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International Seaways, Inc. (NYSE:INSW)
Q3 2019 Earnings Call
Nov 7, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the International Seaways Inc. Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to James Small, General Counsel. Please go ahead.

James D. Small -- Senior Vice President, Chief Administrative Officer, Secretary and General Counsel

Thank you. Good morning everyone and welcome to International Seaways earnings release conference call for the third quarter of 2019.

Before we begin, I would like to start off by advising everyone on the call with us 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. Outlook for the crude tanker and product carrier markets; changing oil trading patterns; forecasts of world and regional economic activity; and of demand for and production of oil and other petroleum products; the company's strategy; purchases and sales of vessels and other investments; anticipated financing transactions; expectations regarding revenues and expenses, including vessel charter hire and G&A expenses; estimated bookings and TCE rates in the fourth quarter of 2019 or other periods; estimated capital expenditures for the fourth quarter of 2019 or other periods; projected scheduled dry-dock and off-hire days; the company's consideration of strategic alternatives; the company's ability to achieve its financing and other objectives; and other economic, political and regulatory developments around the world.

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 those statements. Factors, risks and uncertainties that could cause International Seaways actual results to differ from expectations, include those described in its annual report on Form 10-K for 2018, its quarterly report on Form 10-Q for the third quarter of 2019 and in other filings that we have made or in the future may make with the US Securities and Exchange Commission.

With that out of the way, I'd like to turn the call over to our President and Chief Executive Officer, Ms. Lois Zabrocky. Lois?

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you very much, James. Good morning, everyone. Thank you for joining Seaways earnings call to discuss our third quarter 2019 results.

If you turn to Slide 4, we review our third quarter highlights and our recent accomplishments. During the quarter and subsequent to the end -- to its end, we have implemented multiple initiatives that strengthened our commercial prospects and optimize shareholder value. In October, we drew upon our successful and ongoing relationship with Nakilat to monetize our ownership interest in our LNG Joint Venture for $123 million in cash. This is an important accomplishment, as we unlocked significant value for shareholders, evidenced by the approximately $100 million increase in our market cap on the day of the announcement. In addition, this opportunistic sale enabled us to strengthen our balance sheet and advance our disciplined and accretive capital allocation approach, which has been a key part of our strategy, since becoming a stand-alone public company.

Second, in September we help to expand Tankers International's footprint, which further enhances Tankers International's position, as the leading VLCC pool worldwide. As a founding member of TI, nearly 20 years ago, we are pleased to host TI's new office here in Seaways headquarters, expanding our relationships with customers in the Western hemisphere and positioning us to more fully capitalize on increasing US exports.

Next, the notable success we've had year-to-date in 2019 strengthens our balance sheet and our liquidity position. Following our $600 million investment in big modern ships at the bottom of the cycle, significantly strengthening our earnings power, we have shifted the focus of our capital allocation strategy, beginning with deleveraging. Consistent with this we prepaid $110 million of debt, creating an annual interest savings of $9 million and improving our proforma net loan to value to well below 40%, compared to 50% as of June 30th. This solidifies our position, as a tanker company with one of the lowest leverage profiles in the business.

As of September 30th, we had $124 million in cash. Our total liquidity stood at $174 million including our undrawn $50 million revolver. Jeff will discuss our current capital allocation priorities and our ongoing strategy to optimize our balance sheet and lower our cost of capital later on this call.

Moving to the final bullet. While seasonal weakness impacted rates throughout the majority of the third quarter, the tanker market reached its inflection point during the third quarter, as we realized the initial benefits from the IMO 2020 low-sulfur regulations. Together with geopolitical and broader macro factors this led to significantly higher crude tanker rates at the end of the third quarter and into the fourth, with significant operating leverage based on our strong spot exposure, we expect to continue to capitalize on favorable crude and product tanker prospects into 2020. We note that our fourth quarter bookings to date are significantly higher than the third quarter. Jeff will also provide a more detailed fourth quarter earnings update later in the call.

Finally, I want to highlight our upside potential in this rising market. Every $5,000 per day increase in tanker rates corresponds to a $72 million increase in our EBITDA and $2.46 in earnings per share.

