International Seaways Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2024

There are 10 speakers on the call.

Operator

Good morning, everyone, and welcome to the International Seaways Second Quarter 20 24 Results Conference Call. My name is Carla, and I will be coordinating your call today. I will now hand you over to your host, James Small, CAO and General Counsel to begin. James, please go ahead.

Speaker 1

Thank you. Good morning, everyone, and welcome to International Seaways' earnings call for the Q2 of 2024. 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. 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 petroleum products, the effects of ongoing and threatened conflicts around the globe, the company's strategy and business prospects expectations regarding revenues and expenses, including vessel, charter hire and G and A expenses estimated future bookings, TCE rates and capital expenditures projected scheduled drydock and off hire days purchases and sales of vessels and construction of new build vessels, the company's consideration of strategic alternatives, anticipated and recent financing transactions and 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.

Speaker 1

Any such forward looking statements take into account assumptions made by management based on various 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 statements. Factors, risks and uncertainties could cause International Seaways' actual results to differ from expectations include those described in our annual report on Form 10 ks for 2023, our quarterly report on Form 10 Q for the Q2 of 2024 and in other filings that we have made or in the future may make with the U. S. Securities and Exchange Commission.

Speaker 1

Now let me turn the call over to our President and Chief Executive Officer, Ms. Lois Labrock. Lois?

Speaker 2

Thank you very much, Jane. Good morning, everyone. Thank you for joining International Seaways earnings call for the Q2 of 2024. On Slide 4 of the presentation, which you can find in our Investor Relations section of our website, results for the Q2 represent our 8th consecutive quarter of adjusted net income over $100,000,000 Net income was $145,000,000 or $2.91 per share, Excluding the gains on vessel sales and other one off items, adjusted net income for the 2nd quarter was $118,000,000 or $2.37 per diluted share and adjusted EBITDA was $167,000,000 On the lower left section of the slide, we were busy with fleet renewal in the Q2, taking delivery of 6 Eco MR, while selling 3 aged 15 years or more. This lowered our average MR age by 1 year.

Speaker 2

1 of the 3 vessels sales closed in mid July. We funded the acquisition of the Eco MR with the proceeds from vessel sales along with a $50,000,000 revolver draw and the issuance of 624,000 shares in cash on hand. On the upper right hand side of the slide, we continue to benefit from our balance sheet. At the end of the Q2, we had $682,000,000 in total liquidity, which included $506,000,000 of undrawn revolver. We increased our revolver capacity by nearly consolidated our term loan and converted them into a revolving credit facility.

Speaker 2

We now say about $80,000,000 per year in mandatory repayment, which also raises our free cash flow generation and lowers our spot breakeven rate to under $13,400 per day. As a result of these accomplishments, we continue to share our upside with our shareholders. Today, we declared a combined dividend of $1.50 per share, representing 64% of adjusted net income. And as shown in the lower right hand chart, another quarter of a double digit yield for our shareholders. Over the last 12 months, Seaways dividend yield has been 12% of our average market cap.

Speaker 2

We continue to prioritize our balanced capital allocation. Positioning the company for the future with opportunistic fleet renewal and enhancing our balance sheet, while sharing in our up cycle with a double digit dividend yield to our shareholders. Slide 5, we've updated our bullets on tanker demand drivers. We've settled green up arrows next to the bullets representative positive for tankers. The black dash representing a neutral impact and a red down arrow meaning the topic is not good for tanker demand.

Speaker 2

Pulling highlights. We expect oil demand to continue to grow at a rate above its 30 year average growth. A good portion of this growth is regionally in Asia, which has grown slower than expected at the beginning of the year. While oil supply growth is largely in areas not capped by OPEC plus taker demand, particularly the V are better off when the cartel's production also grows. It's a heavy election year worldwide and results could indirectly impact our tanker demand.

Speaker 2

While Seaways has benefited by geopolitical events that have caused disruption to both crude and product tanker trade, It is important to recognize that these events have not defined tanker earnings, but merely bolstered a fundamentally strong market. The graph at the bottom of the slide show that the growth in oil demand and seaborne transportation of crude oil and refined products looks to remain healthy over the next few years. On Slide 6, strong tanker market naturally would dictate more ordering and the order book has grown to about 11% of the total fleet. However, shifts on order as we show at the bottom left hand of the page are not enough to replace a fleet that is aging significantly. The average age of the tanker fleet today is over 13 years old and is likely to get older with so few new building delivery.

