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International Seaways, Inc. (NYSE:INSW)
Q4 2019 Earnings Call
Mar 3, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the International Seaways Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

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 quarter and year-ended December 31, 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; outlooks for the crude and product tanker markets, changing oil trading patterns, forecast of world and regional economic activity and of the 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 first quarter of 2020 or other periods, estimated capital expenditures in 2020 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 2019, and in other filings that we have made or in the future may make with the US Securities and Exchange Commission.

Now with that out of the way, I would 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 International Seaways earnings call to discuss our fourth quarter and full year 2019 results. If you would please turn to Slide 4, we review our fourth quarter highlights and our recent accomplishments. As we kick off our fourth year as a publicly traded company, Seaways has maintained an unwavering commitment to enhancing our earnings power and our financial strength, unlocking value for our shareholders and implementing our disciplined and accretive capital allocation strategy. The significant progress we have made in achieving each of these important objectives was evident in our strong 2019 and our year-to-date 2020 results.

Moving to the first bullet, Seaways implemented important initiatives to optimize shareholder value. Following our $600 million investment in modern vessels at the bottom of the cycle, the monetization of our non-core LNG joint venture for $123 million and our success reducing our cost of capital, we remain focused on effectively allocating capital throughout the tanker cycle. Taking into consideration our strong cash and our liquidity position and our compelling long-term prospects, we have worked with our Board to shift our capital allocation priorities beginning the return of capital to shareholders. Our initiative which will initially consist of a fixed quarterly dividend of $0.06 per share also provides us the flexibility to continue to allocate capital to best serve our shareholders.

Based on our stock's valuation relative to our NAV, we believe our $30 million share repurchase program currently provides an attractive opportunity for Seaways to further unlock value for shareholders, complementing the $0.06 quarterly dividend. Going forward, we will continuously evaluate capital allocation decisions based upon where we are in the tanker cycle and where we believe we can create value. This includes dividends, share buybacks and vessel purchases. We intend to remain opportunistic as we did in the fourth quarter.

In the fourth quarter to further strengthen our earnings power, we purchased an LR1, the Seaways Guayaquil, fittingly named for our lighthouse in Ecuador. This ship will trade in our Panamax International joint venture with Flopec of Ecuador and Ultratank of Chile. This joint venture has consistently outperformed the market.

Moving to the next bullet, the notable success we have had in 2019 and 2020 year-to-date has enabled us to transform Seaways' capital structure and to ensure that we are ready for future value creation. With both the prepayment of $110 million of high-cost debt in 2019 and the refinancing of $380 million of high-cost debt in January 2020, we lowered our margins on the refinance debt by 350 basis points, reducing our annual interest expense by a total of $25 million. The refinancing positioned us with one of the lowest leverage profiles in the industry. Our pro forma net loan to asset value of our conventional tanker fleet is 41% post refinancing.

With the closing of our new senior secured credit facilities, we are proud to have become the first publicly listed tanker company to include a sustainability-linked pricing mechanism in our new credit facilities. International Seaways has always been committed to environmental initiatives and to minimizing risk of all forms of pollution and waste streams. Through this sustainability-linked pricing mechanism, we have created an innovative partnership with our leading banking group and Sustainalytics, a leading firm in ESG and corporate governance research that further advances our commitment to sustainability initiatives. We will continue to focus on our ESG footprint and align our sustainability goals with our broad group of stakeholders.

Moving to the final bullet, we are pleased to have returned to profitability in the first quarter. Excluding items related to asset sales and debt repayment, net income was $39 million or $1.32 per share. Fourth quarter adjusted EBITDA was $72 million, representing a year-over-year increase of $26 million and a full-year adjusted EBITDA of $165 million. Our strong results in the fourth quarter highlight our fleets earning power and significant operating leverage enabling us to end the year with $150 million in cash and $200 million in total liquidity.

Now turning to Slide 5, we provide an update on demand. As can be seen from the chart in the top right corner of the slide, the coronavirus has negatively impacted oil demand while China and the world seek to contain the coronavirus. In terms of Chinese crude throughput for 2020 in the first quarter, the IEA has cut its expectations by an estimated 1.1 million barrels per day. As a result, global crude demand is now expected to temporarily decline by over 400,000 barrels per day in the first quarter. Lower demand and the negative sentiment around the coronavirus have contributed to rates coming off recent highs and resulted in what we believe to be a temporary pause in the tanker market recovery. Even so, we believe the increased rates our sizable fleet of product and crude tankers earned in the fourth quarter and through our book days at the beginning of the first quarter demonstrate our strong prospects in a robust market.