Now turning to Slide 5 and highlighting the current drivers of this Tanker market. As we progress to the fourth quarter, fundamentals remain strong and we expect a favorable rate environment to continue into 2020 based on a number of factors. On the demand side, oil demand growth is projected to increase 1.6 million barrels per day in the second half of 2019 over the first half. This supports a robust market. In addition, with refinery maintenance now complete, we have begun to see throughput increases, which we expect to continue and have an ongoing positive impact on the crude and product tanker markets. While we started to see the positive impact from an initial IMO 2020 related demand surge in October, we expect incremental IMO 2020 demand to become more pronounced as we get closer to year's end. Specifically, our expectation remains that refiners will continue to produce more very low-sulfur fuel and middle distillates, increasing overall crude volume and the seaborne transportation of petroleum products due to changes in trading patterns.

Supply fundamentals also remain favorable and supportive of a strengthening market. During a time when the overall tanker order book is at its lowest level in over 20 years, vessel supply has been reduced as a result of increased out of service time from scrubber installations ahead of the IMO 2020 regulations going into effect. We have seen up to 30 VLCCs with the global fleet to store various grades of crude and fuel oil in Singapore, further reducing vessel supply.

Moving to the chart at the bottom of the page, we can see how the market reacted to two recent geopolitical triggers with VLCC rates briefly reaching record levels in October. Specifically a sharp rise in tanker rates precipitated by the attack on Saudi oil processing facilities on September 14, and with further boosted with the announcement of sanctions on a number of Chinese tanker companies including a COSCO subsidiary on September 25th. In addition to the strong supply and demand drivers that I described earlier, in a tightly balanced market geopolitical events can drive rates higher, creating additional upside on top of our already strong market.

Briefly an update on our 2020 compliance initiatives. For our scrubber program, nearly all of our equipment has been delivered to our two shipyard sites well in advance of the 10 VLCCs scheduled arrival dates. Engineering and procurement are complete and our site teams are in place to over see pre-fabrication of the new structures. We're grateful to our project partners, Hyundai Global Services, Clean Marine, PaxOcean and Wenchong for working with us so ably. The first ship is on schedule to arrive in the shipyard at the end of this month.

In October, with market conditions strong, we pushed back two scrubber installations from the fourth quarter to the first quarter. Both of these ships were subsequently fixed at high time charter equivalent rates. For our ships that will burn very low-sulfur fuel, we have been working more than 18 months to prepare for January 1. Our shift implementation plans are in place. Our tank cleaning program is largely complete and we are now in the logistics space, this includes working with pool partners to carefully monitor the status of each bunker tank on each ship, seeking potential bunkering opportunities and buying both high and low-sulfur fuels strategically to manage our supplies to the end of the year and going forward. Our shore side teams and our crews on board the vessels have done a great job.

I will now turn the call over to Jeff. He will provide additional details on the third quarter results.

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Thanks, Lois, and good morning everyone. Let's move directly to reviewing the third quarter results in more details.

But before turning to Slide 7, let me quickly summarize our consolidated results. We achieved the highest adjusted B as EBITDA at $23.8 million that we've ever had it's just becoming a public company. Net loss for the third quarter was $11.1 million or $0.38 per diluted share compared with a net loss of $47.8 million or $1.64 per diluted share in the third quarter of 2018.

Now getting into specifics on Slide 7. I'll first discuss the results of our business segments beginning with the Crude Tanker segment. TCEs for the Crude Tanker segment were $49 million for the quarter, compared to $40 million in the third quarter of last year. This increase reflects our success improving the age profile and increasing the capacity of the fleet, and primarily resulted from the impact of higher average blended rates in the VLCC Suezmax and Aframax sectors.

Turning to the Product Carriers segment. TCE revenues were $16 million for the quarter, compared to $11 million in the third quarter of last year. This increase primarily results -- resulted from the impact of higher average daily blended rates earned by the LR1, LR2 and MR fleets, with spot rates rising to approximately $15,500, $17,300, $11,400 per day respectively. This increase in overall revenue occurred even though MR revenue days were down as we sold four older MRs in doing so completing our program to sell all six older MRs.

Overall as reflected in the chart, top left, consolidated TCE revenues for the third quarter of 2019 is $65 million compared to $51 million in the third quarter of 2018. Again, this increase was primarily driven by higher average daily rates earned across the Crude and Product Carriers in this quarter compared to last year. Looking at the chart on the top right of the page, adjusted EBITDA was $24 million for the quarter compared to $6 million for the same period last year. Again, increase primarily driven by higher daily rates.

On the bottom half the page, we look at results on a sequential basis, i.e., quarter-to-quarter. Consolidated TCE revenues and adjusted EBITDA for the third quarter were up in the second quarter both increasing by $3 million.

