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Date
Thursday, Nov. 6, 2025, at 9 a.m. ET
Call participants
- President and Chief Executive Officer — Lois K. Zabrocky
- Chief Financial Officer — Jeffrey D. Pribor
- Chief Commercial Officer — Derek G. Solon
- Vice President, Investor Relations — James D. Small
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Takeaways
- Net Income -- $71 million in net income for Q3 2025, equating to $1.42 per diluted share reported for Q3 2025.
- Adjusted Net Income -- $57 million in adjusted net income for Q3 2025, or $1.15 per diluted share for the third quarter, excluding vessel sale gains.
- Adjusted EBITDA -- $108 million in adjusted EBITDA for Q3 2025, with reconciliation provided in the call appendix.
- Free Cash Flow -- Approximately $63 million in free cash flow for the third quarter, calculated as adjusted EBITDA less debt service, dry dock, and capex.
- Total Liquidity -- $985 million in total liquidity at the end of the third quarter, comprising $413 million in cash at quarter end and $572 million in undrawn revolver availability.
- Net Debt -- Under $400 million in net debt at quarter end, resulting in a net loan-to-value of 13% on $3 billion in fleet value.
- Combined Dividend -- $0.86 per share dividend declared for payment in December 2025; fifth consecutive quarter with a payout ratio of at least 75%.
- Share Repurchase Program -- $50 million share repurchase program extended through 2026, providing another capital return avenue.
- Vessel Transactions -- Sold five vessels with an average age above 17 years for $67 million in proceeds in Q3 2025, plus three additional MRs to be sold for about $37 million in Q4 2025.
- New Vessel Deliveries -- Took delivery of two of six LR1s in Q3 2025, with $82 million in ECA-backed financing drawn in Q3 2025; one eco-modern VLCC to be delivered, with $107 million due in Q4 2025.
- Future Contracted Revenue -- Over $230 million in contracted charter revenue with an average 1.5-year duration remains on the books as of Q3 2025.
- Senior Unsecured Bond Issue -- Issued $250 million in senior unsecured bonds in Q3 2025, nearly matching lease repayment requirements, cited as one of the lowest coupons for a first-time tanker-sector issuer.
- Fleet Profile -- Average fleet age is about 10 years, with 31 unencumbered vessels, and ongoing asset sales and purchases planned for continued renewal.
- Spot TCE -- Achieved strong rate increases in the fourth quarter, with MR rates reaching $29,000 per day in Q4 2025 for days booked.
- Expense Guidance -- 2026 full-year spot cash breakeven is expected to be around $14,500 per day, reflecting increased operating costs and higher dry dock expense versus the prior view.
Summary
International Seaways (INSW +4.18%) management emphasized that OPEC+ production normalization and reduced voluntary cuts are benefiting both VLCC and midsize crude tanker segments, with Suezmax and Aframax rates rising as VLCCs concentrate on core trades. The company confirmed the sale of eight vessels through October 2025 for approximately $100 million in proceeds, offset by a nearly equivalent investment in a new eco-modern VLCC to be delivered in Q4 2025. Lois K. Zabrocky stated, "We continue to renew our fleet so that our average age is about 10 years old and what we see as the sweet spot for tanker investments in return." The call detailed that less than 800 ships are scheduled for delivery industrywide over the next four years—about one-third the number of vessels likely to face age-based trading restrictions, illustrating near-term supply constraints. Management reported a compounded annual total shareholder return of more than 20% over the past nine years, with a commitment to ongoing high payout ratios and capital returns.
- Derek G. Solon explained, "with that healthy VLCC market, you're gonna have a healthy midsized crude tanker market," attributing improvements in Suezmax and Aframax rates to VLCC normalization in the fourth quarter.
- The company now requires spot vessels to earn under $15,000 per day to break even in 2026.
- Sanctions pressure and shifting trade flows are increasing compliance fleet utilization in the MR product carrier segment, notably supporting elevated day rates relative to sector indices.
- Lois K. Zabrocky noted, "Well, you know, on those older MRs, we've had a high degree of success, and we are starting to see asset values pick up reflecting, you know, increased rates. You know, we will continue to judiciously upgrade the fleet going forward. So, you know, in 2026, it'll be more of the same of some disposals of the older vessels, and then we wanna high-grade the fleet. So that we really improve our earnings capability," indicating ongoing asset optimization despite rising asset values.
