INSW goes into the red

May 11 2018

International Seaways (INSW) suffered a net loss of $29.3 mill in the first quarter of this year, compared to net income of $18.1 mill for 1Q17.

The net loss includes a $6.6 mill deficit from the sale of four vessels. The net loss, excluding the loss from vessel sales, was $22.7 mill.

TCE revenues for 1Q18 were $48.8 mill, compared to $84.1 mill in same period of 2017. Adjusted EBITDA was $6.5 mill, compared to $46.6 mill for 1Q17.

INSW’s FSO joint ventures closed on a credit facility in April, 2018, resulting in the company receiving $110 mill in proceeds from the drawdown of the facility.

As for the vessel sales, INSW delivered a 2002-built and a 2004-built MR to buyers in January and February, respectively and agreed to sell an older VLCC during the quarter, which was delivered to buyers in April. INSW also completed sale and leaseback transactions for two 2009-built Aframaxes in March.

Subsequent to the end of the quarter, the company agreed to sell a 2001-built Aframax, a 2004-built MR and a 2003-built VLCC. The MR was delivered to buyers in April.

“During the first quarter, we maintained our lean and scalable model with low breakevens, continued to benefit from our contracted fixed-rate charters, and increased our cash position to $91.2 mill,” said Lois Zabrocky, INSW’s president and CEO. “We also continued to execute on our fleet growth and renewal strategy in 2018 year to date, highlighted by the sale of four vessels with an average age of 15.4 years.

“We also have taken important steps to enhance our financial flexibility ahead of the anticipated second quarter closing of the acquisition of six VLCCS, which is expected to increase the size of the company’s fleet by 23% on a deadweight tonne basis, following the recent sale of older vessels.

“While preparing these vessels for sale resulted in a reduction in revenue and increased costs in the near term, the sales generated substantial additional liquidity for the acquisition and balance sheet. We are pleased to add highly-efficient modern sister ships to our fleet, positioning the Company to significantly reduce its fleet’s age and enhance its earnings power.

“We are pleased to have recently closed on an attractive credit facility for our FSO joint ventures, which provides the company with $110 mill in proceeds and underscores the sizeable contracted cash flows these vessels generate and the significant value of these assets. We believe we are well-positioned to complete the six-vessel acquisition based on our success increasing the company’s liquidity position, combined with the expected assumption of the debt currently secured by the vessels.

“Going forward, we expect our balanced fleet deployment strategy and moderate level of predictable cash flows to enable International Seaways to both optimise revenue through the current tanker cycle and capitalise on the market recovery in both the crude and the product tanker sectors,” Zabrocky said.

The decrease in TCE earnings resulted primarily from the impact of lower average blended rates in all of the crude tanker fleet sectors, totalling around $28 mill. VLCC, Aframax and Panamax spot rates declined to around $12,900, $10,000 and $12,700 per day, respectively.

About $3.9 mill of the reduction in TCE revenues was due to the impact of the company’s only ULCC being idle for the whole of the quarter. The decline in TCE revenues also reflects a $3.5 mill decrease in revenue in the crude tankers lightering business during the period.

These declines were tempered by the impact of 234 additional revenue days, reflecting the two Suezmaxes and one VLCC that were acquired in the second half of 2017, totalling $4.6 mill. Shipping revenues for the crude tanker segment were $32.4 mill for the quarter, compared to $59.9 mill in 1Q17.

As for the product carriers segment, the TCE decrease was primarily due to a decline in average daily blended rates earned by the MR, LR1 and LR2 fleets, with spot rates declining to around $11,200, $11,600 and $13,900 per day, respectively, accounting for $4.6 mill of the drop in TCE revenues.

In addition, the impact of 324 fewer revenue days, due to the sale of four MRs between August, 2017 and February, 2018 and the redelivery of a bareboat vessel late in December, 2017 contributed to the lower TCE revenues, partially offset by 95 fewer MR drydocking days in 1Q17, compared to the previous year period.

Shipping revenues for the product carrier segment were $19.6 mill for the quarter, compared to $28.9 mill in 1Q17.


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