Now turning to Slide 8. We provide a Q3 review and Q4 earnings update. Spot rates are broken out for a modern VLCCs and then VLCC in that part of the fleet, which is over $13 million. As I -- all of our previous call, regarding spot rates for VLCCs particularly lower point in the tanker cycle, modern VLCCs earning higher rates. As the market recovers this gap will narrow significantly and rates for modern VLCCs more closely reflect those of the overall VLCC group and we've seen evidence of this during the recent market strengthening.

Now turning to bookings for Q4, thus far, which are significantly higher relative to the third quarter based on the stronger market fundamentals that Lois spoke about earlier. We booked 69% of our available Q4 spot days for modern VLCCs at an average of approximately $15,000 a day, and we would note that this number is consistent with the -- on a full point adjusted basis with the rates reported by our TI pool partners. 46% of available VLCC days for those -- that was 15 years or older average $44,000 a day, 54% of Suezmax spot days in an average of $50,900 per day, 47% of available Aframax LR2 spot days and an average of $30,800 per day and 49% of our available Panamax LR1 segment, spot days were at a very impressive $28,700 per day. On the MR side, we booked 37% of our fourth quarter spot days at an average of approximately $12,800, but here I would point out that recent bookings has been more in the $20,000 range. So we would expect that number to go up.

Now if you could turn to Slide 9. The cash cost TCE breakevens for the 12 months ended September 30, 2019 are illustrated on this slide. International Seaways overall breakeven rate was $22,300 for the 12 months ended September 30, 2019. These rates are the all in daily rates, are owned vessels must earn to cover operating costs dry-dock in G&A expense and debt service costs schedule which means principal amortization as well as interest expense. Of note, taking into consideration distributions from our FSO JV, the overall breakeven rate for the company drops to $20,500.

At this time, I would like to also reaffirm and update cost guidance for the year for modeling purposes. First, we expect regular daily OpEx, which includes our running costs insurance management fees and other similar and related expenses for our various classes to be at the levels previously provided, so no change there. For details on projected dry-dock CapEx costs and off-hire days by quarter, you can please refer to Slide 7 and the appendix for an update. Continuing with cost guidance for your modeling, we expect the fourth quarter interest expense to be $14.3 million, which includes amortization of deferred finance costs and non-cash costs of $1.6 million. This is about $2 million lower than Q3, reflecting the to repay on our debt.

Additionally, our debt costs were $11.4 million in principal repayments scheduled in the fourth quarter. For G&A in the fourth quarter, we expect it to be approximately $6.3 million all in including $0.9 million non-cash charges. So $5.4 million in cash G&A for the quarter. We also expect about $5.4 million equity income before the impact of a $2.9 million cash gain on the sale of our interest in the LNG Joint Venture and a non-cash reclass of approximately $21 million representing the company's share of the unrealized losses associated with the interest rate swaps held by the LNG JV that is already reflected in the September 30 carrying value of the investment into earnings from accumulated other comprehensive loss. Finally, we expect about $19 million for depreciation and amortization in the fourth quarter.

Now if we could go to Slide 10 for our cash bridge. Moving from left to right. We began the third quarter with total cash and liquidity of $200 million. During the quarter, we generated $24 million of adjusted EBITDA. This amount includes $8 million in equity income from the JVs, which is non-cash. So therefore we deducted to reach a cash figure so that add back the cash distributions from the JVs, which were $3 million from the FSO JV. The proceeds from vessel sales were $7 million. In addition, we expended $7 million on dry docking and CapEx. Cash interest and principal paid on our debt that was $37 million, excluding our 2017 terminal prepayment which total $10 million. The net result of these various cash flow was that we ended the quarter with approximately $124 million of cash and $50 million undrawn revolver, giving total liquidity of $174 million.

Now if you please turn to Slide 11. I'd like to next talk about our balance sheet. As discussed earlier, we made a prepayment of $10 million in July and a further prepayment of $100 million in October on our 2017 Term Loan B facility, which has a current interest rate in excess of 8%. These prepayments result in a $9 million decrease in cash interest expense on an annual basis, and $1.9 million specifically in the fourth quarter of 2019 compared to third quarter based on our Interest rate as well as the reduction in future quarterly amortization payments from $6.1 million to $4.6 million per quarter. Having completed these prepayments and significantly lowered our interest expense, we believe there is still an opportunity to further optimize our balance sheet and lower our cost of capital in the future.

