearly 20 years. In 2025, it will be 20 years that we've been in this joint venture and it's been very successful And we look forward to supporting that trade, our customer base and our partners.

Speaker 8

Thanks, Lois. And it sounds like you clearly you're ordering those 2 ships to perhaps maybe get deeper into that trade. In terms of, say, looking at a broader fleet renewal in general, I guess, where we've seen a bit more of your activity recently In terms of adding or kind of just been in the LR1s, how are you thinking about the MRs as it is right now? Any plans to reinvest in that segment? And As you think about that, do new buildings similar to the LR1s make sense?

Speaker 8

Are there opportunities that you think may be more appropriate in the secondhand market? Any color you can give there?

Speaker 2

I mean, Omar, what I would say is that we have been Highly selective. So you're really looking for in an environment where we do feel that cyclically asset levels, value levels are high, We are looking for those opportunities where it's strategic and overall fundamentals are very strong. What the BLCCs These that we just took delivery of and the Panamaxes or LR1s that we just ordered, those 2 sectors have in common, their order book is 2%. And I think that's very strong. I think that as we look at our broader sectors, One of the beauties of being diversified and being present in all of these different markets is having more in-depth knowledge about All

Speaker 3

of those

Speaker 2

fundamentals and we're looking for the opportunities to provide a strong return and That maybe in MRs going forward, it's something that we will continue to study, but it's not something that we're teed up for today.

Speaker 8

Thanks, Lois. Thank you. And just one final just quick follow-up. You were just highlighting the profit share on those 3 VLCCs Based they're based off of the TD3D, is that basis just general bunker fuel or is that an LNG price LNG fuel component.

Speaker 2

Derek DeSalon, our Chief Commercial Officer is going to handle that.

Speaker 7

Hey, Omar. It's Derek. Yes, it's based on VLSFO pricing, not LNG pricing, but in the negotiation with the charter, we were able to work Some advantages to that BLSFO pricing.

Speaker 8

Got it. Okay. Thanks, Derek, and thanks, Lois.

Speaker 2

Thank you.

Operator

Thank you. Our next question comes from Liam Burke from B. Riley. Liam, please go ahead. Your line is open.

Speaker 9

Thank you. Good morning, Lois. Good morning, Jeff.

Speaker 2

Good morning, Liam.

Speaker 9

Lois, the Suezmax are out earning the VLCCs. Is that function of the redistribution of crude supply and do you think this will continue?

Speaker 2

Yes. Derek will take that.

Speaker 7

Hey, Liam, it's Derek Salone here. Yes, I think that's a function of the changing trading patterns Around the Russian invasion of Ukraine, where we've seen the mid sector, the Suez and the Afras and as Lois has talked about the LR1s Sort of outperform the larger crude. So we expect that to continue while we have these continued hostilities in Europe.

Speaker 9

Great. And Jeff, on the capital allocation side, How much does newbuilds after we've after you've ordered 2 new LR2s, how do newbuilds Come in and balancing your allocation of capital now.

Speaker 6

Well, I think Lois touched on it.

Speaker 3

If we look at assets today, they're generally at the high end of the cyclical of Pricing as we know. So when there's going to be a new building, if there is to be a new building Allocation is going to be a specific value proposition and that's what we found with respect to these LRR Watts They work out well, taking into account the financial metrics of making them Conversion ready and even considering in a conversion in the future in the DCF. So that's a specific value proposition. So I don't as Lois said, we'll evaluate that in other sectors, but we're not expecting anything at this time.

Speaker 9

Great. Thank you, Jeff. Thank you, Derek.

Operator

Thank you. Our next question comes from Ben Nolan from Stifel. Ben, please go ahead. Your line is open.

Speaker 10

Yes, thanks. Hey, guys. Good quarter. Actually, if I could just follow-up to you're just talking about Jeff, on the LR1s that you ordered, they're LNG ready. I'm curious, You guys trade those in a pretty distinct pattern.

Speaker 10

Was there any thought about actually making them LNG equipped and why not just go ahead and go full tilt on that?

Speaker 3

Let me ask one of my colleagues to answer that question.

Speaker 2

Yes. Our Chief Operational Officer and Head of Sustainability, Bill Nugent, just highlight, Bill, if you would, how you're preparing us with this order for a multi fuel future?

Speaker 6

So thank you. My responsibility to Lois and Derek is to provide them with Safe, reliable, quality ships to trade. And as we look forward as to how those ships may trade, right, and as the rules evolve and the regulations change and we kind of This change, we kind of consider IMO's latest announcements and tightening of restrictions. We want to make sure that we're prepared for a multitude of different scenarios. So these ships can operate on biofuel as a drop in fuel.

Speaker 6

We have made considerations in the design for the potential for carbon capture if that becomes the viable logistical Technology, viable technology. And then we have the ability to also consider LNG as a fuel. So what I've tried to do is make the ships as flexible as possible so that Derek has the ability to trade them In whatever way he wishes to do so. So I realize I've sort of answered all of the questions there.

Speaker 3

Yes. So Ben, it's Jeff again. So as you know, people talk about whatever something future fuel ready And that can be not much or that can be a fully fleshed out program and what you hear what we thought in this case is to have A lot of optionality built into these ships and we factored in the future cost of that into our decision making on this new build. Hope that answers your question.

