International Seaways, Inc. · NYSE:INSW
International Seaways — Investor Day (December 2016)
45 slides from International Seaways's investor day presentation, Dec 6, 2016
Slide 1: Investor Day December 6th, 2016
International Seaways, Inc. 1 International Seaways, Inc. Investor Day December 6 th , 2016
Slide 2: Disclaimer
International Seaways, Inc. Disclaimer Fo r w ar d - Loo ki n g Sta t e m e nt s • Dur ing the course of th i s presentation, the Co m pany ( International Seaways, Inc . (INSW)) m ay m a k e f or w ard - loo k ing state m ents or prov ide f or w ard - loo k ing in f or m at i on. All state m ents o
Slide 3: Today's Presenters
International Seaways, Inc. Today’s Presenters Lois K. Zabrocky President & CEO International Seaways, Inc. Jeffrey D. Pribor Chief Financial Officer International Seaways, Inc. ▪ Most recently served as President for OSG’S International Flag strategic business unit, International Seaways’ predecess
Slide 4: Company Overview
Company Overview Intemational Seaways, Inc.
Slide 5: Two Industry-Leading Public Companies
International Seaways, Inc. Two Industry - Leading Public Companies Enhanced Strategic Focus, Simplified Operating Structures, Strong Financial Profiles OVERSEAS SHIPHOLDING GROUP 5
Slide 6: INSW Overview
International Seaways, Inc. • x Favorable time to invest in tanker industry x Strong balance sheet - low leverage provides protection and opportunities x Strong and transparent corporate governance x Large pure play international tanker company – 55 vessels; 6.5M DWT 1 x Balanced commercial strategy
Slide 7: INSW Overview
International Seaways, Inc. 7 INSW Overview Deleveraged Balance Sheet Operating Leverage Low Breakeven Fixed Cost Coverage Capital Allocation Policy ▪ 39 Vessels in pools provide upside in a rising market ▪ Every $5,000 TCE above $14,300 breakeven provides $68.7M in EBITDA ▪ Rigorous policies around
Slide 8: Seaways Spin-Off
International Seaways, Inc. International Seaways Spin - Off 8 ▪ On Distribution date – November 30, 2016 - Holders of OSG common stock as of record date received 0.3333 shares of INSW stock for each OSG share - Holders of OSG warrants received 0.063327 share of INSW stock per warrant ▪ Record date
Slide 9: 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 10: 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 ▪ President, CEO and Director of O
Slide 11: Recent Accomplishments
International Seaways, Inc. ▪ In 2014, adopted an outsourced technical and commercial operational model reducing costs and enhancing flexibility while retaining best in class quality Recent Accomplishments 11 INSW Spin - Off Significant Cash Generation G&A Reductions Adopted Outsourcing Model ▪ Rigo
Slide 12: Investment Highlights
> bbc Investment Highlights Intemational Seaways, Inc.
Slide 13: Investment Highlights - A Differentiated International Tanker Opportunity
International Seaways, Inc. Investment Highlights - A Differentiated International Tanker Opportunity 13 Positioned to Optimize Revenue ● 55 vessel fleet with balanced mix of contracted cash flows and spot market upside ● Contracted revenue from 10 (1) time charters and JV cash flow cover fixed cost
Slide 14: Capital Allocation Strategy
International Seaways, Inc. Capital Allocation Strategy 14 Policy/Goals Balance Sheet Liquidity Consolidation Timing CAPEX ▪ Currently $160M ▪ Over three years of fixed cost coverage ▪ 1% annual amortizing debt until bullet maturity 3Q 2019 ▪ No newbuilding commitments ▪ No external funding requirem
Slide 15: Strong Financial Position
International Seaways, Inc. Strong Financial Position ▪ 3Q 2016 Debt of $440M and $110M Cash. Net Debt $330M - 26% Debt to Total Book Capital - Less than 40% Net Debt to Market Value of Vessels - Debt to EBITDA of 1.8x for LTM 3Q 2016 ▪ Value of JVs not included in the above leverage figures ▪ $110M
Slide 16: Lean and Scalable Model - Significantly Reduced G&A
International Seaways, Inc. $38.7 $33.2 $25.0 $24.0 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 2015 2016 (annualized) 2017 Target (with Transition Costs) 2017 Target Run Rate $M Lean and Scalable Model – Significantly Reduced G&A 16 ▪ Outsourced model allows for a lean organizational