As Lois mentioned we remain well positioned to further implement our disciplined and accretive capital allocation strategy in a strengthening market. In terms of balance sheet specific as of September 30th, we had $1.8 billion of assets, compared to $717 million of long-term debt, which again is before the October prepayment of $100 million. In addition, we have, as mentioned, the $50 million revolving credit facility remains undrawn as of September 30, 2019.

As you can see on the right hand column, proforma for the sale of our LNG an $100 million debt prepayment, our total debt to capital under 41%, our net loan to value stands at 36%. On the bottom of slide we outline the face amount of our debt facilities giving proforma effect to the $100 million prepayment, all of which importantly matures in 2022 or later.

Lastly, turning to Slide 12. We illustrate again our strong earnings power or our fleet as we head into a market recovery. And the far left we show 2018 spot rates earned by INSW vessels, which we view as a trough in the market or the tanker market. And in order to demonstrate the impact of a rising rate environment relative to these 2018 levels, we present three specific scenarios to the right. First is mid-cycle by which we mean 15-year average rates. Second is a recent peak represented by 2015 average rates and last on the right is sort of the openings rate as experienced in 2008.

You can see that base on the mid-cycle average rates are currently would generate annualized EBITDA of $244 million with $3.65 per share EPS. If rates were we would turn to 2015 level that would represent $438 million adjusted EBITDA and $10.31 of EPS. And of course we ever experienced super cycle levels again we generate over $600 million of EBITDA.

I'd like to highlight that our past success implementing our fleet growth and modernization strategy has significantly enhanced our upside potential capitalize in a market recovery in both the product and crude tankers where we continue to maintain significant operating leverage. As a reminder, $5,000 increase in spot rates in every vessel class would result in about $72 million in additional cash flow or $2.46 additional earnings per share per annum.

I'd now like to turn the call back to Lois for closing comments.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you very much, Jeff. Please turn to summary slide on Page 15. During the third quarter and as we have for all of 2019, we executed initiatives that strengthened our prospects and unlocked significant value for shareholders. By monetizing our LNG Joint Venture for $123 million, we significantly strengthened our balance sheet enabling us to further implement our disciplined and accretive capital allocation strategy for the benefit of shareholders.

Following our success capitalizing on attractive asset values at the bottom of the market to grow the fleet and our earnings power. We have used a portion of the proceeds from the LNG Joint Venture sale to prepay $110 million of debt, saving $9 million in annual interest expense. We remain in a strong position to further optimize our balance sheet as we continue, lowering our cost of capital. In addition, our accretive and disciplined approach to capital allocation has been a hallmark of our strategy, since becoming a stand-alone public company three years ago, and we remain committed to further implementing this approach.

On the commercial side, the opening of Tankers International office in International Seaways headquarters brings us closer to our customers in the Western Hemisphere, which is particularly important given the increasing US Gulf exports. In the 2019 year-to-date, we have further strengthened our financial position and are pleased to continue to have one of the lowest leverage profiles in the industry. We ended the quarter with $174 million in liquidity and following the recent debt repayments -- prepayments, we improved our proforma net loan to value to below 40% compared to 50% at June 30.

Progressing through the fourth quarter, the tanker market environment is undergoing a significant upturn. We expect this robust market to continue into the fourth quarter and into 2020, with the order book being at the lowest level since 1997, continued strong oil demand growth, decreasing vessel supply and the impact of IMO 2020 becoming more pronounced as we get closer to the January 1, 2020 deadline. In addition to IMO 2020, we continue to expect that increase in US Gulf exports will be a game changer for the tanker industry. Importantly, International Seaways is a -- is in a strong position to capitalize on favorable conditions and the tanker market, strong prospects.

Based on our sizable spot exposure, our operating leverage is substantial with every $5,000 increase in rates, corresponding to $72 million in EBITDA to our bottom line and $2.46 in our annual earnings per share.

Before we open up the call to questions.

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Yeah, I would just like to turn it to -- this is Jeff again. Go back to Page 8. I may have misspoke about the printed pages correct. The modern Q4 VLCC rates booked in the fourth quarter is $57,000 a day. So just to be clear.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you very much, Jeff. And now we open up the call for questions. Operator?

Questions and Answers:

Unidentified Speaker

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Randy Giveans with Jefferies. Please go ahead.

