International Seaways, Inc. International Seaways, Inc. Second Quarter 2017 Earnings Presentation August 9, 2017

Transcription

1 1 Second Quarter 2017 Earnings Presentation August 9, 2017

2 Disclaimer Forward-Looking Statements During the course of this presentation, the Company ( (INSW)) may make forward-looking statements or provide forward-looking information. All statements other than statements of historical facts should be considered forward-looking statements. Some of these statements include words such as outlook, believe, expect, potential, continue, may, will, should, could, seek, predict, intend, plan, estimate, anticipate, target, project, forecast, shall, contemplate or the negative version of those words or other comparable words. Although they reflect INSW s current expectations, these statements are not guarantees of future performance, but involve a number of risks, uncertainties, and assumptions which are difficult to predict. Some of the factors that may cause actual outcomes and results to differ materially from those expressed in, or implied by, the forward-looking statements include, but are not necessarily limited to, general economic conditions, competitive pressures, the nature of the Company s services and their price movements, and the ability to retain key employees. The Company does not undertake to update any forward-looking statements as a result of future developments, new information or otherwise. Non-GAAP Financial Measures Included in this presentation are certain non-gaap financial measures, including Time Charter Equivalent ( TCE ) revenue, EBITDA, Adjusted EBITDA, and total leverage ratios, designed to complement the financial information presented in accordance with generally accepted accounting principles in the United States of America because management believes such measures are useful to investors. TCE revenues, which represents shipping revenues less voyage expenses, is a measure to compare revenue generated from a voyage charter to revenue generated from a time charter. EBITDA represents net (loss)/income before interest expense, income taxes and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted for the impact of certain items that we do not consider indicative of our ongoing operating performance. Total leverage ratios are calculated as total debt divided by Adjusted EBITDA. We present non-gaap measures when we believe that the additional information is useful and meaningful to investors. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-gaap financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See Appendix for a reconciliation of certain non-gaap measures to the comparable GAAP measures. This presentation also contains estimates and other information concerning our industry that are based on industry publications, surveys and forecasts. This information involves a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of the information. Additional Information You should read the Company s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, and the other documents the Company has filed with the SEC for additional information regarding the Company, its operations and the risks and uncertainties it faces. You may obtain these documents for free by visiting EDGAR on the SEC Web site at or from the Company s website at 2

3 Business Review Lois K. Zabrocky, President & CEO

4 Second Quarter 2017 Highlights & Recent Accomplishments Successfully Completed Refinancing o $500 million Term Loan B and $50 million Revolver o Upsized Term Loan to $550 million in July o Extended maturity to June 2022 and Dec 2021 respectively o Enhanced financial flexibility Acted on Fleet Growth and Renewal o Opportunity for renewing fleet at low point in cycle o Acquisition of two Suezmax tanker newbuildings which were delivered at the end of July o High quality Korean-built ships at attractive prices o Entered agreement to sell Overseas Petromar, a 2001 built handy tanker, expected to close mid-august Increasing Contracted Cash Flows o Announced execution of five year contracts for the two FSO Joint Venture vessels o Contracts with North Oil Company (NOC), a joint venture between Total and Qatar Petroleum. NOC is the operator of the Al Shaheen oil field o Expected to generate in excess of $180 million of EBITDA for INSW over the five year period Solid Performance in a Weak Market o 2017 Q2 results: o o o TCE revenues of $69.3 million Adjusted EBITDA of $31.8 million Net loss of $11.6 million which includes $15.0 million of one-time costs associated with the refinancing 4

5 Diversified Fleet - Positioned to Optimize Revenue Panamax / LR1 16% INSW Conventional Tanker Fleet 1 By DWT By Vessel Class MR 10% Aframax / LR2 16% Suez 6% ULCC/VLCC 52% MR 39% Panamax / LR1 23% ULCC/VLCC 18% Suez 4% Aframax / LR2 16% INSW Average Age: 11.4 Years Vessel Type Size (dwt) Owned Source: commercial pool websites 1 Represents the number of vessels in each class as a percentage of the fleet, as of June 30, Does not include JV vessels. 2 Does not include one vessel operating on Commercial Management Agreement (CMA) 3 TC contracts currently under negotiation Owned DWT Chartered In Total INSW Fleet TC & BB Out 2 VLCC / ULCC 300, , ,875, Suezmax 159, , Aframax / LR2 112, , , Panamax / LR1 70,000 75, , MR 36,000 51, , Total Crude & Product Fleet LNG 216,000 m 3 4 N/A 4 FSO 432, , ,916 2 Total JV Fleet 6 6 5