Speaker 10

No, that's helpful. And actually, if I could just I assume you even priced that. For something like an LR1, what's the incremental cost of having it The LNG equipped versus just ready any framework around that?

Speaker 2

Okay. Yes, I mean, maybe what I would say is the one of the distinctions that Bill led the team to achieve is that we have a classification, right, go ahead Bill, That we're certified for to carry LNG with the conversion.

Speaker 6

Yes. I mean, it's important that Dual fuel ready is not just lift service?

Speaker 2

Correct. That's exactly the

Speaker 3

same. So, yes,

Speaker 6

I mean, but even beyond that, right, that the actual equipment is Certified has been on other ships converted and provided or operates on dual fuels of the boilers, the engine, main engine generators All do that and are sized for that future service, right. So that's a key distinction. Specifically, the adder for it to deliver that ship In the market today is dual fuel, somewhere in the $12,000,000 to $13,000,000 range. Yes.

Speaker 2

Just to We estimate it would be the cost, but again, then we prepared for that in the future. We are not Undertaking that today.

Speaker 10

Understand. Just trying to frame in the value proposition a little bit, but Appreciate that. My last question, again, you guys are Maybe a little bit more on the West Coast with the ILRs, but in particular with the MRs all over Both the Gulf and the Pacific Coast, and there's been a lot of noise about Panama and Congestion and low waters and everything else.

Speaker 8

Is that having any specific impact

Speaker 9

on the business that you guys do? And have you thought at all about sort of

Speaker 10

or if not, then I'd be curious to hear that.

Speaker 9

But if it is, any sense of how

Speaker 10

you would quantify what that impact is?

Speaker 2

The Panama Canal for the trading within the joint venture of Panamax International It is an integral piece of the trade routes. We are constantly calling there And Dirk, do you want to talk about the delays? I mean

Speaker 7

Well, I think to Ben's point, there's been I think Ben, you're speaking specifically about the most recent Building delays at the Panama Canal, yes?

Speaker 10

Well, yes, I mean it's been for months now, but it's just getting worse and worse, right?

Speaker 7

Right. So in some instances, yes, We have seen increasing delays for both the MRs and the Panamaxes. I think the delays at the Neo Canal have grown Larger than at the old beam restricted canal. So that's why longer term we've built the LR1s with the 32.2 meter beam, so they can continue to use the older Panama Canal. But some of the delays have had an impact on the TCEs, As we picked up longer weighted delays to go through, so we've seen that.

Speaker 7

And in one instance, we sent a ship From Argentina over to the West Coast and didn't utilize the canal. We went around Cape Horn. So I think that the chartering teams have to Play that game of delay versus cost in each and every voyage and you've seen it impact us.

Speaker 10

Interesting. Okay. All right. That does it for me again. Thanks and good quarter.

Speaker 3

Thank you.

Operator

Thank you. Our last question is from Sharif Elmerkarabi from BTIG. Sherif, please go ahead. Your line is open.

Speaker 4

Good morning. Thanks for taking my question. I realize it's a bit early to see the full impact, but on the dark pool trading Russian crude, are you seeing tankers leave that pool and return to their regular trade As East Asia started buying more Middle Eastern crude, is that something that can happen quickly or will you have a lot of visibility as that unfolds?

Speaker 7

Sherif, hi, it's Derek Salone again. Maybe I can answer this one. Lois touched on it in her remarks. I think as crude has increased overall, Urals crude has increased And we're starting to see euros crude above the set there's a differentiation Within the Russian trading fleet, there is the great fleet who are more comfortable sanction busting, if you will, will carry crude at any cost. And then there's the compliant group of owners who are willing to load Russia, unlike us, but who are willing to load Russia, Provided it's in accordance with the price cap that's set.

Speaker 7

So as the price goes up, we some of those shifts come back. They don't come back necessarily completely efficient though, because when they come back, There's a lot of customers, a lot of charters who are not keen to take ships that have called Russia. So They'll have to take disadvantaged business to sort of clean up their cargo history. So I think to your point, Sherry, that it'll take a little bit of time to see How that impacts the market?

Speaker 4

That's helpful. Thanks. Really, I'm just trying to kind of gauge the volatility there. And then you exercised 2 repurchase options during the quarter. Going forward, how are we thinking about exercising more sale and leaseback repurchases versus other parts of the capital allocation strategy?

Speaker 3

Yes. Hi, it's Jeff.

Speaker 2

I think

Speaker 3

that it's probably The last of the repurchases you might see for a while just based on the terms of the other sale leasebacks that are out there. So nothing imminent. And as we said in our remarks, we will look at the whole portfolio of other debt instruments we have In terms of this incremental debt prepayment that we're we've been doing and we'll continue to do as it Nicely brings down our cash breakeven. So it will probably spread somewhere else in the debt portfolio.

Speaker 4

Okay. Thanks for taking my question.

Speaker 3

Thank you. Thank you.

Operator

Thank you. We have no further questions. So I'd like to hand back to Lois for any closing remarks.

Speaker 2

Thank you very much. I want to thank everyone for joining us today on our 2nd quarter conference call and a very strong quarter. Thank you very much.

Operator

Thank you everyone for joining today's call. You may now disconnect your lines and have a lovely

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International Seaways Q2 2023
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