International Seaways, Inc. · NYSE:INSW
International Seaways — Investor Day (December 2018)
54 slides from International Seaways's investor day presentation, Dec 12, 2018
Slide 1: Investor and Analyst Day December 12, 2018
International Seaways, Inc. 1 International Seaways, Inc. Investor and Analyst Day December 12, 2018
Slide 2: Disclaimer
International Seaways, Inc. Disclaimer Forward - Looking Statements During the course of this presentation, the Company (International Seaways, Inc. (INSW)) may make forward - looking statements or provide forward - looking information. All statements other than statements of historical facts should
Slide 3: Agenda
International Seaways, Inc. Agenda 3 Introduction to International Seaways and Investment Highlights Commercial Update Operations Update Financial Overview Environmental, Social, Governance (ESG) Update Key Takeaways Q & A
Slide 4: Presenters
International Seaways, Inc. Presenters 4 Lois K. Zabrocky President & CEO Jeffrey D. Pribor Chief Financial Officer
Slide 5: Introduction to International Seaways – Lois Zabrocky
Introduction to International Seaways – Lois Zabrocky
Slide 6: Overview
International Seaways, Inc. Overview 6 1 Represents the number of vessels in each class as a percentage of the fleet, as of December 7, 2018. Does not include JV ves sel s. Includes 1 MR in the process of being sold Leading diversified tanker owner with significant presence in crude, product and g
Slide 7: Key Takeaways
International Seaways, Inc. Macro tanker environment looking favorable for 2019 / 2020 INSW has begun to book significantly higher rates Well positioned to further capitalize on a developing tanker market recovery • High quality fleet, of which a significant portion acquired at lowest point in
Slide 8: • Our FSO and LNG JVs provide stable cash flow • Strategic foothold in
International Seaways, Inc. • Our FSO and LNG JVs provide stable cash flow • Strategic foothold in offshore and LNG sectors • Significant value - $8.72 book value per share • $20,200 Fleetwide Cash Breakeven Q3 2018 • Effectively $18,200/day when factoring in JV contributions • Competitive OPEX and
Slide 9: Tanker Markets are Strengthening
International Seaways, Inc. Tanker Markets are Strengthening Tanker Rates Since October Have Recovered from Multi - Year Lows 9 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 VLCC Suezmax Aframax Panamax MR Quarterly Average TCE per day Oil demand remains stron
Slide 10: Sizable, Diverse Tanker Fleet
International Seaways, Inc. 10 Sizable, Diverse Tanker Fleet VLCC (330 meters) Suezmax (275 meters) Aframax/LR2 (250 meters) Panamax/LR1 (230 meters) MR (180 meters) Capacity Our Fleet 2 million barrels 300,000 DWT 13 1 million barrels 160,000 DWT 2 750,000 barrels 110,000 DWT 6 500,000 barrels 70,0
Slide 11: Conventional Tanker Fleet Development Since Inception
International Seaways, Inc. 11 1 As of December 7, 2018. Includes Chartered - in Vessels. KDWT = thousand deadweight tons. Includes 1 MR in the process of bein g sold Conventional Tanker Fleet Development Since Inception Total KDWT Age Total KDWT Age VLCC 9 2,876 12.0 13 3,950 7.5 Suezmax --- --- --
Slide 12: Acquisitions of Modern Large Crude Ships
International Seaways, Inc. 12 ▪ Acquired Modern, Large Crude Ships o Acquired 6 VLCCs from Euronav NV for $434 million in June 2018 o 300,000 DWT VLCCs constructed at Shanghai Waigaoqiao Shipbuilding Co. o 5 built in 2016 and 1 built in 2015 o Acquired another VLCC (Seaways Raffles) in 2017 o Acqui
Slide 13: Disciplined Asset Allocation
International Seaways, Inc. 13 ▪ International Seaways Has Invested $600 million at the bottom of the cycle o Two Suezmax newbuilding resales purchased for $58 million each o 2010 - built VLCC purchased for $53 million o Six VLCCs built 2016 and 2015 purchased for $434 million total o Assets have ma