6 02/15 05/15 08/15 11/15 02/16 05/16 08/16 11/16 02/17 Crude Exports (000 b/d) Product Exports (000 b/d) Tanker Demand Global Oil Demand Remains Strong Chinese crude oil imports at record levels IEA 2017 global demand growth forecast revised upward to 1.4 million barrels/day OECD stocks trending downward; 6 million barrel reduction from April to May US crude and product stockpiles lowest since January Record Chinese Crude Oil Imports OPEC is Struggling to Limit Output Libya and Nigeria, exempt from the OPEC cutbacks, both increasing output US crude oil exports growing Brazilian exports forecasted to reach 1 million b/d this year from 798,000 b/d in 2016 Longer ton miles compared with Arabian Gulf Increased Demand for Refined Products Mexico refinery fire driving 40% national utilization rate Venezuela refinery utilization less than 50% US Gulf exporting refined products to make up the shortfalls Tankers await impact from refinery fire at Shell Pernis, Netherlands Source: True North Chartering US Exports Growing 1,000 5, , , , ,000 US Crude Oil Exports US Product Exports Source: EIA. Excludes exports to Canada 6

7 Tanker Supply Orderbook Update MR orderbook under 9%, the lowest since January 2000; supports earlier upward pressure on clean product rates Since the end of May, only 5 new VLCC orders placed; orderbook stands at 12.6% Shipyard Capacity Declining All shipbuilding sectors have seen a drastic decline in capacity since the peak in shipyards have at least one vessel on order; half have not won a new contract since the beginning of 2016 Source: Clarksons Shipyard Capacity Down from Peak Ageing Fleet Balancing Newbuildings Ageing Global Fleet 9% of VLCCs currently over 17.5 years old Increases to 12%, 15%, 18% by Jan 2018/19/20 Total VLCC orderbook: 28 million DWT against 27 million DWT ships hitting 17.5 by end 2019 Capital improvement requirements (e.g. Ballast Water Treatment systems) likely to support further market exits Source: Clarksons 7

8 Financial Review Jeffrey D. Pribor, SVP & CFO

9 Financial Summary TCE Revenue ($ millions) Quarterly TCE Revenue 1 $101 Lightering Revenue Contribution (Included in Crude Tanker TCE Revenue) $67 $69 $46 $34 $ Q16 Product Tankers 2Q17 Crude Tankers 2Q16 2Q17 Number of Lighterings Q Earnings Update $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $26,657 $19,000 $14,000 SPOT $12,605 $11,000 $11,903$11,000 $10,697$11,000 ULCC & VLCC Suezmax Aframax/LR2 Panamax/LR1 MR Q2-17 Actual Q to-date SPOT + TC Remaining Q3-17 Open Days Available Q3-17 % Revenue Days Booked todate Q3-17 Blended TC/Spot TCE Booked to-date Q3-17 Estimated Drydock Days ULCC & VLCC Suezmax Aframax / LR2 Panamax / LR1 MR % 45% 53% 72% 46% $20,000 $14,000 $11,000 $12,000 $11, See Appendix for TCE Revenue reconciliation. 9

10 Financial Summary Adjusted EBITDA 1 ($ millions) Quarterly Adjusted EBITDA Lightering EBITDA (Included in adjusted EBITDA) EBITDA: $2.3 $62 $32 EBITDA: $ G&A 0.3 Charter Hire 1.9 OPEX G&A 0.3 Charter Hire 3.7 OPEX 1.8 2Q16 2Q17 2Q 2016 Revenue 2Q 2016 Expenses 2Q 2017 Revenue 2Q 2017 Expenses 1 See Appendix for EBITDA reconciliation. 10