Randy Giveans -- Jefferies -- Analyst

How are you Lois, Jeff, David, how are you all?

Lois K. Zabrocky -- President and Chief Executive Officer

Good. How are you?

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Good Randy. Excellent.

Randy Giveans -- Jefferies -- Analyst

So a few quick questions from me, starting with your quarter day rates, you're VLCCs slightly below peers. Suezmaxes well above peers, but honing in on to these. What was your kind of most recent fixture kind of current fixture levels? I'm assuming above the $57,000 a day booked quarter-to-date just trying to get a run rate for the rest of the quarter? And then also how many of these are going to be off-hire for the rest of the quarter or in the fourth quarter?

Lois K. Zabrocky -- President and Chief Executive Officer

Randy. I'll take the first part of your question there. So the prevailing spot market as you could see on the TI app where they published the fixtures every day, those rates are being fixed somewhere around $65,000 per day presently. The second part of your question, we don't believe that we are fixed below our peers and we are on par with our pool partners in Tankers International, and we think we posted strong results there. And then to the third part of your question, when we're looking at off-hire days in the fourth quarter, there is in the appendix, the out-of-service days projected for Q4 at around 150 days for our VLCCs, and that were our scrubber installations.

Randy Giveans -- Jefferies -- Analyst

Yeah, I'm trying to sensitize that five vessels, 30 days, three vessels, 50 days?

Lois K. Zabrocky -- President and Chief Executive Officer

That is, includes [Indecipherable] which is undergoing a drydock that is just her routinely schedule period. And as far as -- I mean, we have five vessels that are going into the yard in Q4 for scrubbers and five in Q1. And what we can do Randy is, slide those data for you I think offline might be better.

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

But it's basically what you said, it's the five vessels, one of which may provide a little bit completion into Q1. So it's 30 or 5 times 30, kind of get you to the 150 in Q4. So you're right there.

Randy Giveans -- Jefferies -- Analyst

Okay, that's fair. And then, yeah, looking at your divestiture obviously, the $123 million for the LNG joint venture was above our estimates. So that was a positive surprise in that regard. Good use of the cash, obviously paying that kind of high price term loan down. What about kind of further divestitures obviously with FSO joint venture not really core to your business some older tankers that you could still kind of divest. So not only the strategy around that, the possibility around that, but also the use of those proceeds would it be further kind of term loan repayments or possible share repurchases or kind of what would you do with that incremental cash?

Lois K. Zabrocky -- President and Chief Executive Officer

Again, Randy i'll take the first part and throw the second part to Jeff. So there are some differences between the FSO and the LNG. Notably on the FSO, we will have basically gotten about $20 million through to International Seaways from that joint venture in 2019. We expect to receive around $14 million cash from our 50% interest in 2020 . We are two years into the five-year charter that goes through 2022 on those FSOs, and they are ideal for the field on which they are operating. So as we move forward, we expect to engage in conversations with our customer, our charter and we'll keep everyone updated on our progress regarding the FSO.

And then on the second part of that when as we are able to secure additional charter on that vessel and look to monetize it. Your second part of the question is really around capital allocation.

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Yeah. I mean Randy. It's too early to speculate what would happen with FSO proceeds because that's down the road, but I think the playbook, we don't do the see the [Indecipherable] right the playbook was shown by what we did with LNG when you have extra cash you look at what's the right place to deploy it. And we found having done our $600 million fleet renewal in advance of this upturn that we're experiencing now and I would note those vessels that were significantly worth of $600 million today, we find the priorities for capital allocation will be first deleveraging as we have done, but then most likely returning cash to shareholders in one form or another. So that's really the next step.

Randy Giveans -- Jefferies -- Analyst

Okay that's fair. I'll turn over from there. Thanks so much for the time.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you, Randy.

Operator

The next question is from Greg Lewis with BTIG. Please go ahead.