Industry glossary
- VLCC (Very Large Crude Carrier): An oil tanker with capacity typically between 200,000 and 320,000 deadweight tons, predominantly used for long-haul crude transport.
- LR1: Long Range 1 product tanker, generally between 55,000 and 79,999 deadweight tons, specializing in the transport of refined petroleum products.
- MR (Medium Range) Tanker: Product tanker with capacity between 34,000 and 54,999 deadweight tons, servicing regional oil and clean petroleum product trades.
- TCE (Time Charter Equivalent): A shipping performance metric that standardizes revenue per day, permitting comparison across time-charter and spot fixtures.
- Sale-Leaseback: Transaction where the owner sells an asset and leases it back, maintaining operational control while unlocking capital.
- ECA Financing: Export Credit Agency-backed financing, typically providing favorable terms for capital equipment procurement like vessel newbuilds.
Full Conference Call Transcript
James D. Small: Good morning, everyone. And welcome to International Seaways' earnings call for 2025. Before we begin, I would like to start off by advising everyone with us on the call today. During this call and in the accompanying presentation, management may make forward-looking statements regarding the company or the industry in which it operates.
These may address, without limitation, the following topics: outlooks for the crude and product tanker markets, changes in trading patterns, forecasts of world and regional economic activity, forecasts of the demand for and production of oil and petroleum products, the company's strategy and business prospects, expectations about revenues and expenses, including vessel, charter hire, and G&A expenses, estimated future bookings, TCE rates and capital expenditures, projected dry dock and off-hire days, new build vessel construction, vessel purchases and sales, anticipated and recent financing transactions, and plans to issue dividends, the effects of ongoing and threatened conflicts around the world, economic, regulatory, and political developments in the United States and globally, including the impact of protectionist trade regulations.
The company's ability to achieve its financing and other objectives and its consideration of strategic alternatives and the company's relationships with its stakeholders. Any such forward-looking statements take into account various assumptions made by management, based on a number of factors including 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, that could cause actual results to differ materially from those implied or expressed by the factors, risks, and uncertainties that could cause the company's actual results to differ from expectations.
Include those described in our annual report on Form 10-K for 2024, and our quarterly reports on Form 10-Q for 2025, as well as in other filings that we have made and may make with the US Securities and Exchange Commission. Now let me turn the call over to our President and Chief Executive Officer, Lois K. Zabrocky. Lois?
Lois K. Zabrocky: Thank you so much, James. Good morning, everyone. Thank you for joining International Seaways' Earnings Call for 2025. On Slide four of the presentation, which you can find in the Investor Relations section of our website, net income for the third quarter was $71 million or $1.42 per diluted share. Excluding gains on vessel sales, adjusted net income for the third quarter was $57 million or $1.15 per diluted share with adjusted EBITDA of $108 million. Today, we also announced a combined dividend of $0.86 per share to be paid in December as you can see in the upper right section of the slide. This is our fifth consecutive quarter with a payout ratio of at least 75%.
We continue to believe in building on our track record of returning to shareholders as part of our consistent and balanced capital allocation strategy. We also announced the extension of our $50 million share repurchase program to 2026. We believe repurchasing shares is an option for us in addition to our payout ratio. On the lower left part of the page, we took delivery of two of our six LR1 vessels. The Seaway Alacran delivered in September and the Seaways Balboa delivered October 30. In connection with the delivery, we borrowed $82 million or $41 million per vessel on our new Korean export agency-backed finance that we put in place during the quarter.
On our last call, we announced the ECA financing for up to $240 million with a blended twenty-year amortization profile and a margin of 125 basis points with a twelve-year maturity. The balance of the financing will be drawn upon delivery of each new building vessel in 2026 and the company has only $30 million of additional liquidity required to complete the program. During the third quarter, we sold five vessels, with an average age above 17 years old for proceeds of $67 million. Another three of our oldest MRs with an average age close to 19 years old have been agreed to be sold in the fourth quarter for proceeds of about $37 million.