While timing is uncertain and we continue to closely monitor developments, once the virus is contained, oil demand is forecasted to rebound and support a strengthening rate environment. Other developments that bode well for increasing tanker rates include the China trade deal, which eliminates tariffs on US oil imports and forward Brent trending toward Contango resulting from lower demand and reduced oil prices. Contango may lead to an increase in demand for vessels for floating storage and we continue to monitor this development.

Finally, we see IMO 2020 resulting in an incremental tanker demand, similar to what we experienced in the first half of January. Our expectation remains that refiners will continue to produce more very low sulfur fuels and middle distillates, increasing overall crude volumes and seaborne transportation of petroleum products due to changes in trading patterns.

On Slide 6, we provide an oil supply update. During the time when OPEC continues to restrict production, Western non-OPEC supply has increased and as a result, global oil supply is unchanged on a year-over-year basis. As highlighted on the chart at the bottom of the slide, the West has made up for OPEC production limits with oil demand growth being concentrated in Asia and oil supply growth being concentrated in the West. Importantly, this represents a positive for ton-mile demand and is supportive of a strengthening rate environment.

Recent productions that have come online also bodes well for increased ton-mile demand. For example, the first tanker shipments from new oil fields in Guyana took place in February on a Suezmax. Phase 1 production is expected to peak soon at 120,000 barrels per day and grow to 750,000 barrels per day by 2025. In addition, Norway's new Johan Sverdrop oilfield is up and running, currently producing 350,000 barrels of oil per day.

Moving to Slide 7, we take a look at ship supply. The overall tanker order book remains at historical lows, with only one VLCC ordered to date in 2020. We believe that year-to-date ordering has been tempered due to the uncertainty surrounding decarbonization and suitable propulsion systems. Current vessel supply also continues to be constrained, driven by scrubber installations being extended and Chinese newbuilding deliveries facing delays due to the yards being understaffed.

Moving to the chart at the bottom right of the slide, the VLCC fleet continues to age with over 30% of the existing VLCC fleet now 15 years old. As we have pointed out in the past, once Vessels reach 15 years of age, they are more expensive to operate with significant investments required to continue trading beyond 15 years and then every 2.5 years thereafter. In addition, once ships reach ballast water treatment deadlines, even greater capital expenditures are required for the vessels to keep trading. Due to the recovering market in late 2019 and early 2020, scrapping activity has been limited. So, we believe the potential for scrapping is building based on the aging VLCC fleet.

With IMO 2020, low-sulfur regulations going into effect, I wanted to provide a brief update on our successful transition. First, focusing on the ships burning very low-sulfur fuels, prior proper planning has paid off. We have not faced any significant issues in our transition to the new fuel. We continue to actively manage that program and ensure that we are booking our bunker orders well in advance to secure good quality supplies at competitive prices. For our scrubber program, we have three ships on the water trading, two are in the yard and five are in the queue. The two in the yard have been impacted by coronavirus with reduced workforces and logistic challenges, but these issues are now easing. Of the five remaining, we took an early proactive decision to perform additional voyages on three of them and postpone the installations by 60 days. This avoids any additional ship delays as a result of waiting as the virus impacts are managed down. We expect that all 10 ships will be trading before the end of the second quarter.

I'll now turn the call over to Jeff to provide additional details on our fourth quarter financial results.

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

Thanks, Lois, and good morning, everyone. Before reviewing our fourth quarter results, I'd like to discuss our newly implemented dividend, which is part of our broader capital allocation strategy. Following our success capitalizing on asset values -- on asset vessels are at the bottom of the cycle, redeploying capital for the monetization of our LNG joint venture to pay down debt and continuing to reduce our cost of capital through our recent refinancing, the Company is now positioned to return capital to shareholders beginning this quarter with a $0.06 per share of fixed quarterly dividend.

Our capital allocation philosophy is flexible and will be continually evaluated based on where we are in the tanker cycle and where we believe we can best create value, which includes dividends, share buybacks, vessel purchases as well as deleveraging. In the near-term, based on the stock valuation relative to NAV, we believe our currently authorized $30 million share repurchase program provides us highly attractive opportunity to unlock additional value for shareholders.