Gregory Lewis -- BTIG -- Analyst

Yes. Thank you and good morning. Lois, I just wanted to talk a little bit about your comments around increasing production out of the US Gulf and really what that could mean in terms of bottleneck and how we should be thinking about that potentially impacting beyond the lightering business as we look out over the next year ahead of -- or the next couple of years ahead of this potential infrastructure build out that we keep hearing about.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you, Greg. So maybe I'll divide that into two pieces of the question as well, and say, you know, the US Gulf exports were stunning, I think 3.2 million barrels per day and in rolling over the last month. Now the last week, they were hardly 2.3 million barrels a day. But we expect those exports to continue to increase and within the next -- first half of 2020, we expect them to go up at least between 250,000 to 500,000 barrels per day of export, and the benefit of what we're really seeing there is that those cargoes are being exported not only to Korea and Japan and far eastern locations on VLCCs, but also on the mid-size vessels Afra to Suezmaxes which are benefiting our -- the middle of our fleet to Europe. And when we look at it on lightering, we do have lightering operations. It is predominantly in US Gulf, but we also cover the US West Coast, Panama and Bahamas. So the deepening of the channels in Corpus are really not fully expected to be realized until around 2022, and in the interim, you are seeing just a heavy load of reverse lightering as well as the lightering we continue to do with the VLCCs coming in from Saudi.

Gregory Lewis -- BTIG -- Analyst

Okay, great. And then just one more for me. The China -- the Chinese vessel sanctions obviously were big headline news a month, two months ago in September. Just as we think about what impact that's having on the market has, I guess, I'm trying to understand are those vessels still being discriminated against, are those vessels trading like any kind of color you can give around some of these vessels that have been sanctioned by the US would be helpful.

Lois K. Zabrocky -- President and Chief Executive Officer

Absolutely. The way that the market spikes was really just a sign of how tightly balanced we are now in the fundamentals. And the picture over what is or is not a sanctioned COSCO tanker is not still fully transparent in the marketplace, and it does lead to reduced supply as charters are careful with their ships they are fixing. The industry is watching everything very closely. But as long as these sanctions are in place, on these COSCO entities, it is a plus for tanker rates. And I also think the second part of that is the additional clauses that have been brought into the market on -- that have loaded in Venezuela and we are just going to increasingly see that highlighted going forward and that just makes it in the even near [Phonetic] to your marketplace, which is better for owners.

Gregory Lewis -- BTIG -- Analyst

Okay and just really like a quick follow-up to that. Now these vessels are sanctioned I guess by the US and US partners, but does -- I mean they were doing things they shouldn't have been doing anyway. Is the right way to think about these vessels well that are out there, they're just being under-utilized or they're out there and they're just not doing anything?

Lois K. Zabrocky -- President and Chief Executive Officer

The more of the first. You know, I doubt in this marketplace such as anyone sitting fully idle. It would just be that they are sub-optimized.

Gregory Lewis -- BTIG -- Analyst

Okay, perfect. Thank you very much for the time everybody.

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Thanks Greg.

Lois K. Zabrocky -- President and Chief Executive Officer

Thanks Greg.

Operator

The next question comes from Omar Nokta with Clarksons Platou Securities. Please go ahead.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay. Thank you guys. Just maybe my question maybe a bit more operational or commercial kind of just thinking about it. Obviously Seaways you're investing in scrubbers and your partner in TI, [Indecipherable] if not -- just thinking about, does this have any effect or any impact on how the pool earnings are set up, do you guys share working capital and fuel costs and whatnot. Is that part of the pool, or is it completely separate?

Lois K. Zabrocky -- President and Chief Executive Officer

So already in Tankers International, we have the main pool and then we have a 15 year plus pool, and the scrubber pool will sit right alongside of these other two pools from an accounting perspective, but from a marketing and operational phase, our customers will see no differentiation between scrubber and non-scrubber ships. All the vessels will be available for charter and then division happens back in the accounting department, where we have the scrubber and non-scrubber breakout.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay. And then, does each company responsible for fuel separately or is that...

Lois K. Zabrocky -- President and Chief Executive Officer

No. Tankers International performs all commercial functions for the vessels including fuel procurement.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay. And does that -- so how does that -- you're not having bought the new VLCC worth of bunker fuel that's sitting off Singapore. How does that play into the pools earnings. Does that create some sort of drag on earnings just due to I don't know if it's interest costs or just dead money that does that play a role in the earnings power of the pool?

Lois K. Zabrocky -- President and Chief Executive Officer

Absolutely not. Tankers International will buy tools at market levels and any tools that are used by Tankers International and provided by the VLCC would be priced at market levels and Euronav's balance sheet remains their own.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay. All right. Thanks for that clarity. I have a, just a follow-up and maybe a broader, I know you addressed it a bit in the comments and some of the questions, but Jeff, you've talked about refinancing, the term loan B here in the near term as well as some other debt you prepaid the term loan already with the proceeds of the LNG sale. As things are now -- once you do that refinancing, how do you think about Seaways from a growth perspective/more focused on debt repayment and also with respect to shareholder rewards and I'm asking that because, obviously growth has not necessarily not been there, you've been more focused on selling some of the older assets, you've talked about selling the JVs.