Slide 14: Asset Management – Opportunistic Sales
International Seaways, Inc. 14 Asset Management – Opportunistic Sales • By selling ships ahead of special surveys / drydocks, reduced cash outlay by approximately $17 million, bolstering our cash position • Sales proceeds deployed toward purchasing assets and value - added capital improvements such
Slide 15: IMO 2020 Scrubber Installation
International Seaways, Inc. 15 ▪ Global 0.5% Sulfur Emissions Cap Enters Into Force January 1, 2020 o Seaways installing scrubbers on its 10 modern VLCCs o Represents approximately 40% of our total fleet fuel consumption o Prudent portfolio approach – balance of fleet to use compliant fuel o At leas
Slide 16: FSO Joint Venture
International Seaways, Inc. Pro v ides global di v ersific at i on w ith expande d customer base • New five - year contracts commenced in the third quarter of 2017 and are expected to generate in excess of $180 million of EBITDA over the five - year term to International Seaways based on ownership p
Slide 17: LNG Joint Venture
International Seaways, Inc. Pro v ides global di v ersific at i on w ith expande d customer base • The JV anticipates generating $3.5 million in cash on average for our share annually until refinancing debt in 2022/2023 • Distributions expected to rise assuming debt is refinanced prior to 2022/2023
Slide 18: Lightering Business
International Seaways, Inc. • Asset - light service business based in Houston • Provides STS coverage in US Gulf, US Pacific, Grand Bahama and Panama • INSW market share of the USG offshore lightering market is approximately 30 - 35% • Lightering unit generated EBITDA of $3.8 million January - Octob
Slide 19: Experienced INSW Management Team
International Seaways, Inc. Experienced INSW Management Team Lois K. Zabrocky President & CEO • Most recently served as President for OSG’S International Flag strategic business unit, International Seaways’ predecessor company • Joined OSG in 1992, previously held positions as Head of International
Slide 20: Strong, Transparent Corporate Governance
International Seaways, Inc. Strong, Transparent Corporate Governance Douglas D. Wheat Chairman of the Board • Managing Partner of Wheat Investments Timothy J. Bernlohr Director • Founder and Managing Member of TJB Management Consulting, LLC Ian T. Blackley Director • Director, GARD P&I Club. Former
Slide 21: Commercial Update
Commercial Update
Slide 22: Commercial Pools
International Seaways, Inc. 22 Pools VLCC Suezmax Aframax Aframax/LR2 Panamax / LR1 MR Total # of INSW Vessels 12 2 5 1 5 11 36 1 # of Total Vessels 60 23 43 12 34 18 190 Other Participants Rationale for Participation Largest VLCC pool and provides best access to China and Caribbean VLCC - style mar
Slide 23: Fleet Deployment Strategy Beats Clarksons Spot Averages
International Seaways, Inc. -$1,000 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 VLCC Suezmax Aframax Panamax/LR1 MR TCE Differential per day 2017Q4 2018Q1 2018Q2 2018Q3 Source: Clarksons: Average 2010 - built VLCC earnings, average 2010 - built Suezmax earnings, 2000 - built Af
Slide 24: Oil Demand is Increasing
International Seaways, Inc. Oil Demand is Increasing • IEA expects to reach over 100 million b/d by year end and growth of 1.4 million b/d for 2019 • Around 60% of oil demand is supplied by tankers; nearly all incremental demand is on tankers • Lower pricing of crude has reduced fears that oil price
Slide 25: Oil Production is Increasing
International Seaways, Inc. Oil Production is Increasing • OPEC and Russia have announced a cut totaling 1.2 million b/d for six months starting January, although the cut will be from the peak of October production • Since bottoming out in the second quarter of 2018 at 32.2 million b/d, OPEC increas