Speaker 2

Generally, older ships have less efficiency. And less utilization with a greater percentage of the fleet in this vintage, the industry needs more shift to cover the increasing seaborne demand. Different from other cycles, the longer lead time in our order book has limited the new orders today, especially when factoring in pending environmental regulation. Overall, this sets the stage for a continued strong up cycle over the next few years and Seaways will capitalize on these market conditions. You can count on us to utilize our balanced capital allocation approach to renew our fleet and adapt to industry conditions with a strong balance sheet while returning to shareholders.

Speaker 2

I'll now turn it over to our CFO, Jeff Prevor to provide the financial review. Jeff?

Speaker 3

Thank you, Lois, and good morning, everyone. On Slide 8, net income for the 2nd quarter was $145,000,000 or $2.91 per diluted share. This includes gains on vessel sales and a provision for the settlement of our UK multi employer pension funds. Excluding these impacts, our net income was $118,000,000 On the upper right chart, adjusted EBITDA for the Q2 of 2024 was $167,000,000 We've provided a reconciliation from reported earnings to adjusted earnings in the appendix. Our expense guidance for the Q2 fell largely within the range of expectations, I'd like to highlight certain aspects within our ecosystem.

Speaker 3

At the time of our last earnings conference call, we guided toward 359 days of off hire planned drydocking and repairs. As outlined in the appendix, our actual off hire time was 559 days. About half of the 200 day difference relates to dockings that we move forward into the Q2 ahead of most of these vessels delivering into time charters early in Q3. Another 60 days of additional off hire time relates to repair work, which was generally one off in nature to maintain safe and reliable operations. The remaining 40 days relate to some additional positioning and adapting of our vessels to support U.

Speaker 3

S. West Coast trading for our customers. Our volumes business continues to prosper with nearly $14,000,000 of revenue in the quarter, combined with about $3,000,000 in vessel expenses, $4,000,000 in charter hire and $1,000,000 of G and A, the linering business contributed about $6,000,000 of EBITDA in the 2nd quarter and brought its year to date EBITDA contribution to just about $13,000,000 Turning to our cash bridge on Slide 9. We began the quarter with total liquidity of $626,000,000 proposed of $250,000,000 in cash and $411,000,000 in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we first had $167,000,000 in adjusted EBITDA for the 2nd quarter, less $24,000,000 in debt service, less our drydocking capital expenditures of $16,000,000 and then add working capital benefit largely due to the collection of receivables of approximately 28,000,000 dollars We therefore achieved our definition of free cash flow of $154,000,000 for the 2nd quarter.

Speaker 3

This represents an annualized cash flow yield of about 20% on today's share price. The remaining bars of the cash bridge reflect our capital allocation. We spent $175,000,000 to acquire 6 ECO MRs, which is net of $35,000,000 of share value issued to the sellers in the form of 624,000 shares. We also sold 2 vessels during the quarter for 48,000,000 dollars and borrowed $50,000,000 on our new $500,000,000 revolving credit facility in funding for the MRs. In connection with the closing of the revolving credit facility, we increased our capacity by $150,000,000 which was subsequently reduced to $100,000,000 after drawing for the MR person.

Speaker 3

And also we extinguished our ING term loan for $20,000,000 Lastly, we paid $1.75 per share or $87,000,000 dividends during the quarter. These components led to ending liquidity of $682,000,000 comprised of $176,000,000 in cash and short term investments and $506,000,000 in non co op development capacity. Moving now to Slide 10. We have a strong financial position detailed by the balance sheet on the left hand side of the page. Cash and liquidity remains strong at $682,000,000 Vessels on the books at cost are approximately $2,000,000,000 versus current market values of over $3,700,000,000 And with $720,000,000 in gross debt at June 30th, this equates to a net loan to value of right around 14%.

Speaker 3

Our debt at June 30 was 78% hedged towards fixed rates, leading to an all in weighted average interest rate of about 625 basis points or less than 100 basis points above today's. So In the table on the bottom right hand side of the slide, our debt balances as of June 30 reflect the amended extend of $750,000,000 facility, which we now call the $500,000,000 RCF. As well as mentioned before, this facility has no mandatory debt with me, generating a savings of about $80,000,000 per year. This also increases our free cash flow generation by the same $80,000,000 per year since mandatory repayments are included as part of debt service calculating free cash. We continue to enhance our balance sheet to create the financial flexibility necessary to both facilitate growth and provide returns to shareholders.