As we think about how Seaways stands today and looking ahead, where do you think the capital is going to be deployed, based on where the company is big picture.

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Yeah, thanks, Omar. I hit a little bit, that was Randy's question, but there is a number of aspects of it so I'm happy to expand. First of all, I think we've been clear that the LNG joint venture or divestiture and other cash has come in does clear the path to the ability to do optimization of our balance sheet, which is you quite rightly point out could well mean refinancing of are Term Loan B. That does two things, at least, it first of all, lowers our overall cost to capital, equally, importantly doing that would give us more flexibility to make capital allocation decisions in 2020 that we presently have, and that's really important to have that flexibility. So as you said jump ahead to assume that's done, what do we do, as I said before was the playbook from here.

First of all, I might say, we have been focused on growth, right. We did spend $600 million and eight years of depreciation and two years of operation plus the demand of CapEx on top of that, so we often use a phrase, we high graded our fleet, it's newer and bigger. So we don't feel we need to do any other growth just to say we've done it, right, we've already checked that box. So that's not to say there couldn't be acquisitions in the future. Again, we look at this thing through a very disciplined capital allocation lines, if there is a acquisition that meets our return hurdles and leverage hurdles that is a possibility, especially tactically here and there, but -- as we've said before, I think you've heard us, but I'd like happy to be clear on the call, as we go into this market with the additional cash from selling non-core assets which will also include older assets with selectively prone, our emphasis is likely to be on continued deleveraging and returning cash to shareholders and that form of returning cash to shareholders is going to depend on where our share price is. Share price is well below NAV, you would expect to see share repurchase. If not, you would see less share repurchase. And in any event I think we will look into a dividend but not as of this time, but that's something of course that we are looking into as a method to return cash to shareholders. So I hope that covers the alternatives and it's also it's something that when we say it's not just ever picking one thing, these are all really good capital allocation alternatives that we fortunately are going to have to utilize in an upturning market like we've got right now.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Got it. Thanks Jeff. And I didn't mean to overlook the other six VLCCs because obviously that was quite significant. As you guys stand today your leverage is, we estimate sub 40% on a value -- fleet value basis. So you clearly did a lot of flexibility. Maybe as you think about the fleet expansion potentially, you have been scaling down on the MRs and selling some of those older ships that you become increasingly much more crude focused. Is that sort of -- is that by design, is that the plan as maybe to just invest more on the crude side relative to the product?

Lois K. Zabrocky -- President and Chief Executive Officer

Well, we definitely put our $600 million to work on the Suezmaxes and the VLCCs in advance of this market recovery, which we felt we would see the highest and earliest return on those assets. The lightening up on the MRs has largely been around specifically DCX as the 2004-series of 6 MRs came up on their 15 years, and the sale of them avoided Dallas water and coding upgrades to the tanks, right. So we do think the fundamentals on the products are strong. We think that they will come right along with the crude, and we're not abandoning products. We just put our capital investment where we felt we get the highest return first.

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Yeah and again just underscore that we are comfortable with diversification and really look how the IMO 2023 has played out. A lot of people expect the products to run first but it turned out that crude picked up first, that was great. Now products are having their day while crude continues to be very strong as witnessed by particular results that we saw in that [Indecipherable] one segment. So I know there's as well. So we really are comfortable with having a fleet that covers both crude and product.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Got it. Thank you. Thanks for that color. And maybe just one more if you don't mind OSG your predecessor and I know you were very active. You had a fairly large in-charter portfolio, what are the thoughts on, is that something you'd look to grow with this outlook here in the medium term or are you comfortable with just the fleet size as it is now, when it comes from just I mean, looking to take advantage of the market today?

Lois K. Zabrocky -- President and Chief Executive Officer

That's actually where you seen us take exposure on the products market. We have 3 MRs in-charters with optionality on all of those vessels and we recently chartered in two LR1s, albeit they are trading dirty in our Panamax international pool, and they also have options on their period. So we continue to look for value on in-charters and opportunistically we do look for that to enhance our overall returns.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay. And I saw that in the release there was another vessel today disclosed. Okay. Thank you Lois. Thank you, Jeff. Thanks for answering my questions.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you.

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Thanks, Omar.