Slide 26: US Crude Exports are Ramping Up
International Seaways, Inc. US Crude Exports are Ramping Up • US Crude exports averaged nearly 2 million b/d in 2018, the equivalent of one VLCC per day • Every 1 million b/d in US exports to Far East requires approximately 60 - 65 VLCCs • China did not import any oil from the US in August or Septem
Slide 27: VLCC Growth Tempered in 2019 and 2020
International Seaways, Inc. VLCC Growth Tempered in 2019 and 2020 Orderbook Update • Q3 had zero VLCC newbuilding orders • 2018 has seen a net growth of only 4 VLCCs YTD due to scrapping (approximately half a percent) • 2019 VLCC orderbook is large but is likely to be tempered by further scrapping a
Slide 28: Tanker Markets Are Finally Turning
International Seaways, Inc. 28 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 VLCC Suezmax Aframax Panamax MR Clarksons Routes: VLCC – TD3 (AG - Japan); Suezmax – TD 5 (WAF - USAC); Aframax (Average); Panamax (Average); MR (Average) Tanker Markets Are Finally Turning After 18 Months of Very Low
Slide 29: IMO 2020 Impact on Tanker Markets
International Seaways, Inc. Increased Crude Runs • Need to replace approximately 3 million barrels HSFO with 0.5% compliant fuel will increase refinery runs • Estimates as high as 1.8 million bpd increase in runs during first half of 2020 Adjusting Crude Slates • Crude slates will adjust with sweete
Slide 30: Operations Update
Operations Update
Slide 31: Seafarers and Culture of Compliance
International Seaways, Inc. 31 • abcd 1,500+ Seafarers 99% Retention Rate 10 Year Average Length of Service 14 Years Experience Masters 11.5 Years Experience Chief Engineers 99 Seafarers 20+ years with Company 20 Senior Officers started as Cadets 54 Cadets today Dedicated well trained employees Cult
Slide 32: Emissions Regulation Timeline
International Seaways, Inc. 32 1997 • MARPOL Annex VI adopted • Emissions standards established 2005 • MARPOL Annex VI comes into effect • Sulfur levels for marine fuels <4.5% 2008 • IMO sets timeline for sulfur content reduction in marine fuels 2010 • Sulfur content in ECA Zones reduced to 1.5% 201
Slide 33: IMO 2020 Preparation
International Seaways, Inc. 33 Rest of Fleet • Prepare for multiple fuels • Risk assessment • Implementation plans • Clean tanks • Adjust, overhaul machinery • Additives to improve the fuel properties • Contingency plans Scrubbers • 10 Modern VLCCs • Experienced Partners • Clean Marine of Norway • H
Slide 34: Scrubber Design
International Seaways, Inc. • Superior Grades of Material • Zero Back Pressure • Engines, Boilers able to work within original design parameters • Safe to start and stop engines • Compliance Measures • Redundant gas analyzers • Washwater monitoring • Continuous logging 17m, 56ft Tall 8m, 26ft Diamet
Slide 35: IMO 2020 and IMO 2050
International Seaways, Inc. 35 • Shipping produces about 3% of the global CO 2 and GHG emissions annually • Each year, ships consume ~430 million tons of fuel and produce 1.21 billion tons of CO 2 • Preparing for 2020 and beyond • Every ton of fuel we do not burn reduces our CO 2 output by three ton
Slide 36: Get to Green
International Seaways, Inc. 36 • Partnered with TRES Solutions for • Performance Optimization • Virtual twins • Onboard intense data gathering • Advanced validation and analytics • Performance analysis • Feedback and learning Get to Green Get to Green
Slide 37: Seaways Redwood Voyage Analysis
International Seaways, Inc. • 43 day voyage • 24 tons excess FO consumption • $12,000 or $279/day 129 tons of CO 2 37 Seaways Redwood Voyage Analysis
Slide 38: Seaways Montauk Onboard Daily Feedback
International Seaways, Inc. 38 Seaways Montauk Onboard Daily Feedback
Slide 39: Seaways Montauk Onboard Feedback