Slide 17: Lean and Scalable Model - OPEX
International Seaways, Inc. Lean and Scalable Model – OPEX 17 15 ▪ Highly competitive OPEX numbers ▪ Assets maintained to top quality/vetting standards by INSW specific criteria ▪ INSW 3Q 2016 YTD Average Daily OPEX for owned and bareboat - in vessels is approx. $8,000 INSW Daily OPEX excludes DDK d
Slide 18: Lean and Scalable Model - Operations KPI Benchmark
International Seaways, Inc. Confidential Lean and Scalable Model – Operations KPI Benchmark 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Intertanko Industry Average INSW 2. Certification and Docum
Slide 19: Lean and Scalable Model - Experience Drives Performance
International Seaways, Inc. Lean and Scalable Model – Experience Drives Performance 19 Pro v ides global di v ersific at i on w ith expande d customer base Experienced crews trained in best practices drive operational success ▪ Our customers through Oil Companies International Marine Forum (OCIMF) i
Slide 20: Lean and Scalable Model - Low Breakevens
International Seaways, Inc. $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 VLCC Aframax Panamax MR INSW Vessel Expenses DDK & CAPEX G&A Debt Service Lean and Scalable Model – Low Breakevens 20 $17,000 $13,400 $14,000 $12,900 $14,300 INSW Daily OPEX excludes DDK deviation bunk
Slide 21: Positioned to Optimize Revenue - Diversified Fleet
International Seaways, Inc. Positioned to Optimize Revenue – Diversified Fleet S our c e : c o mm er cial poo l w eb sit e s 1 Represents the number of vessels in each class as a percentage of the International Flag fleet, as of September 30, 2016. Do e s not include JV vessels. 2 Does not include t
Slide 22: Positioned to Optimize Revenue - Balanced Revenue Mix
International Seaways, Inc. Positioned to Optimize Revenue – Balanced Revenue Mix 22 ▪ Sufficient scale allows optimization strategies to maximize Time Charter Equivalent revenue ▪ Builds economies of scale to drive down cost ▪ Creates flexibility for INSW to scale up or down without adding overhead
Slide 23: Positioned to Optimize Revenue - Upside from Pool Employment
International Seaways, Inc. Positioned to Optimize Revenue – Upside from Pool Employment 23 Pools VLCC Aframax Aframax /LR2 Panamax / LR1 MR MR Total # of INSW Vessels 5 7 1 6 2 14 35 2 # of Total Vessels 36 1 42 18 29 67 28 220 Other Participants Rationale for Participation Largest VLCC pool and pr
Slide 24: Positioned to Optimize Revenue - Vessels Have Outperformed Markets
International Seaways, Inc. $10,000 $15,000 $20,000 $25,000 $30,000 3Q 2016 YTD INSW Spot Rate TD9* Clarksons Average c. 2010-built $5,000 $10,000 $15,000 3Q 2016 YTD INSW Spot Rate TC2/TC14* Clarksons Avg MR Earnings $10,000 $15,000 $20,000 $25,000 3Q 2016 YTD INSW Spot Rate TD21** Clarksons Avg Pa
Slide 25: Positioned to Optimize Revenue - Contracted Cash from FSO JV
International Seaways, Inc. Positioned to Optimize Revenue – Contracted Cash from FSO JV 25 Pro v ides global di v ersific at i on w ith expande d customer base 50% owner of a Joint Venture with Euronav that owns two Floating Storage and Offloading (FSO) units with multi year contracts to process oi
Slide 26: LNG Joint Venture
International Seaways, Inc. 26 Pro v ides global di v ersific at i on w ith expande d customer base 49.9% owner of a Joint Venture with Nakilat that owns four LNG carriers on long term charter for export of LNG from Qatar ● JV has paid $5M in cash distributions to INSW on average from 2011 to 2015 a
Slide 27: Positioned to Optimize Revenue - Cash from Lightering
International Seaways, Inc. 27 ▪ Asset - light service business based in Houston ▪ Provides STS coverage in US Gulf, US Pacific, US Atlantic, Grand Bahama and Panama - INSW market share of the US lightering market is approximately 30 - 35% ▪ Lightering unit generated EBITDA of over $2.3M over the la
Slide 28: Market Fundamentals
oe Market Fundamentals Intemational Seaways, Inc.