Now, I will review the fourth quarter results in more detail. Let me quickly summarize our consolidated results. In the fourth quarter, we achieved adjusted EBITDA of $72.2 million, our highest EBITDA in any quarter since we became a public company. Net income for the fourth quarter was $15.9 million or $0.54 per diluted share compared to a net income of $7 million or $0.24 per diluted share in the fourth quarter of 2018. Including the impact of certain one-time items including a $3 million cash gain on the sale of the LNG joint venture, the release of the Company's share of unrealized losses associated with the interest rate swaps held by the LNG joint venture amounting to $21.6 million into earnings from accumulated other comprehensive loss, all of which is otherwise known as unwinding a swap and a $0.3 million loss on sale of vessels, a $3.2 million write-off of deferred financing costs and finally, a $1.0 million loss from the extinguishment of debt, net income in the fourth quarter was $39 million or $1.32 per share.

Now, if I could ask you to turn to Slide 9. I'll first discuss the results of our business segments beginning with the crude tankers segment. TCEs for the crude tankers segment were $93 million for the quarter compared to $72 million in the fourth quarter of last year. This increase primarily resulted from the impact of higher average blended rates in the VLCC, Suezmax, Aframax, and Panamax sectors. Turning to the product carriers segment, TCE revenues were $25 million for the quarter compared to $21 million in the fourth quarter of last year. This increase also primarily resulted from the impact of higher average daily blended rates earned by the LR1, LR2 and MR fleets.

Overall, as reflected in the chart on the top left, consolidated TCE revenues for the fourth quarter of 2019 were a $118 million compared to $93 million in fourth quarter of 2018. The increase was principally driven by substantially higher average daily rates earned across the crude and product carrier fleets this quarter compared to last year's fourth quarter.

Looking at the chart at the top right of the page, adjusted EBITDA was $72 million for the quarter compared to $46 million in the same period of 2018 and again, this increase was principally driven by higher daily rates. On the bottom half of the page, if we look at the results sequentially, i.e. quarter to quarter, consolidated TCE revenues and adjusted EBITDA for the fourth quarter were up from the third quarter increasing by $53 million and $48 million respectively.

Now turning to Slide 10, we provided Q4 review and Q1 discussion [Phonetic]. I'll discuss our bookings for Q1 thus far which are significantly higher relative to the fourth quarter based on the strong rate environment, particularly at the beginning of January. We have booked 74% of available Q1 spot days for our VLCCs at an average of approximately $75,000 a day. This rate also does reflect some positioning voyages for our scrubber fitted ships. For Suezmax, 71% have been fixed at an average of approximately $57,700 per day, 66% of our available days are fixed for Aframax and LR2s at approximately $32,800 and 78% of Panamax and LR1 spot days have been fixed at approximately $40,000 a day. On the MR side, we have booked 73% of our first quarter spot days at an average of approximately $19,000 per day. We expect the full quarter numbers will be lower based on the significantly lower current spot market deliveries demand from the coronavirus.

Turning to Page 11. The cash cost TCE break evens for the 12 months ended December 31, 2019, are illustrated on this slide. International Seaways' overall breakeven rate was $20,400 per day for the 12 months ended December 31. These rates are the all in daily rates our owned vessels must earn to cover operating costs, dry docking, G&A expense and debt service costs, which means scheduled interest, 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 $18,900 per vessel per day. We've included on the far right side of the bar chart, the all-in daily breakeven costs for the forward 12 months ending December 31, 2020. We expect our overall breakeven rate to be $20,500 per day, essentially unchanged from 2019. But note that the debt service is changing, such that we are amortizing more and paying a lower amount of interest.

Going forward, I also would like to provide cost guidance for 2020 consistent with what we have provided to you previously. So, for 2020, we expect regular daily opex, which includes all running costs, insurance, management fees and other similar and related expenses for our various classes to be as follows; for VLCCs $8,400 per day, for Suezmax $7,700, for Aframax $8,100, for Panamax $7,900 and for MRs $7,500 per day. Further guidance for 2020, we expect the drydock and capex expenses to be $27 million and $40 million respectively with more details on this provided in the appendix on the deck.

To go with these expenses, we would give you the guidance that we expect the following out-of-service days in 2020. For VLCCs 622 days, mainly in Q1 and Q2, a higher than previously expected number primarily due to scrubber installations coupled with delays due to Coronavirus, 10 days for Suezmax fleet, for Aframax and LR2s 29 days for the year and for the Panamax/LR1 fleet, 392 days, and finally for MR, 35 [Phonetic] days. An updated schedule by quarter is provided in the appendix.