Speaker 3

We have $506,000,000 in undrawn revolver. Our nearest maturity in the portfolio didn't until the next decade. We continue to lower our breakeven costs, 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, combined with our spot cash breakeven rate. Starting with TCE pictures for the Q3 of 2024, we can see some seasonality returning to the tanker markets.

Speaker 3

While I will remind you that actual TCE report at our next earnings call may be different. As of today, we have a blended average spot TCE of about $37,300 per day fleet wide so far for this quarter. On the right hand side of the slide, you can see our forward spot breakeven rate now $113,400 per day composed of a fleet wide breakeven of about $16,000 per day less the effect of nearly $2,800 per day in time charter revenues. As a result, based on our spot TCE book to date and our spot breakevens, it looks like Seaways can generate significant free cash flows during the Q3. On the bottom left hand side of the chart, we provide some updated guidance for our expenses in the Q3 as well as our estimates for 2024.

Speaker 3

We also included in the appendix our quarterly expected off hire for the rest of the year, which is significantly lower than previously guided due to changes in our drydock schedule and the CapEx schedule down to 24. I don't plan to read each slide 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 Welles for closing comments.

Speaker 2

Thank you very much, Jack. On Slide 12, we have provided you with Seaways investment highlights. Summarizing briefly, over the last 7 years, International Seaways has built a track record of returning to shareholders, maintaining a healthy balance sheet and growing the company. Our total shareholder return is nearly 500% since our inception, representing a 23% compounded annual return. Over the last 12 months, our combined dividend of $5.82 per share represents a 12% yield on our average share price over that time.

Speaker 2

We continue to make strides to keep our fleet age below the global tanker average in what we see as a sweet spot for tanker investments and return. We've invested in a range of tanker classes, casting a wider net for growth opportunities and supplementing our scale in each class by operating in leading pools. We keep our balance sheet for size for any down cycle. We have over $500,000,000 in undrawn credit capacity to support our growth. Our net debt is 14% of the fleet's current value and we have 34 tankers that are unencumbered.

Speaker 2

Lastly, our spot tankers need only earn $13,400 per day to breakeven in the next 12 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. And with that said, operator, we'd like to open the lines up for questions.

Operator

We will now begin the question and answer session. Our first question comes from Ben Nolan from Stifel. Your line is now open.

Speaker 4

I appreciate it. Thank you, guys. So I wanted to go back to the dry docking days, if I could. Jeff, you mentioned that you pulled some of those forward for ahead of time charters. But still in aggregate, the number went down by more than 100 days for the year.

Speaker 4

Just curious if or is some of that being pushed into next year or is it just less than you thought last quarter?

Speaker 3

Well, yes, so for this hi, Ben. So for this quarter, I think the point is off hire was 200 days more than we had provided in the last quarterly conference call report. So of that, yes, if you look at the Q full year, where we are up now for with our guidance for the full year. So some of it is affects the year, but some of it is just timing between quarters. And that's the main point we wanted to make is that that's not something you could have seen before we put out the information today.

Speaker 3

So I wanted to in my remarks to make clear that part of the off hire is just timing and a little bit of positioning of vessels or

Speaker 5

preparing vessels.

Speaker 4

It was just sort of opportunistic. Sorry, it was just opportunistic. Yes. That's

Speaker 6

a lot.

Speaker 4

Yes. Okay.

Speaker 2

All right. Dan, one of the things

Speaker 4

Go ahead.

Speaker 2

I was just going to supplement what Jake was thinking. One of the things we are focusing on with Aframax is getting them into a position for that West Coast trade. And those in particular were a couple of vessels that we were preparing the extra drydocking.

Speaker 4

Got you. Sorry, Lois, you said the Aframax is there?

Speaker 2

Yes. We are positioned now with that pool that we've put together with Ultra Chile and have those vessels out there and we will try to take advantage of that TMX trade as that develops.

Speaker 4

Got you. That actually leads to my second question. It seems like the Aframaxes in particular have been below sort of market levels. And I appreciate that they're a little bit older maybe than average, but it was part of that and is part of that even in the Q3 simply a function of the shifting around of the fleet and maybe some of that dry docking. And going forward, we should expect those to be a little bit more similar to the market rates, would you think?

Speaker 5

Hey, Ben. It's Derek Stallone. I'll take that one if I can. You kind of answered the question for us. That's exactly right.