International Seaways, Inc. Comparison to Twin Comparison to Twin Get to Green Get to Green 39 Seaways Montauk Onboard Feedback
Slide 40: Seaways Montauk Shoreside Analysis
International Seaways, Inc. Performance over Time Sources of Excess Emissions Comparison to Peers Specific timely feedback during all aspects of operations 40 Seaways Montauk Shoreside Analysis
Slide 41: Seaways Operations
International Seaways, Inc. Safe Efficient Reliable Dedicated Focused Compliant and Prepared Seaways Operations
Slide 42: Financial Overview – Jeff Pribor
Financial Overview – Jeff Pribor
Slide 43: INSW Financial Highlights
International Seaways, Inc. 43 • Moderate amortization of approx. 6% annually on conventional fleet • Long maturities, earliest in 2022; Sinosure maturity in 2027/2028 • Protected against rising rates – 83% fixed or hedged at end October Appropriate Financial Leverage Diverse Capital Sources Attract
Slide 44: Strong balance sheet protects INSW
International Seaways, Inc. 44 Strong balance sheet protects INSW during low portions of tanker cycle Net Debt to Asset Value 2 : 55% Net Debt to Capital: 42% INSW Debt 1 Includes deferred financing costs. Excludes debt at the FSO and LNG JV level 2 Conventional fleet and FSO JV: excludes value of L
Slide 45: Cash Breakevens
International Seaways, Inc. • INSW Daily OPEX excludes DDK deviation bunkers, insurance claims and one - off expenses • Vessels that have been sold are excluded • Only includes owned vessels. Two bareboat - in Aframaxes vessels have charter hire and OPEX expenses of approx. $15,700 per day • Effect
Slide 46: Financial Summary – Q3 & Q4
International Seaways, Inc. 46 1 MR TC rate is for a bareboat charter, ship was sold on December 7, 2018 2 December results as of December 7, 2018 Financial Summary – Q3 & Q4 Earnings Update Q4 TCE bookings to date at a significant premium to Q3 rates Dec 2018 Overall Spot Overall % Fixed Spot % Fix
Slide 47: Operating Leverage
International Seaways, Inc. 47 Note: 12 Year Average, 2015 Average and 2008 Average TCE are Clarksons Average rates for each ship class. EBITDA/EPS calculations include 5 Panamax on short term charters and exclude 1 MR in the process of being sold. Circled figu res are incremental from annualized 20
Slide 48: Environmental, Social, Governance Update
Environmental, Social, Governance Update
Slide 49: Environmental, Social, Governance (ESG) Update
International Seaways, Inc. 49 • INSW is committed to industry leading Environmental, Social and Governance practices as part of our core culture • Key pillars of this commitment are as follows: Environmental • Commitment to minimizing risk of marine and atmospheric pollution from spills and emissio
Slide 50: ESG Update: Governance
International Seaways, Inc. 50 Governance • Six members of Board of Directors fully independent • Split non - Executive Chairman and CEO • Commitment to diversity exemplified by two female Directors, one of whom is CEO • Shareholder representation on Board • Board includes former CEOs, former CFOs,
Slide 51: Key Takeaways – Lois Zabrocky
Key Takeaways – Lois Zabrocky
Slide 52: Key Takeaways
International Seaways, Inc. Macro tanker environment looking favorable for 2019 / 2020 INSW has begun to book significantly higher rates Well positioned to further capitalize on a developing tanker market recovery • High quality fleet, of which a significant portion acquired at lowest point in
Slide 53: What the Analysts are Saying
International Seaways, Inc. 53 What the Analysts are Saying – Average Price Target Over $27 Arctic Securities, October 26, 2018 • “INSW has wasted no time during the tanker market downturn, and has been actively renewing its fleet through acquisitions of modern vessels and offloading of older tonn
Slide 54: International
International Seaways, Inc.