Continuing with cost guidance for your modeling, we expect 2020 interest expense will be $37 million total, of which importantly $35 million is cash and the balance of $3 million is amortization of unamortized discounts and deferred fees, which are of course non-cash items. Additionally, our debt calls for $11 million of scheduled principal repayments in the first quarter and $20 million in future quarters. For 2020 G&A, we expect it to be in the region of $28 million all-in, which includes non-cash charges in the amount of $5 million, so $23 million in cash G&A. Finally, we expect about $5 million in equity income and $19 million for depreciation and amortization per quarter.

Now, if we could turn to Page 12 for our cash bridge. Moving from left to right, we began the fourth quarter with total cash and liquidity of $174 million. During the quarter, we generated $72 million of adjusted EBITDA. This amount includes $5 million in equity income from the JVs, which is non-cash. So therefore, we deducted to reach a cash figure but then add back cash distributions from the JVs, which were $3 million from the FSO JV. We extended $33 million in dry-docking and capex. Cash interest and principal paid in our debt was $25 million excluding our 2017 term loan prepayment which totaled another $100 million. Proceeds from the sale of the LNG joint venture were $123 million, so the net result of the various cash movements was that we ended the quarter with approximately $150 million of cash and a $50 million undrawn revolver yielding total liquidity of $200 million.

Now, turning to Slide 13 for a quick look at the balance sheet. Before I detail the steps we have taken to transform our capital structure following our recent financing, I would like to briefly highlight a number of balance sheet specifics as of the end of the year. At December 31, 2019, we had $1.8 billion in assets compared to $591 million of long-term debt. In addition, as mentioned, we had a $50 million revolving credit facility that was undrawn as of December 31.

Now turning to Slide 14, Lois mentioned earlier in January, we closed on a $390 million refinancing that will reduce annual interest expense by approximately $15 million by lowering the Company's average interest rates on the refinanced portion of the debt by 350 basis points for 3.5% and the overall average interest rates for the Company by 200 basis points or 2%. Specifically, our new credit facility consists of a five-year $300 million core facility, a five-year $40 million core revolver, of which $20 million has been drawn and a 2.5-year $50 million transition facility. Borrowings on the core facility and the core revolver initially bear interest at LIBOR plus 260 basis points or 2.6%, while borrowings at the transition facility bear interest at LIBOR plus 350 basis points.

Margins on the two core facilities may adjust by 20 basis points based on whether the Company meets certain leverage ratios. The Company currently anticipates that margin in these facilities will therefore decrease to 2.4% by the third quarter of 2020. The proceeds that fund the facilities were used to refinance $380 million of adjusting high cost secured and unsecured debt of the Company and its subsidiaries. This included repaying the Company's 2017 term loan facility and the senior secured credit agreement with ABN AMRO as well as repurchasing the Company's outstanding 10.75% subordinated notes.

We very much appreciate the ongoing support of our leading banking group, which now includes seven major shipping banks in raising these attractive new credit facilities, which reflects our strong execution over the past three years and compelling long-term prospects. As you can see at the bottom right of the slide, our total debt to capital now stands at 34%, while our net loan to value stands at just 41%. Our liquidity position post refinancing remains strong at approximately $130 million of cash and $20 million of undrawn revolver. Essentially, the refinancing parted a $40 million deleveraging and $430 million of higher cost debt and available revolver was placed with $390 million of new bank debt and revolver availability.

Turning to Slide 15 now, briefly I would like to highlight the sustainability linked pricing mechanism included in the new loan facility, which Lois mentioned earlier on the call. This is a first of its kind for a publicly listed tank router and has been certified by an independent leading firm in the ESG and corporate governance research ensuring that it meets sustainability-linked loan principles. The adjustment in pricing will be linked to the carbon efficiency of the INSW fleet as it relates to CO2 emissions year-over-year such that it aligns with the International Maritime Organization's 50% industry reduction target in greenhouse gas emissions by 2050. The target emission reductions follow the trajectory outlined in Poseidon principles. The global framework used by financial institutions to assess the climbing alignment of their ship finance portfolio. We are really pleased to be working with a bank group that supports those goals and ours at the same time. If we need to target to future years, we will receive a modest discount or pay a modest increase if we do not.

Turning to Slide 16, we illustrate the strong earnings power of our fleet. In order to demonstrate the impact of a rising rate environment we present two scenarios. The first is mid cycle by which we mean the 15-year average rate. The second is the recent peak represented by 2015 average rates. You can see that based on the mid cycle average rates, our current fleet will generate an annualized adjusted EBITDA of $243 million and also $4.10 per share of EPS. If rates return to 2015 levels that would represent $441 million of debt and $10.88 of earnings per share.