When these transactions close, we expect to record a gain on the sale. Also in the fourth quarter, we expect to take delivery of our 2020 built scrubber-fitted VLCC which we will utilize our available liquidity to pay the remaining $107 million due since making a deposit of $12 million in the third quarter. Overall, in 2025, through October, we sold eight vessels for proceeds of around $100 million and will be purchasing this eco-modern VLCC in the fourth quarter for close to the same amount. Fleet renewal is always part of our strategy, and we expect to execute sales and purchases throughout the tanker cycle. We continue to work through our time charter book as well.
While we did not execute any fresh charters this quarter, and even though some have rolled off, we will have over $230 million in future contracted revenue with an average duration of about one and a half years. We continue to work with the market for opportunities as we believe generally a portion of the fleet will remain on fixed charter. Onto the balance sheet. The lower right part of the page, we continue to explore and execute options to enhance our capital stack.
After executing the ECA facility document, to fund our LR1 new building, the team went back to work on a knock-on opportunity as an option to pay for our upcoming purchase option that we declared on some of our sale leaseback. I'm very pleased with the execution to secure a coupon as one of the lowest for first-time issuers in the tanker space. Due to the strength in demand, we increased the size of the bond to $250 million which is nearly equal to the amount needed to repay the leases. We're very grateful to welcome in our new credit investors and quite proud of the success and the execution of the bond.
Due to the timing of the settlement of the bond, in the third quarter, and repayment of the leases in the fourth quarter, we ended the third quarter with $985 million in total liquidity, with $413 million in cash and $572 million in undrawn revolver capacity. Net debt at the end of the quarter was under $400 million which on over $3 billion in fleet value our net loan to value is a very low 13%. Turning over to slide five.
We've updated our standard set of bullets on tanker demand drivers with a subtle green up arrow next to the bullets representing positive for tankers the black dash representing a neutral impact and a red down arrow, meaning the topic is not good for tanker demand. Without reading each bullet individually, we believe demand fundamentals are solid. And continue to support a constructive outlook for seaborne transportation.
Oil demand growth remains healthy, at 1 million barrels per day of growth for this year and next OPEC plus is supplementing a million barrels per day of production growth from outside the group with their own production increases that we have not seen the full scope of what could be on the water soon. Some countries in the cartel had penalties for overproduction during the cuts and others were using some production increase in country for power generation. The fourth quarter looks to be the environment where the increased production is hitting the water.
For now, it's much needed after the inventory levels have been near their historic lows as you can see in the chart on the lower left. We are still monitoring how these increased barrels on the water can affect the tanker markets in the longer term. The geopolitical intensity on tankers remains strong with port fee discussions, altering trade routes, and working through a multitude of scenarios. That could impact our business. On the lower right-hand chart, sanctioned barrels out of Russia and Iran have historically been transported to India and China. Lately, we've been seeing more pressure on those exports on those two specific countries in particular, along with more sanctions put on the tanker fleet.
Both effects could be positive for international tanker markets. And we expect more development in time as we have had over the last few years. Moving on to the supply side. On Slide six of the presentation. It remains one of the most compelling cases for tanker shipping. Orders have slowed in 2025 following a surge in 2024, as you can see on the lower left-hand chart. Tankers on order represent 14% of the fleet that deliver over the next four to five years. Over a twenty-five-year life of a vessel, we would expect as much with a 4% increase per year of removal candidates multiplied by the three to four years it takes to deliver a new ship.
In practicality, based on actual ship delivery, there is a significant number of removal candidates that were built in the golden age from 2004 to 2010. By the time the order book delivers, fully in 2029, nearly 50% of the fleet will be over twenty years old. And likely excluded from the commercial trade. There is simply not enough tankers to replace the current aging fleet. As we show in the graph on the lower right-hand side. Less than 800 ships are delivering over the next four years, representing one-third of ships likely to face challenges in securing tonnage for the global trade. Not to mention further sanctions or environmental regulations.
We also highlighted in dark blue as sanctioned vessels in the chart which currently tops the number of vessels on order. We believe these fundamentals should translate into a continued upcycle over the next few years and Seaways remains well-positioned to capitalize on these market conditions. We will continue to execute our balanced capital allocation approach to renew our fleet and to adapt to industry conditions. With a strong balance sheet, while returning to shareholders. I'm now going to turn it over to our CFO, Jeffrey D. Pribor, to provide the financial review. Jeff?
