Balancing Crude and Clean: The Strategy Behind International Seaways’ Fleet Agility
Capital Link
Investor relations, financial communications, advisory firm-14 forums : Maritime, Commodities & Energy, MLPs, CEF & ETFs
Highlights
The 2025 Capital Link Company Presentation Series spotlighted International Seaways, Inc. (INSW), one of the largest tanker companies globally, renowned for its energy transportation services for crude oil and petroleum products in international flag markets. The conversation featured Ms. Lois Zabrocky , Chief Executive Officer, Mr. Jeffrey Pribor , Chief Financial Officer and Mr. Tom Trovato , Head of Investor Relations.
To watch the presentation, please visit the following link:
Market Maneuvering: Fleet Composition and Strategy
International Seaways operates a fleet of 83 vessels, with its shares listed on the New York Stock Exchange under the ticker symbol INSW. Ms. Zabrocky explained that the fleet was almost evenly split between dirty and clean trading, with 38 tankers trading dirty and 39 trading clean. Specifically, on the clean side, the fleet included one LR2 and 38 MRs, while the dirty side was evenly divided among VLCCs, Aframaxes, and Panamaxes.
Ms. Zabrocky elaborated on the value proposition of INSW, referring to it as a “de facto ETF in the tanker space” due to its balance between crude and product trading. She noted that the six new building ships currently on order were for Panamax international, which traditionally traded dirty, but with the new LR1 coatings, there were discussions with oil majors about trading those ships clean. This adaptability showcased the correlation between crude and product trading, which she illustrated by discussing the dynamics in the Middle East and China. She pointed out that the Middle East countries were increasingly deciding whether to refine products for export or to export crude oil, while China was considering importing more crude than needed, refining it, and then exporting the product.
Sustainability at the Core
INSW’s commitment to sustainability is evident through its investments in eco-friendly technologies and governance initiatives. The company has established a Sustainability Committee at the board level and an internal senior management team dedicated to integrating sustainability into daily operations. Green spending in 2025 is estimated to be about $10 million, allocated to innovations such as enhanced propeller wake systems and hull coatings, which improve fuel efficiency and reduce emissions.
Strategic Partnerships and Pool Operations
INSW’s participation in commercial pools, including Tankers International and Norden, has been instrumental in enhancing operational efficiency and customer engagement. By operating within larger pools, the company can provide consistent solutions to customers and achieve higher TCE rates over time. INSW’s partial ownership of several pools ensures low commercial costs and maximized returns for stakeholders.
Financial Fortitude: A Robust Balance Sheet
Ms. Zabrocky proceeded to outline the composition of the fleet in the spot market, revealing that 20% of the ships were on time charter. She provided a breakdown of the vessels in the spot market: 32 crude vessels and 30 product tankers. She noted the significance of operating in pools, which allowed INSW to manage a total of nearly 200 ships when combined with other vessels. This approach provided greater consistency and the capability to deliver more solutions to customers, ultimately enhancing long-term relationships and improving TCEs.
As she addressed the financial highlights, Ms. Zabrocky emphasized the company’s loan-to-value ratio was under 20% and reported that as of September 30th, the company had nearly $700 million in liquidity. Maintaining a strong balance sheet remains a priority, especially in a geopolitically charged environment.
She also highlighted the progress the company has made over the past eight years since its listing on the New York Stock Exchange. She mentioned that over the past eight years, INSW has undergone a remarkable transformation, doubling its fleet size and evolving from an older tanker company valued at less than $500 million to a modern, competitive company. After investing about $2 billion in its fleet, it is now worth $3.4 billion as of today.
This transformation was attributed to consistent efforts in discipline, capital allocation, sustainability, and critical improvements in capital structure.
Furthermore, she made sure to point out the transparency of the company’s financials, showcasing data that illustrated the over $1 billion in free cash flow generated during the past eight quarters. Due to the improved balance sheet, INSW was able to utilize a revolving credit facility, thereby holding less cash while effectively putting $1.2 billion to work. Over the same timeframe, returns to shareholders amounted to $650 million, distributed over eight quarters through dividends and sharebuybacks, representing over a third of the company's market capitalization. Additionally, Ms. Zabrocky reported that the company achieved a double-digit return of approximately 12% over the most recent four quarters.
The company’s break-even levels for the fleet, stood at $13,300 per day across the fleet, including the VLCCs and allowing for sustained profitability even in challenging market conditions. She later explained that this figure was achieved through strategic utilization of time charters, which helped mitigate volatility and through voluntary debt prepayments, which contributed to lower break-even requirements. ?
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Debt Management and Fleet Valuation
In turn, Mr. Pribor also pointed out the company’s interesting balance sheet. He reiterated the liquidity position, which included over $700 million available, consisting of $150 million in cash and $550 million in undrawn revolving credit. He highlighted that the earliest maturity on any of the company’s debt was not until the next decade, indicating a strong cash and liquidity position for future opportunities.
He provided insights into the valuation of the fleet, noting that the book value exceeded $2 billion, while the market value was approximately $3.7 billion. This discrepancy was attributed to the company’s strategy of acquiring assets during the low points of the market cycle, resulting in a favorable book-to-market value ratio.
Additionally, Mr. Pribor detailed the breakdown of the company’s total debt, which was around $600 million. He explained how the debt was structured, including revolving credit facilities with traditional shipping banks and diversified debt sources. He mentioned that the company’s all-in weighted average interest rate was just over 6%, which is competitive given the current market conditions.
Capital Allocation Strategy and Shareholder Returns
After the presentation, Mr. Trovato presented management some questions from the interactive Q&A session about the company’s hybrid operating model, capital allocation strategy and the recent payout ratios.
In answer to the latter, Mr. Pribor explained that the company had progressively increased its payout ratio to 75%, reflecting a commitment to returning value to shareholders. He noted that both dividends and share buybacks were valid methods of returning cash to shareholders, with the company leaning more heavily on dividends in recent months.
Geopolitical Considerations: Navigating Challenges
As the conversation shifted towards the geopolitical environment, Ms. Zabrocky addressed the implications of the OFAC (Office of Foreign Asset Control) list and its impact on tanker operations. She expressed concerns over the evolving situation, indicating that the United States could impose sanctions that might affect fleet operations.
She also briefly touched on the impact of the ongoing Russian - Ukrainian conflict on oil flows, noting a reduction in Russian exports and the geopolitical complexities surrounding the situation. She stressed that the global oil market was still expected to experience growth, particularly from non-OPEC sources.
Looking ahead to 2025
In regard to supply-side dynamics, Mr. Trovato inquired about new orders and the outlook for 2025. Ms. Zabrocky indicated that while there was a modest supply of new orders, the overall market was not witnessing a rush to add capacity. She mentioned that geopolitical challenges were likely influencing owners' decisions regarding fleet expansion. Finally, when it came to the segments that International Seaways would focus on in 2025, Ms. Zabrocky emphasized that investing in operational efficiency remains a priority and concluded by noting the company continues to focus on niche growth areas, such as Panama Canal-suitable LR1 tankers, while maintaining a pragmatic approach to secondhand acquisitions and fleet efficiency upgrades. INSW’s balanced exposure to both crude and product markets positions it to navigate volatility effectively.
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