I'd like to highlight that our past success in refining our fleet growth and modernization strategy has significantly enhanced our upside potential for capitalizing on a market recovery in both the product and crude tanker segment. We continue to maintain significant operating leverage and as a reminder, every $5,000 increase in spot rates in every vessel class would result in an increase of $72 million in cash flow, which also corresponds to $2.46 in earnings per share per annum.

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

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you very much, Jeff. In summary, please turn to Slide 18. Our 2019 and year-to-date 2020 results underscore the significant progress that we have made enhancing our earnings power and our financial strength, unlocking value for shareholders and implementing our disciplined and accretive capital allocation strategy.

First, we continue to implement initiatives to optimize shareholder value, which over the past three years has included Seaways capitalizing on attractive asset values at the bottom of the cycle and monetizing a non-core asset to prepay debt and reduce our cost of capital. With the goal of continuing to effectively allocate capital through the tanker cycle, we have once again shifted the priority of our disciplined capital allocation strategy and are pleased to have worked with our Board to establish a program to begin to return capital to shareholders. We expect the program, which will initially consist of a fixed quarterly dividend of $0.06 per share to create long-term shareholder value, while providing us the flexibility to continue to allocate capital to best serve shareholders. In terms of attractive opportunities in the near-term in addition to the dividend, we believe a $30 million share repurchase program can further unlock value for our shareholders based on our stock's current valuation relative to NAV. In future quarters, we will continue to evaluate how to best allocate capital balancing dividends, share buybacks and vessel purchases based on the existing market conditions.

Second, we transformed our capital structure through a combination of paying down expensive debt and completing a $380 million refinancing. This enabled us to reduce our cost of capital and ensured an appropriate capital structure for the future while maintaining one of the lowest leverage profiles in the industry.

Finally, our significant operating leverage and our earnings power were also evident in 2019. We capitalized on the strong market in the fourth quarter, returning to profitability and ending the year with over $150 million in cash and $200 million in total liquidity. While the tanker market recovery has paused due to the sentiment around the coronavirus, the increased rates, our sizable fleet of product and crude tankers earned in the fourth quarter and at the beginning of the first quarter demonstrates Seaways' strong prospects in a robust market.

As we progress throughout the year, we believe that supply and demand fundamentals remain supportive of a strengthening market once the coronavirus has been contained. Importantly Seaways continues to be well positioned to capitalize on the tanker market's strong long-term prospects. Based on our sizable spot exposure, our operating leverage is substantial with every $5,000 per day increase in rates, corresponding to $72 million in EBITDA and $0.62 per share in quarterly earnings.

We will now open up the call to questions. Operator?

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Ben Nolan with Stifel. Please go ahead.

Ben Nolan -- Stifel -- Analyst

Hey, good morning, Lois and Jeff. So, I have a couple or maybe, actually three. So, the first is just from a capital structure perspective, I think, it is fantastic you guys have been able to pay down the debt that you have and are now substantially less levered. Do you have a target in mind? I mean is this your lower than average, but you could argue that maybe the Group was higher than it needed to be, is there a sweet spot for you?

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

Hi, good morning, Ben. Well, we've often said that that our targeted leverage that we allow ourselves to go up to which we did during the period when we were buying vessels was around the area of 50% net loan to value. So, obviously, we're below that. We don't have a set target to get down to. We just like the idea of allocating capital to deleverage first before we turn as we have now beginning to return capital to shareholders. We have with this new, I guess, importantly, I'd say with this new balance sheet, a debt that has naturally more amortization built into it. So, we will be naturally deleveraging at a pretty healthy clip about equal to depreciation, which I think it's really good.

So, I think, we're sort of meeting deleveraging goals, and so we don't feel the need to push through more than that, but one of the other things I'd say is that one we said about deleveraging is optionality. If there was a really great ship purchase or something like that, by being lower than the peers, we have the option to temporarily lever up to allocate capital that way if that kind of opportunity presents itself.

Ben Nolan -- Stifel -- Analyst

Right, great. And then my second is sort of related to the market, but just getting a sense of what you're seeing and I'll cram them together. The first is, are you seeing any changes as it relates to this Rosneft sanctioning stuff? And then the second is, I believe that the heavy fuel carriage ban went into place on Sunday if I'm not mistaken, it's obviously just a few days in, but has there been any changes as it relates to bunkering or fueling or anything that you're seeing as a function of that carriage ban in addition to the IMO 2020 sanction for -- implementation at the beginning?