Jeffrey D. Pribor: Thanks, Lois, and good morning, everyone. On Slide eight, net income for the third quarter was $71 million or $1.42 per diluted share. Excluding gains on vessel sales, our net income was $57 million or $1.15 per diluted share. On the upper right chart, adjusted EBITDA for the third quarter was $108 million. In the appendix, we provided a reconciliation from reported earnings to adjusted earnings. At the lower left chart, I would like to point out that our TCE revenues from crude and product have been evenly balanced over the past year. Our revenue and expenses were largely within expectations for the third quarter. We're pleased with our cost management. Particularly with vessel expense.
The lightering business generated approximately $9 million of revenue in the third quarter, and contributed nearly $1 million in EBITDA. After $3 million in vessel expenses, less than $4 million in charter hire, just over a million. During the summer, the number of jobs decreased. But we're pleased that since September, activity has picked back up again. Turning to our cash bridge on Slide nine. We began the quarter with total liquidity of $790 million composed of $149 million in cash, $560 million, undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we first add $108 million in adjusted EBITDA for the third quarter.
Plus $22 million of debt service and another $22 million of dry dock and capital expenditures. We therefore achieved our definition of free cash flow of about $63 million for the third quarter. This represents an annualized cash flow yield of nearly 10% on today's share price. We received $67 million proceeds from the sale of the five vessels as well as expected earlier. We also paid a $12 million deposit for a 2020 built VLCC which delivers in the fourth quarter. We paid about $36 million in LR1 new building installments and there's a $41 million drawn down from our new ECA facility. We paid $27 million on a revolver in the third quarter.
Of which $15 million offset our capacity reduction. Increasing our ongoing revolver capacity to $572 million. Net of fees, we received $247 million of proceeds from our issuance of senior unsecured bond. The remaining $38 million represents our 77¢ per share dividend, that we paid in September. The latter few bars on the chart reflect our balanced capital allocation approach. Where we utilize all the TOEs. We renewal, balance sheet optimization, and returns to shareholders. In summary, the result of our activity this quarter yielded a net increase in cash of $64 million. This equates to ending cash of $413 million, $572 million in undrawn revolvers for total liquidity of nearly $1 billion.
Naturally, this is impacted by the timing of settlement of the bond proceeds and the $258 million purchase option that we will execute on the Ocean Yield lease in the fourth quarter. Now moving to Slide 10. We have a strong financial position detailed by the balance sheet on the left-hand side of the page. Pro forma cash and liquidity remain strong at $727 million including the impact of payment of the Ocean Yield purchase option. We invested about $2 billion of vessels that cost on our books currently valued at enough, $3 billion. And with under $400 million of net debt at the end of the third quarter, our net loan to value is approximately 13%.
Shown on the lower right-hand table of the page, we have included the pro forma impacts of our debt at the end of 2026. Gross debt at the end of September was $804 million. Repay the Ocean Yield leases in November, and add another $200 million debt in connection with the LR1 new building. In the case sure because it's so Mandatory debt repayment through 2026 by $33 million giving us a little over $700 million debt by 2026. Based on our latest balance sheet initiatives. We continue to enhance our balance sheet maintain the financial flexibility necessary to facilitate growth. As well as our charge to shareholders.
Our nearest maturity in the portfolio is an end to the next decade, We have 31 unencumbered vessels on a fully delivered basis. And we have ample undrawn RCM capacity. We continue to explore ways to lower our braking cost even more and share the upside with substantial returns to shareholders. On the last slide that I'll cover, slide 11 reflects our forward-looking guidance and book to date TCE aligned with our spot cash breakeven. Starting with TCE pictures, for 2025, I'll remind you that actual TCE during our next earnings call may be. But in the fourth quarter, we are now seeing the impact of the elevated rate environment we began to see in May '3.