Slide 29: Market Fundamentals - Demand Drives the Business
International Seaways, Inc. Market Fundamentals – Demand Drives the Business 29 $/Day $/D a y Source: Lloyds Maritime Intelligence, EIA November Short Term Energy Outlook Demand Strong Chinese Seaborne Petroleum Imports Encouraging signs continue on demand side 5.0 5.5 6.0 6.5 7.0 7.5 8.0 +8.7% CAGR
Slide 30: Market Fundamentals - Favorable Demand Dynamics in Product Sector
International Seaways, Inc. Chinese Gasoline Imports ( kMT ) 0 1000 2000 3000 4000 2010 2011 2012 2013 2014 2015 2016 E Total Chinese Product Exports ( kMT ) 5000 15000 25000 35000 2010 2011 2012 2013 2014 2015 2016 E Market Fundamentals – Favorable Demand Dynamics in Product Sector 30 $/Day $/D a y
Slide 31: Market Fundamentals - Supply
International Seaways, Inc. Market Fundamentals - Supply 31 $/Day $/D a y 0 10 20 30 40 50 60 70 80 90 100 Fewest orders in 20 years 0 20 40 60 80 100 HHI Ulsan HHI Samho HHI Gunsan HMD Samsung DSME Sungdong STX SPP Daehan Last 5 yrs capacity Current capacity Projected Capacity Source: Clarksons , M
Slide 32: Ballast water treatment requirements
International Seaways, Inc. • IMO requirements enter into force Sept 7, 2017 • At the first IOPP certificate renewal after this date, ships must be fitted with a ballast water treatment system. IOPP renewals generally coincide with five year Special Surveys • Ballast treatment systems remove or kill
Slide 33: Market Fundamentals - Favorable Entry Point
International Seaways, Inc. 0 20 40 60 80 100 120 140 160 180 Inflation Adjusted Clarksons' 5 Yr Old VLCC Source: Clarksons, US BLS Adjusted Prices at Levels Seen Only Twice Before in 30 Years 33 Tanker Cycle Low Point Provides Opportunities Market Fundamentals – Favorable Entry Point
Slide 34: Financial Overview
Financial Overview Intemational Seaways, Inc.
Slide 35: Strong Financial Position - Balance Sheet
International Seaways, Inc. Strong Financial Position – Balance Sheet 35 September 30, 2016 ( $ M) Assets Liabilities Cash and Equivalents $110 Current Liabilities $44 Other Current Assets $61 Long Term Debt Other Long Term Liabilities $433 $7 Total Current Assets $171 Total Liabilities $484 Vessels
Slide 36: Strong Financial Position - Robust Revenue Generator
International Seaways, Inc. Strong Financial Position – Robust Revenue Generator 36 Avg. Fleet 2 60 50 49 Source: Company filings 1 See Appendix for reconciliation s . 2 Represents average fleet size over each period. 3 9 % 39 % 48 % $16,548 $27,551 $24,461 2014 2015 3Q16 LTM TCE Revenue Per Day Rev
Slide 37: Cash Flow from Operating Leverage
International Seaways, Inc. 1 Applies illustrative rate increases shown above to actual spot days for the last 12 months, ending 3Q2016, to calculate the i ll ustrative incremental EBITDA increase. Source: Clarksons ’ Shipping Intelligence Network Incremental EBITDA from Higher Rates 1 Cash Flow fro
Slide 38: Free Cash Flow
International Seaways, Inc. Free Cash Flow INSW’s already sufficient free cash flow improves as the spot markets strengthen Incremental Improvement of Free Cash Flow ($M) $176.9 $245.6 $314.3 $383.0 $451.6 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 3Q16 LTM +$5k / Day +$10k / Day +
Slide 39: Closing Remarks
Closing Remarks Intemational Seaways, Inc.
Slide 40: Investment Highlights - A Differentiated International Tanker Opportunity
International Seaways, Inc. Investment Highlights - A Differentiated International Tanker Opportunity 40 Positioned to Optimize Revenue ● 55 vessel fleet with balanced mix of contracted cash flows and spot market upside ● Contracted revenue from 10 (1) time charters and JV cash flow cover fixed cost
Slide 41: International Seaways, Inc.
Intemational Seaways, Inc.
Slide 42: Appendix
Appendix Intemational Seaways, Inc.
Slide 43: INSW TCE Revenue
International Seaways, Inc. INSW TCE Revenue in thousands of dollars LTM ended September 30, 2016 Year ended December 31, 2015 Year ended December 31, 2014 Time charter equivalent revenues 422,686 475,790 346,987 Add: Voyage expenses 14,793 21,844 170,031 Shipping revenues 437,479 497,634 517,018 43
Slide 44: INSW Continuing Operations - Adjusted EBITDA
International Seaways, Inc. INSW Continuing Operations – Adjusted EBITDA in thousands of dollars LTM ended September 30, 2016 Year ended December 31, 2015 Year ended December 31, 2014 Net (loss)/income $77,140 $173,170 ($119,099) Income tax provision $411 $140 $744 Interest expense $40,885 $42,970 $
Slide 45: Glossary of Commonly Used Shipping Terms
International Seaways, Inc. Glossary of Commonly Used Shipping Terms 45 Source: Tankers International, various industry websites Handysize Product Carrier:29,000 - 39,999 MR: 40,000 – 54,999 Panamax / LR1: 55,000 - 79,999 Aframax / LR2: 80,000 - 119,999 Suezmax: 120,000 – 199,999 VLCC: 200,000 – 319