Speaker 5

So we've taken advantage of our JV partners where we even before the Saffromax pool, we've had 2 pools with Ultra Chile that specialize on the West Coast of the Americas with Panamax International and CPTA. So as TMX was coming to fruition, we've made the call to start Aframax International so we could take advantage of, 1, hopefully the TMX trade, but 2, just the relationships that have been built over years with those joint venture pools. What that meant though for the first half of the year is advancing dry docks, doing a little bit more work to be ready for the West Coast trade. And the real pain point was tridox in the East that we had to then get the ships to the West Coast of the Americas. So that was a lot of positioning training to get this new pool off the ground.

Speaker 4

Got it. Okay. That's very helpful. I appreciate that. And then lastly for me, if I could.

Speaker 4

Just bigger picture, we talk about the aging fleet and there's the dark fleet and all of this kind of thing. Although it seems like there's been a little bit more cracking down on that. Do you think there's much of a chance that we begin to see some of these older assets actually leaving trade and being scrapped even in a high market? Or is it probably just market related other than maybe ones and twos? Just curious if you think that we're beginning to get to maybe a tipping point with respect to the age of the assets in the broader fleet.

Speaker 2

Ben, it's definitely something that we watch constantly. And when we look at the supply side and take the fees where you have even none or one delivery in single digits next year. So you're looking at very little new buildings coming in the market. I kind of expect, believe it or not, for the in 2 years, today, the total tanker fleet in the world is over 13 years. I think in 2 years, it's going to be over 15 years.

Speaker 2

And then we're only in the mid innings, we believe, in this very structurally strong cycle. And unless those owners can't trade at all, I don't expect them to leave the fleet. But then eventually that will come home to

Speaker 6

Ruth. Okay.

Speaker 3

And another point is that the older vessels just have a lower utilization in and of itself because of their age. So while it's not scrapping, older vessels have less utilization. So fleet shrinks naturally.

Speaker 4

Sure. That's a good point. All right. I appreciate it. Thank you, guys.

Speaker 2

Thank you, Ben. Thanks, Ben.

Operator

Our next question comes from Chris Robinson from Deutsche Bank.

Speaker 5

Hey, good morning everybody and

Speaker 7

thanks for taking my questions.

Speaker 3

Good morning. Hi, Jeff. Yes, good morning, Lois. Jeff, maybe this is

Speaker 7

a question for you, but just looking at the summer pullbacks here in rates and then as that relates to the share price, could you look towards the $50,000,000 repurchase program here to take advantage of the it seems like an attractive discount to NAV. How are you thinking about, I guess, the trade off between the quarterly dividend and potential repurchases here?

Speaker 3

Yes. Hi, Chris. So look, we think it's important to have a share repurchase program in place and we not long ago refresh the amount from our last repurchases. So we do have a solid $50,000,000 in place. And as always, we will look at that opportunistically.

Speaker 3

But we stuck with the dividend. What we are striving for with that is a measure of transparency, consistency and a really solid yield or return to shareholders. And I think we've shown that the transparency is based on always being at least 60% of net income, which is an easy statistic for people to wrap their minds around or look up at whatever source they want. And consistency for straight quarters of it, That's a measure of consistency and solid yield. I always mentioned in her remarks that it's still double digits 12% last 12 months.

Speaker 3

So we think that's good capital allocation. But with our to answer your question again with the share repurchase program in place and our low leverage and a lot of liquidity, yes, we will monitor the share price and that's certainly an option available to us going forward.

Speaker 7

Got it. All right. Thank you for that. My next question is just around the cash breakeven here, which is at very low levels relative to history. Looking at your expectations for OpEx and the inflation going forward, do you think you can maintain the cash breakeven where it is today?

Speaker 7

And what would be the main drivers do you think of upward pressure on that number from where we are today?

Speaker 2

Well, I would say, basically, when you talk about where we see, I think some of the inflation creep in is in transportation expenses and shifting crew, some availability at times of dry docks where because the world is really busy and but we think that we can hold the line on that and in the appendix we give you some expense guidance and for the remainder of the year and we look to be able to hold that line.

Speaker 7

Got it. Sounds good, Lois. Thank you for that. I'll turn it over.

Speaker 3

Thanks, Chris.

Operator

Our next question comes from Omar Khotter from Jefferies.

Speaker 8

Thank you. Hey, guys. Good morning. A couple of questions from my side. Just wanted to ask, we're talking about the tanker market and rates are clearly softer at the moment.