We currently have a blended average spot TCE of $1,400 per day we won. 7% of our fourth quarter expected that. On the right-hand side, our expected 2026 breakeven rate is about $14,500 per day. Compared with roughly $13,100 per day when we last presented a next twelve-month view. A comparable next twelve-month basis, the breakeven remains about $13,500 per day. With that difference, primarily reflecting higher operating costs and the roll-off of time charter block. The higher full-year 2026 figure mainly driven by timing. Specifically, higher dry dock costs in 2026 compared with the '2.
Based on our spot TCE book to date, and our spot breakeven, it looks like Seaways can continue to generate significant free cash flows during the fourth quarter, building on our track record of returning significant cash to shareholders. In the bottom left-hand chart, we provide some updated guidance for our expenses for the fourth quarter and our preliminary estimates for 2026. We also included in the appendix our quarterly expected off-hire and CapEx. I don't plan to read each item line by line, but encourage you to use these for modeling purposes. That concludes my remarks. I'd now like to turn the call back to Lois for her closing comments.
Lois K. Zabrocky: Thank you, Jeff. On slide 12, we have provided you with Seaway's investment highlights which I encourage you to read in its entirety. And summarizing briefly here, over the last nine years, International Seaways has built a track record of returning cash to shareholders. Maintaining a healthy balance sheet, and growing the company. Our total shareholder return represents over 20% compounded annual return. We continue to renew our fleet so that our average age is about 10 years old and what we see as the sweet spot for tanker investments in return.
We've invested in a range of tanker classes to cast a wider net for growth opportunities and to supplement our scale in each class by operating in larger pools. We aim to keep our balance sheet fortified for any down cycle. We have nearly $600 million in undrawn credit capacity to support our growth, Our net debt is under 15% of the fleet's current value, and we have 31 vessels that are unencumbered. Lastly, we need only have our spot shipped earned. Under $15,000 per day to break even in 2026. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders.
We want to thank you very much. And with that said, operator, we'd like to open the lines for questions.
Operator: Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad now. When preparing to ask your question, please ensure your device is unmuted locally. We will make a quick pause here for the questions to be registered. And our first question comes from Omar Mostafa Nokta with Jefferies.
Omar Mostafa Nokta: Hi, Lois and Jeff. Good morning. Thank you for the update. Obviously, it looks like things are continuing to work out quite nicely for you guys. You're doing a bit of everything. You're growing, rejuvenating the fleet, strengthening the balance sheet, lowering your breakevens, and obviously paying out capital. I wanted to just ask a couple of questions more market-related. Just based off of what we've been seeing here recently. And I like your slide. On slide four, you show the table of your achieved rates so far. In the fourth quarter. They're quite a bit of a step up, we'd say, across all the different segments. From what you've earned, you know, during the prior four quarters.
And I think in general, when people have been thinking about this market with OPEC and all that, it's been viewed that the VLCCs are gonna lead the way. And, certainly, we're seeing that. But we're also seeing some strength in the other classes, especially the Suezs and the Afras. Just wanted to get a sense from you given your vantage points. Is the midsized tankers, are they benefiting from what's going on with the VLCCs? Are they getting pulled into those trades? Or is this a shift in cargo flows for those vessels that maybe has to do with Russia?
Lois K. Zabrocky: Good morning, Omar. So I'm going to have Derek G. Solon, our chief commercial officer, attempt to tackle that one.
Derek G. Solon: Great. Thanks, Lois. Omar, this is Derek. Thanks for the question. I mean, you're, of course, right. You know, the fourth quarter has been a lot stronger than the prior quarters. And a lot of that is OPEC plus sort of removing some of their voluntary cuts. And kind of returning to a tanker market, a more normal tanker market where the VLCCs would lead the way on the big crude. So when the VLCCs are strengthening, what we see is they're doing a lot less of the business that they have done since post-Russia. Meaning fewer transatlantic cargoes that were really cannibalizing off Suez. And the Aframaxes.
So now that we've got the VLCCs with healthy rates back in more of their normal trades, that naturally benefits the Suez and the Afras. To the point now where we're seeing the Suezmaxes try to start to cannibalize back on VLTP trade. Right? So with that healthy VLCC market, you're gonna have a healthy midsized crude tanker market.