Lois K. Zabrocky -- President and Chief Executive Officer

Ben I would take the carriage ban question first. For our fleet, we are in a good position. So, it's really not affecting us, but we are seeing in the bunker markets, there are some vessels that have high sulfur fuel oil on board that may need to lighter that off and that is something that is, I don't think we are dominant in the market, but there are a few individual ships that are experiencing those issues. And then, what was your other question, I'm sorry?

Ben Nolan -- Stifel -- Analyst

About Rosneft?

Lois K. Zabrocky -- President and Chief Executive Officer

Yes, we are starting to see India came out and I believe the majority of those barrels were being moved from Venezuela to India and India is now winding down over 300,000 barrels a day that they were receiving from Venezuela. So, we see that that's going to cause a few vessels to be idle that have been engaged in that trade and we should see India start to source barrels from other areas; Brazil, other areas in the world as opposed to Venezuela.

Ben Nolan -- Stifel -- Analyst

Yes, great, I appreciate it. Thanks Lois.

Operator

The next question comes from Randy Giveans with Jefferies. Please go ahead.

Randy Giveans -- Jefferies -- Analyst

Hi, howdy, Lois, Jeff, David, how are you all?

Lois K. Zabrocky -- President and Chief Executive Officer

Good. How are you?

Randy Giveans -- Jefferies -- Analyst

Good. I'd say a nice to see the newly instituted dividend, so congrats on that. But looking at that, how did you determine that dividend amount of I guess $0.06 a share per quarter equates about $7 million a year in a coincidentally matches the 10-year treasury yield of 1.1% here? And then as you mentioned, with your balance sheet and I guess the $130 million in pro forma cash shares trading at a massive discount to NAV, do you expect share repurchases to be meaningful in the near-term or is it going to be pretty conservative with coronavirus and whatnot?

Lois K. Zabrocky -- President and Chief Executive Officer

So, I'll start Randy and I'll let Jeff finish it. Essentially the $0.06 per quarter, we feel is long term very sustainable and we thought a lot about averages and what the market looks like out there, and then on top of that, I would let Jeff talk about it.

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

Yes, I mean, we definitely had been looking at this for a while, Randy, well before any effects of the coronavirus, etc., But and that came and we said that's it's actually good test case. We're comfortable with where our balance sheet is, where our breakevens are, that a number like this is sustainable and you might say small, but I thank you. That is at least something we thought about it, it was not that the 10-year -- a month ago, but this is right around that, it's not that far off the S&P 500 or what the Russell 2000 says. It's in this in day and age a number that is helpful to investor to have some return, but we feel that, that as I said in my comments, that where our shares are trading today, yes, we find our share price to be a very compelling acquisition.

So, I think we are saying we have a $30 million share repurchase program in place, we have for a while. I would also note that we're super pleased that the steps we've taken going back to selling the LNG, which JV would then enable us to get complete the refinancing of our balance sheet in a way that we are really happy with gives us flexibility to approach this kind of returning cash to shareholders in different ways. So, I think you're seeing the fixed part and you're likely to see us at these prices to be actively involved with using our share repurchase program.

Randy Giveans -- Jefferies -- Analyst

Great. Yes, I think a great use of cash there. I'm now digging deeper into the coronavirus, as one of the few tanker owners with exposure to China, I guess, in three different ways, can you give further color on crude imports into China, currently products/exports out of China and then the ongoing delays for scrubber retrofits in the Chinese yards?

Lois K. Zabrocky -- President and Chief Executive Officer

So, that's very comprehensive, Randy. So, the first part of the equation when we look at the VLCC fleet and what the liftings have been, the fixtures have been pretty consistent, but we have seen vessels get revised orders where a vessel perhaps was originally chartered with the intention to discharge China given revised discharge orders for India. We've seen vessels with discharge orders for China then get revised orders for storage off of Singapore. So, it is a very dynamic situation, and we are seeing fewer barrels actually discharging into China, but the market is still lifting the cargos and you're observing ships with alternate discharge ports. As far as products coming out of China, because the refineries are definitely running at reduced pace, you're seeing fewer product exports out of China at this time.

And then finally on the scrubber front, it is, the coronavirus has definitely impacted scrubber installations for ourselves, particularly on the two vessels that are in the yard. We are seeing workers being repatriated to the yards, and the team is working through this, so that progress is being made on our vessels that we have there, but we have definitely been impacted by that on the VLCCs. And then the final point that I would make is that the Vs are the category that has been most impacted and I would say the most resilient part of the fleet has been Aframaxs, Panamaxs and MRs where we are still seeing in the second half of the first quarter quite strong rates being posted.