Speaker 8

Seasonally, it looks like both crude and product are lower than where they were in the first half. And just wanted to get your sense, as we move through the final here 4 or 5 months of the year, how do you see both crude and product faring? I guess, one, perhaps an easy question is, do

Speaker 6

you see a rise in rates in the coming months in both segments? And then, 2, do

Speaker 8

you think there's one that's going to lead the other?

Speaker 2

You put a lot in there, Omar. How are you? It's Claude. So as we look at the year on crude and product and definitely we've seen seasonality creep into our markets here in the Q3. Nonetheless, while it doesn't look like there will likely be more than 2,000,000 barrels a day of oil demand growth for the year.

Speaker 2

There certainly will be more than 1,000,000 barrels per day and maybe around 1,500,000 in oil demand growth. And that's the fundamentals of kind of where we start. The markets have been pretty consistent this year. And when we look at it, I mean, I would say crude may have a little more products. I mean, look at the Q3 numbers, you're looking at 35 a day for what has been booked on MRs, right, that we put in our charts.

Speaker 2

So that's really quite strong. And then I'll have Derek jump in there on there still is an expectation on the second half for demand increases.

Speaker 5

Thanks, Omar. Thanks, Lois. I think you said it great, right? We've seen a return to seasonality that we haven't really skied since the sort of COVID recovery in the tanker markets in the Russian Ukrainian invasion. So some seasonality is not necessarily a bad thing for the markets, right?

Speaker 4

We see a softer

Speaker 5

summer in June July. But Omar, we've already seen increased OPEC plus crude exports for August, almost 2,000,000 barrels a day more than, say, compared to July. So that sort of push of crude supply should help the crude markets a great deal into the Q4. Couple that with some of the earlier comments on the order book, right? There's a V to deliver this year.

Speaker 5

There's 5 Versus that deliver next year. So do you see some upside in the winter months for the crude sector for sure.

Speaker 8

Got it. Thank you. That's helpful color, Seth. So couple of 1,000,000 barrels more here in August versus July should start to tighten the market. And I guess presumably then that means crude tankers will lead the charge potentially as we move forward?

Speaker 8

Well, they've got if we

Speaker 5

look at the Versus, Omar, they've got sort of the most room to come up, right? I mean, the MRs, 38 Q1, 35 Q2, mid-30s for Q3 booked so far, that's historically very, very strong for the MRs. We don't see anything softening that

Speaker 3

per se,

Speaker 5

but I think the crude will have to lead sort of the increase because they've got the most room to go up. Yes.

Speaker 8

Good point, obviously, mid-30s on the MRs and the seasonal soft period is obviously not too shabby.

Speaker 5

It's going to

Speaker 8

be tankers. The just Lois, you just mentioned in the appendix. I just wanted to ask the guidance on say the OpEx. I'm not sure if I'm looking at it the right way or calculating it correctly, but it feels like perhaps maybe the running costs on the ships are going to be maybe $500 a day lower, if not maybe $1,000 Does that sound right, at least in relation to say the first half? Do you think this is a new baseline?

Speaker 8

Or should we just kind of think about the average for the full year as more indicative?

Speaker 2

What I would say, Omar, is that I think that in the second half, we're very stable overall. And then I'd like to have Tom come back and kind of maybe look at the first half, the second half. But basically, we look at pretty stable OpEx overall and it is as if you're going to have nobody's taken a decrease, right? But we are looking at stable OpEx. So we'll come back just to bridge that with to get into those numbers little bit if that's okay with you.

Speaker 8

That's totally fair. I appreciate it. Thank you. I'll pass it over.

Speaker 2

Thank you, Orest.

Operator

And our next question comes from Sheriff Elmegawy from BTIG.

Speaker 9

Hi, good morning. Thanks for taking my question. In your prepared remarks, you highlighted your liquidity position, which is approaching about $700,000,000 by the end of August. That's a lot of dry powder and looking beyond the next 2 years when yards look backed up, I'm wondering if you see long term growth opportunities on the crude side, the product side or if you would consider something entirely different. I think you've already covered share repurchases, but something different given where asset prices for both are.

Speaker 2

Thank you, Sherry. So I'll flip it to Jeff in a moment. What we would say is that we took delivery of 3 newbies in 2023 dual fuel LNG on those. We are building 60s LR1s and we've been selling MRs that are older and bringing in the more modern ones. So we don't feel like there's a half to here.