11 Breakeven Rates by Sector Basis LTM 2Q 2017 Actuals Lean and Scalable Model Low Cash Breakevens Low TCE breakeven allows INSW to navigate low points in the tanker cycle while providing significant operating leverage in rising markets $18,000 $16,800 $16,700 $16,000 $14,000 $12,000 $13,600 $11,500 $14,500 $10,000 $8,000 $6,000 $4,000 $2,000 $0 VLCC Aframax Panamax MR INSW Vessel Expenses (Net of One-Off Items) G&A (Excluding non-cash items) DDK & CAPEX Debt Service (Excluding deferred financing costs) INSW Daily OPEX excludes DDK deviation bunkers, insurance claims and one-off expenses Only includes owned vessels. Three bareboat-in vessels have charter hire and OPEX expenses of approx. $13,300 per day Breakevens basis Revenue Days 11

12 Financial Summary Change in Cash Balance ($ millions) 12

13 Strong Financial Position Balance Sheet Strong balance sheet and low breakevens protect INSW during low portions of tanker cycle and provide opportunity for growth and returning cash Assets FSO Joint Venture of $260 million LNG Joint Venture of $88 million June 30, 2017 ($ Million) Liabilities Cash and Equivalents $121 Current Liabilities (including $52 current portion of long term debt) Other Current Assets $77 Long Term Debt $453 Other Long Term Liabilities $5 Total Current Assets $198 Total Liabilities $510 Vessels $1,130 Equity Other Long Term Assets $373 Total Equity $1,191 Total Assets $1,701 Total Liabilities and Equity $1,701 INSW Book Values of JVs as of June 30, 2017 Refinanced INSW Debt Closing date of refinance: 6/22/17 Term Loan B Original Amount: $500 million Maturity: June 2022 Amortization: 2.5% in year 1, 5.0% thereafter Rate: LIBOR +550 bps Covenant: Net LTV < 65% LTM EBITDA 1 : $153 million Debt to LTM EBITDA: 3.3x Net Debt to LTM EBITDA: 2.5x Debt to Total Capitalization: 30% Net Loan to Asset Value 2 : 36% 1 Includes Equity Income from JVs 2 Conventional fleet and FSO JV: excludes value of LNG JV 13

14 Chartered Out and Chartered In Fleet 5 Chartered-Out Vessels as of June 30 1 Q3 Q4 Days Fixed Blended Rate $19,724 $18,030 6 Panamax vessels are currently in negotiations for extensions at market rates, and 2 Panamax time charters end in Q3. At the conclusion of these deals, INSW will have a total of 9 vessels on time charter Chartered-In Hire Details Time Charter-Ins: 4 MR vessels that redeliver in Q2-Q Charter Hire expense for balance of 2017: $9.9M Bareboat-Ins: 3 MR vessels that redeliver through Q Charter Hire expense for balance of 2017: $3.4M Lightering: Charter hire expense is variable $3.7M in Q vs $1.9M in Q Includes 2 VLCCs and 2 Panamaxes on time charter and 1 MR on bareboat charter 14

15 Summary Lois K. Zabrocky, President & CEO

16 Summary Strong Financial Position Strong balance sheet with low leverage and low cash breakevens Successfully executed refinancing Completed five year extensions on FSO joint venture contracts Quality Fleet Positioned to Optimize Revenue 57 vessel fleet with balanced mix of contracted cash flows and spot market upside Purchased two Suezmax tanker newbuildings Pruning older fleet opportunistically Lean & Scalable Model Best-in-class outsourced technical and commercial management Model allows for both low cost and scalability $9.8 million YTD cash G&A well below target of $24 million annually Capital Allocation Strategy Management guided by rigorous capital allocation strategy, including returning cash to shareholders via a share repurchase program, purchasing modern vessels, and selling older vessels 16

17 Appendix

18 TCE Revenue Reconciliation ($ Thousands) 2Q17 2Q16 Time charter equivalent revenues 69, ,955 Add: Voyage expenses 2,677 2,107 Shipping revenues 71, ,062

19 Adjusted EBITDA Reconciliation ($ Thousands) All INSW 2Q17 2Q16 Net (loss)/income (11,619) 30,506 Income tax provision Interest expense 9,076 9,690 Depreciation and amortization 19,099 20,025 EBITDA 16,560 60,394 Third-party debt modification fees 7,939 - Separation and transition costs 296 1,130 Write-off of deferred financing costs 7, Reorganization items, net Adjusted EBITDA 31,815 62,335 Lightering 2Q17 2Q16 Net income 2, Depreciation and amortization EBITDA 2,