Randy Giveans -- Jefferies -- Analyst

Got it, OK. A comprehensive question with an even more comprehensive answer, so nicely done. That's it for me. Thanks again.

Lois K. Zabrocky -- President and Chief Executive Officer

Thanks, Randy.

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

Thanks, Randy.

Operator

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

Omar Nokta -- Clarksons Platou Securities -- Analyst

Thank you. Hi, Lois and Jeff. Just had a couple of questions, maybe first, just wanted to get a sense of the cash position, the liquidity position, you ended the year with $89 million of cash, but there is also the $60 million of restricted cash. Jeff, apologies if you already addressed this on the call, but was any of that restricted cash made available as part of the refinancing?

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

Yes, Omar, yes, absolutely. We mentioned a large part of what had been listed or what is listed on line as restricted cash flow be. The go away about $43 million worth of the total that's associated with the term loan B, and there is no longer term loan B. So that the restrictions associated with it naturally go away. So and we did give guidance on the call of what the balance sheet looked like post refinancing, which was pro forma $130 million of cash and $20 million of undrawn revolver. So, a little less liquidity of that because of the refinancing was itself deleveraging transaction, but quite a lot less restricted cash in that amount.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay, thanks for that. That's good. And then also just maybe for the sales of the, the two Aframax's, it wasn't clear in the press release, but I, presumably, the first one, are those both 1Q events, those proceeds you think?

Derek Solon -- Vice President and Chief Commercial Officer

Omar, hi, it's Derek Solon speaking. The first Aframax that we sold [Indecipherable] delivered last month and then we expect the brand to deliver this month. So, all within Q1.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Got it. Thank you. And then also, sorry, I just wanted to double check, Lois you mentioned on the call your scrubber update and just want to say if what I'm saying is correct, the 10 VLCCs are in the program, two are in the yards currently, three have completed, five are in the queue and the plan is for basically all 10 to be trading by mid-year. Is that correct?

Lois K. Zabrocky -- President and Chief Executive Officer

That's correct. And when we say in the queue, those vessels are still actively trading and then we will cycle into the yards.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay, got it. And sorry to keep going, but maybe just one more question and just kind of thinking about the Panamax business you guys have is obviously a niche market you're operating in and clearly the $40,000 a day you've reported for thus far into the first quarter is well above what we are seeing whether it's for an LR1 or Panamax trading dirty. Could you maybe just give, you mentioned it briefly in the call, but could you just maybe give a perspective of how those ships are trading and then also you've invested into a new LR1 that's going to trade there, are there other opportunities to acquire more ships and put them into that pool? Thank you.

Lois K. Zabrocky -- President and Chief Executive Officer

No, absolutely that joint venture is trading largely in North and South America and back and forth between the Panama Canal. We did specifically buy the Seaways Guayaquil for that trade. It is a little bit of an echo balance there. It is not a trade that we like to inundate with too many vessels, so we're careful on bringing ships the end, but it is definitely really the highest earning place that you can put a Panamax or LR1 into the market and it is something that we have really enjoyed with Flopec and Ultragas.

Omar Nokta -- Clarksons Platou Securities -- Analyst

Okay, all right. Got it. Well thanks Lois for that color and thanks again. Thank you.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Greg Lewis with BTIG. Please go ahead.

Greg Lewis -- BTIG -- Analyst

Thank you, and good morning. Just kind of, I had a question about capital allocation but I just kind of wanted to ask it a little different, and I guess piggybacking on Omar's comments about potential opportunities in the market and clearly, I think we all know that the stock is trading at a discount to NAV, you have the buyback out in the market. Lois, I was just curious around your comments, how we should think about the company trying the balance, the ability to be buying back stock and versus allocating that capital to ships when your stock is at a discount to NAV, right, I mean is that, is that something that goes into the equation when you're thinking about whether it's time to deploy capital on new vessels, just kind of curious, any color you can provide around that?

Lois K. Zabrocky -- President and Chief Executive Officer

Absolutely. We look at presently as Jeff said, and I would reiterate that the discount that our shares are trading at really impacted by the risk off in the stock market for shipping, tanker shipping stocks to be outright the absolute best value, best place to put our cash. We absolutely consider every piece of our capital when we are developing the capital allocation priorities. So, I would say that is priority one at the moment.

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

And Greg, I just stress that, as we all have seen in the last, just in two months, things change very quickly with respect to share price, sentiment, asset values. So, the important thing is to be nimble and be able and flexible, I guess, what we used to be able to allocate the capital where the best return appears, which changes in between these say quarterly conference calls, right, so, you just have to be ready for whatever is thrown out at you.