Speaker 2

What we really like is having that balance sheet in beautiful shape where you do have that undrawn revolving credit facility there where if you do see an opportunity, we can take advantage of that. And we are in both crude and product. We don't we are not planning to take a sharp rate turn into another particular space at the moment. And then, Jeff, did you want to talk at all about our liquidity or Well, just to

Speaker 3

say that liquidity is optionality. So we're happy with the low levels of debt we've got at 14% as long as the value. If you want some debt, a lot of debt we have left is so called high quality debt that we would want to pay off, plus it provides a greater return on the equity. So what we've been able to do is establish a lot of liquidity through the undrawn revolver as you noticed, but also they have 34 unencumbered vessels. So that's another form of liquidity that provides optionality or whatever comes.

Speaker 3

But we're prepared for options when we see attractive transactions available to

Speaker 9

us. Got it. And then drilling a little deeper on Omar's question about the market. Last week Nigeria allowed the Dangote refinery to buy crude directly from NNPC, so it can ramp faster. And I'm curious how you see that affecting crude versus product flows and any color on how that refinery has already impacted the Atlantic trade would be helpful.

Speaker 2

So Dangote is putting out some diesel. It's supposed to have a total of 600 1,000 barrels a day of capacity, which I do believe one day they will utilize. But I think we're looking more at around 100,000 barrels a day of where you're seeing some exports coming out and a lot of that's been diesel. And you have seen an effect on the worldwide diesel margins, right, that had gone down and have now bounced back a little bit. So we've also seen in the market some of the imported Dangote crude, which they will continue to do.

Speaker 2

I think it will be around 25% ish that they plan to take from Nigeria. So I think that it's early days in Dan Golgi and that's an evolving situation. Derek, any more flavor on that?

Speaker 5

Not particularly. I mean, we've seen a good deal of imported crude into Dango's Day as the facility was getting up and running. How long we expect that to continue was always debatable being Nigeria as a OPEC producing exporting nation. So we're happy to see it when we have it. Don't expect that to drop off to 0 anytime soon.

Speaker 5

And I think, Shorik, you've got the right questions in terms of what that will do to clean product trades in the Atlantic Basin. And I think we still need a little bit of time to tell.

Speaker 9

Hey, that's great color. Thanks, everyone.

Speaker 2

Thank

Operator

you. And our next question comes from Liam Burke from B. Riley.

Speaker 6

Good morning, Lois. Good morning, Jeff.

Speaker 2

Good morning.

Speaker 6

Lois, you added more MRs into the time charter market. Are you seeing increased step up in demand from the shippers for to secure tonnage on a longer term basis?

Speaker 2

Liam, we've got a total of 15 vessels on time charter and we look we try to look for something that's going to lock in more than you're in very strong spot markets, right? So we look for a multi year period And when Derek can lock it in above long term averages, then we go ahead and do that. We have about 20% of the fleet on time charter right now. So, we've got some strong customer relationships and when they're looking to add in then we'll do that. Right now, we're in a little bit of a steady state, I think.

Speaker 2

And if we see something, we'll go ahead and lock it in. Otherwise, you're in the summer and it's even August. So, I'm thinking everybody comes back in Q later in Q3 and gets to work on blocking in their book.

Speaker 6

Fair enough. Thank you. And on the MRs, you've got you still have a few older ones in the fleet. How are you balancing historically elevated rates with potentially divesting some of these older MRs and lowering the age of the fleet?

Speaker 2

Yes, Liam. So if you look at, we've been steadily, we call it pruning, selling 4 or 5 a year. Now you saw us bring in some more modern assets. And then every one of these vessels that's in the spot market over the last year has brought in $7,000,000 over its breakeven level. So it's pretty stunning all around on the MR.

Speaker 2

So the earnings potential is very strong. We divest some of the older, we bring in more modern. We feel pretty steady on

Speaker 6

it. Great. Thanks, Lois.

Speaker 2

Thank you, Liam.

Speaker 3

Thanks, Liam.

Operator

And that was our final question. I will hand back over to the CEO, Louisa Berkey for any final remarks.

Speaker 2

We just want to thank everyone for joining us for really 8th quarter of really strong returns to shareholders and we're looking forward to getting back together next quarter. So thank you very much. Enjoy the summer.

Operator

This does conclude today's conference call. Thank you for joining. You may now disconnect from the call.

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