Omar Mostafa Nokta: Okay. Thank you. So it's a bit more it's a pull, basically. Upwards by the VLCCs. Which is the old-fashioned way. As you're kinda hinting at. And I guess maybe, you know, as we've seen this big move up in crude spot rates, your products seem to have lagged and been held back. Is this normal? Do you think crude is leading the way and eventually products will get there? But here, obviously, I'm looking at your MR performance, and it's $29,000 is still fairly strong. Quite a bit stronger than, say, indexes. But I guess maybe the indexes have lagged the crude.
Do you think that's a lag, or is it just one of those things where maybe product fits this one out and it's really more of a crude trade in the next few months?
Lois K. Zabrocky: So, yeah, Omar, imagine that, you know, we earned just shy of $26,000 a day in the third quarter on MR. And earning $29,000 a day in the fourth quarter for days booked, and that we think that's lagging. So that is just, you know, stunning stellar outperformance continued, I think, on the MR sector.
Derek G. Solon: Sure. Look. I mean, obviously, the MR rates are very healthy. I think our third quarter is strong. Our fourth quarter to date is very strong. A lot of that has to do with where we trade. In the Americas with a substantial portion of our MR fleet. But, Omar, I think it's also it's certainly not that the MRs are sitting it out because the market's strong, but there's just different geopolitical factors impacting the MRs on the positive side. So, you know, you kinda talked about Russia in the bigger crude but I talk about Russia more here on the clean sector.
Because the combination of things happening between stronger, newer sanctions on Russian oil companies, and Ukraine upping its attack on Russian oil and infrastructure. We see a lot less diesel exports from Russia. So that void is being filled by the US, by some Latin American stuff. And the benefit to us and a lot of our peers is also that those are barrels that the compliant fleet can move out the dark fleet, not the gray fleet, but the compliant fleet too. That's part of why you see where we see the MRs pretty healthy.
Omar Mostafa Nokta: Okay. Yeah. No. No. And certainly, we can see from your results that the definitely a fairly strong, I would say, outperformance. In that segment. Okay. Well, thanks, guys. I'll turn it over.
Operator: Thank you. Just as a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Next question comes from Christopher Warren Robertson with Deutsche Bank.
Christopher Warren Robertson: Thank you, operator. And thanks, Lois and Jeff, for taking my questions. Just wanted to turn to the current crude inventory levels and get your thoughts around how that inventory building cycle will play out here. And do you think given the current forward oil curve, will this incentivize any offshore storage opportunities in the coming quarters, or is the curve, you know, not steep enough yet to kind of incentivize that?
Lois K. Zabrocky: It's interesting for sure. You know, what we're seeing at the moment is that there's a lot of oil on the water. We don't really see heightened inventories yet onshore. So we speculate that some of these barrels that are on the water are not sure where they're gonna land yet as a whole. So it may be somewhat sanctions impacted. And we're watching the forward oil curve very carefully. It's pretty flat. So this is definitely not a steep contango situation that we're involved in right now. So it seems a little bit more, you know, you've got a lot of oil on the water.
Disagreements between IEA and OPEC and, you know, on just how much production is out there. So it's really interesting times for us.
Christopher Warren Robertson: Thanks, Lois. Just turning to the S&P market, given the recent momentum in rates and things, as part of your normal fleet renewal strategy. Are you seeing an increase in opportunities here to potentially divest further older assets or are rates sufficiently high at the moment that you might wanna slow down on, on divesting assets at the moment?
Lois K. Zabrocky: Well, you know, on those older MRs, we've had a high degree of success, and we are starting to see asset values pick up reflecting, you know, increased rates. You know, we will continue to judiciously upgrade the fleet going forward. So, you know, in 2026, it'll be more of the same of some disposals of the older vessels, and then we wanna high-grade the fleet. So that we really improve our earnings capability.
Christopher Warren Robertson: I appreciate the color. I'll turn it over. Thank you.
Lois K. Zabrocky: Thank you, Chris.
Operator: Just as a final reminder that if you like to ask a question, it's star one on your telephone keypad. And as we have no further questions, I will hand back over to Lois for any final comments.
Lois K. Zabrocky: Thank you very much. We appreciate it, Carla, and I want to thank everyone for tuning in to International Seaways' quarterly conference call as we continue strong rates into the winter. Thank you.