International Seaways, Inc. (INSW) is a leading provider of ocean transportation services for crude oil and refined petroleum products. The company operates a diversified fleet of 73 wholly-owned or lease-financed vessels, with an additional six LR1 newbuilds scheduled for delivery between the second half of 2025 and the third quarter of 2026, bringing the total operating and newbuild fleet to 79 vessels.
In the fiscal year 2023, International Seaways reported impressive financial results, with annual net income of $556.45 million, annual revenue of $1.07 billion, annual operating cash flow of $688.40 million, and annual free cash flow of $481.77 million. The company's strong performance continued into the first quarter of 2024, with net income of $144.49 million and adjusted EBITDA of $191.48 million.
Business Overview
International Seaways operates in two reportable segments: Crude Tankers and Product Carriers. The Crude Tankers segment includes VLCC, Suezmax, and Aframax crude tankers, while the Product Carriers segment encompasses LR2, LR1, and MR product carriers. The company's revenues are highly sensitive to patterns of supply and demand for vessels of the size and design configurations owned and operated by the company, as well as the trades in which those vessels operate.The company's revenues are derived predominantly from spot market voyage charters, with approximately 89% of its total TCE revenues generated from the spot market in the first quarter of 2024, compared to 96% in the first quarter of 2023. The company also has a portfolio of time charter contracts, with future minimum revenues of $324.6 million as of March 31, 2024, before the deduction of brokerage commissions.
Geographic Breakdown and Revenue Drivers
International Seaways operates globally, with a significant presence in the International Flag trade. The company's Crude Tankers segment generated $126.87 million in shipping revenues in the first quarter of 2024, while the Product Carriers segment contributed $147.53 million.The performance of the Crude Tankers segment was driven by strong demand for crude oil transportation, particularly in the VLCC and Suezmax sectors, which saw average daily TCE rates of $44,736 and $44,666, respectively, in the first quarter of 2024. The Product Carriers segment benefited from robust demand for refined petroleum products, with the LR2 and MR sectors achieving average daily TCE rates of $51,027 and $37,969, respectively.
The company's Crude Tankers Lightering business also contributed to the strong performance, generating $15.07 million in voyage charter revenues in the first quarter of 2024, up from $11.69 million in the same period of 2023.
Financial Ratios and Liquidity
International Seaways' financial position remains robust, with a current ratio of 2.73 and a quick ratio of 2.72 as of March 31, 2024. The company's debt-to-equity ratio stands at 0.39, indicating a healthy balance sheet.As of March 31, 2024, the company had total liquidity of $625.9 million, comprising $139.5 million in cash, $75.0 million in short-term investments, and $411.4 million in undrawn revolver capacity. This strong liquidity position provides the company with the financial flexibility to pursue strategic initiatives and navigate market fluctuations.
Fleet Renewal and Capital Allocation
International Seaways has been actively renewing and upgrading its fleet to maintain a competitive edge. In February 2024, the company entered into agreements to acquire six 2014-built and 2015-built MR Product Carriers for a total consideration of $232 million. Additionally, the company declared options to build two additional dual-fuel ready LNG 73,600 dwt LR1 Product Carriers, bringing the total number of LR1 newbuilds to six, scheduled for delivery between the second half of 2025 and the third quarter of 2026.The company's balanced capital allocation strategy includes not only fleet renewal but also debt reduction and shareholder returns. In the first quarter of 2024, the company paid $64.7 million in dividends, representing a 60% payout ratio of its adjusted net income. Over the last 12 months, the company has returned a combined dividend of $5.74 per share, translating to a 13% yield.
Risks and Guidance
The tanker industry is highly cyclical, and International Seaways is exposed to various risks, including fluctuations in the market value of vessels, declines in charter rates, and changes in fuel prices. The company's performance is also susceptible to global economic conditions, geopolitical tensions, and regulatory developments, such as environmental regulations.For the second quarter of 2024, the company has a blended average spot TCE of approximately $43,700 per day, which aligns with its spot cash breakeven rate of $13,600 per day. The company's expense guidance for the second quarter and full-year 2024 is provided in the appendix of the earnings presentation.