Operator

[Operator Instructions] The next question comes from Tucker Long with Stifel. Please go ahead.

Ben Nolan -- Stifel -- Analyst

Actually, this is Ben in for Tucker. He's letting me sit in for a minute. The -- I've got -- I wanted to follow a little bit on the FSOs that Randy was talking about earlier. And those, maybe you would sell maybe not, but one of the things that we saw out of the LNG sale as you got a price, actually a little bit better than what you had on your books, certainly was a surprise to the market in terms of I think the price that you got there? You're left with, by my math a little bit under $150 million worth of book value on those FSOs and there, sort of, they are very much unique assets? Is that -- in your view, is that a fair way to think about it around $150 million is that really what it worth. Or do you have any idea what they -- what a market value for those might be?

Lois K. Zabrocky -- President and Chief Executive Officer

So what I would say is, one of the differences between the FSO and the LNG, of course, is that the LNG had basically life of the vessel charter potentially up to 35 years, and that would be the ideal of what we could ultimately achieve on the FSO, because they really are great on the field and had zero off hire since 2010. And when you're thinking of the value of the FSOs, I don't think you're far off the mark Ben. We do disclose our book value on those, which is right around as of September 30th, $135 million. But somewhere in that range between that and the $150 million that you mentioned is roughly where we -- scrubb value in our mind.

Ben Nolan -- Stifel -- Analyst

Okay, that's helpful. And then you -- well, sort of again, following on with some of the other questions about capital allocation and potential growth or whatever and paying down debt. One of the things that hasn't really come up and is not unique to you guys is the possibility of building new ships. We've certainly seen that the secondhand asset values in the tanker market appreciate a little bit here lately. That has not been paired with higher newbuilding prices, is that something that, again, given all of the various factors that have been discussed, would you consider maybe placing orders. I don't know for product tankers or something else, given the sort of the price disparity?

Lois K. Zabrocky -- President and Chief Executive Officer

Well, we've been very disciplined as you know, we have not as International Seaways independent company ordered any new buildings. We've been very selective in our purchases, buying modern resales and we found a much better value proposition on those vessels. However, that's not to say that there cannot be a new building component in our future and in particular, we do see some certain big oil companies starting to look at alternative propulsions and this is something that we will be following closely.

Ben Nolan -- Stifel -- Analyst

Okay, all right. Well, it. I'll leave it at that and we'll just see what develops, but lastly for me is on the refinancing and first of all, it's certainly been one of the things that I thought was low hanging fruit in terms of paying down some of that debt and the impact that it can have on your income statement actually. As you look at term loan or as you look at any of the debt, and the fact that now the leverage is a lot less than it was. How -- it just -- maybe if you could remind me, Jeff, how much of that is available to be called back early and refinanced, and any kind of sense of timeframe that some of that might -- could happen?

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Yeah, sure, Ben. And then glad you could fill in for Tucker. The term loan B is as publicly it goes well known. It is, has a call premium right now and then it goes to callable at par at January. So that's the primary instrument that has sort of a change that is really suggestive of a time frame and I think the outstanding at the year-end will be about $331 million. So that's significant. The signs for debt is long-term debt of LIBOR plus 2 that's not going anywhere, right. So the BlackRock and noted -- and the 8.5% note so called baby bond or call or June next year. So they're not really call of before that. So I think primarily Term Loan B, there is a bilateral loan on one vessel, the Raffles that's called a time and the BlackRock does have a make-occupied, so there's obviously ability to do that. Those are the ones that are sort of in the mix for study in terms of our balance sheet optimization.

Ben Nolan -- Stifel -- Analyst

Well that's is very detailed. Appreciate it. I know it would be. And again thanks for Tucker for making space for me here.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you.

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

All right, thanks Ben.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Lois Zabrocky for -- the CEO, for closing remarks.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you very much. We really appreciate everyone joining International Seaways call and we look forward to Seaways taking advantage of the increased building rates into the holiday season. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

James D. Small -- Senior Vice President, Chief Administrative Officer, Secretary and General Counsel

Lois K. Zabrocky -- President and Chief Executive Officer

Jeffrey D. Pribor -- Senior Vice President and Chief Financial Officer

Unidentified Speaker

Randy Giveans -- Jefferies -- Analyst

Gregory Lewis -- BTIG -- Analyst

Omar Nokta -- Clarksons Platou Securities -- Analyst

Ben Nolan -- Stifel -- Analyst

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