Lois K. Zabrocky -- President and Chief Executive Officer

We like that idea of being actively responsive to the market as opposed to being completely formulaic.

Greg Lewis -- BTIG -- Analyst

Perfect, absolutely volatile stock market, volatile and asset prices as well. And just one more question, just because it kind of happened and I think you've touched on a little bit throughout the call. But on, clearly over the last couple of weeks, VLCC rates have stabilized and pushed higher. I'm just kind of curious, Lois, any thoughts around that, was it just a too far too low, just kind of curious, V-rates have doubled, but when you double it from $15,000 to $30,000, it's maybe not as impressive, but nevertheless VLCC rates have doubled over the last couple of weeks. I just kind of curious on any color you can provide around that?

Lois K. Zabrocky -- President and Chief Executive Officer

Well, when we have our in-depth conversations with the traders on the desk, cargo is still moving, the liftings are still happening, the Cosco fleet is going to work. The 25, 26 vessels are now being implemented back into the fleet, we are still seeing a number of vessels, still around 24 VLCCs off Singapore that had varying loads of either high sulfur fuel, very low-sulfur fuel, all different grades of bunkers. So, as the year progresses, we'll see if that becomes part of the logistical chain.

So, when you really look at the whole balance, barrels are moving on the water and, yes, Vs found their bottom and then came up a little bit and I would just note that rates year-over-year are better now than they were last year. So, I really think a little bit of temperance here on the, I know that everybody in the world is reeling from the coronavirus, but quite frankly, I think that the market is a little bit more resilient than what the share price sell off has given it credit for.

Greg Lewis -- BTIG -- Analyst

Lois, when you say your comment before about the other sectors really hanging in there as far as the tightness of the market overall, so you saw a little drop in demand in China naturally but that's returning as you said in the other sectors really holds then pretty good.

Lois K. Zabrocky -- President and Chief Executive Officer

I mean US Gulf is pushing out 3.5 million barrels, 3.6 million barrels a day and a lot of that is going on Aframax's and Suezmax's at the moment, and that has kept those sectors pretty resilient.

Greg Lewis -- BTIG -- Analyst

Perfect day. Thank you very much for the time everybody.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you.

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

Thanks, Greg.

Operator

Our next question comes from Liam Burke with B. Riley FBR. Please go ahead.

Liam Burke -- B. Riley FBR -- Analyst

Thank you. Good morning, Lois. Good morning, Jeff.

Lois K. Zabrocky -- President and Chief Executive Officer

Good morning.

Liam Burke -- B. Riley FBR -- Analyst

Lois, on the VLCCs, you mentioned scrapping being a major push in terms of keeping capacity low. Would you anticipate any change in that if second hand rates hold up with these levels here?

Lois K. Zabrocky -- President and Chief Executive Officer

I would say that right now, we have seen precious little scrapping year-to-date, but what we really kind of emphasize is that age, that fleet is aging in there and bottle necking. So, when you see these rates that are depressed and if a modern V is earning 25, then an older V will be earning substantively less and if that looks like it will persist for a period of time, then we would see some scrapping that would then cause a rebound. But right now, we haven't seen there yet. I don't know if we have even seen a V yet -- one V -- we've seen one VLCC scrapped in 2020. But as people come up against the ballast water and competing with scrubber fitted VLCCs and the older, less efficient units, we may see more pressure on those older units.

Liam Burke -- B. Riley FBR -- Analyst

Great. And on opex, you guided toward flat year-over-year opex per vessel. Do you have enough levers to maintain that kind of discipline on the expense side?

Lois K. Zabrocky -- President and Chief Executive Officer

Absolutely. And our team is working with The Group and digging into all of our cost categories in 2020. So, we do feel pretty confident about holding those levels.

Liam Burke -- B. Riley FBR -- Analyst

Thank you, Lois.

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you.

Operator

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

Lois K. Zabrocky -- President and Chief Executive Officer

Thank you all very much for joining the call. We are excited to implement our sustainable $0.06 dividend per quarter, which will be supplemented by opportunistic additional capital allocation. Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 54 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

Derek Solon -- Vice President and Chief Commercial Officer

Ben Nolan -- Stifel -- Analyst

Randy Giveans -- Jefferies -- Analyst

Omar Nokta -- Clarksons Platou Securities -- Analyst

Greg Lewis -- BTIG -- Analyst

Liam Burke -- B. Riley FBR -- Analyst

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