Welcome everyone to the International Seaways Q3 2021 earnings conference call. My name is Victoria and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing Star followed by one on your telephone keypads. I'll now hand over to James Small, General Counsel from International Seaways, to begin. James, please go ahead.
Thank you. Good morning, everyone, and welcome to International Seaways earnings release conference call for the Q3 of 2021. Before we begin, I would like to start off by advising everyone with us on the call 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: Outlook for the crude and product tanker markets, changes in oil trading patterns, forecasts of world and regional economic activity and of the demand for and production of oil and other petroleum products, the effects of the ongoing coronavirus pandemic, the company's strategy, the anticipated cost savings and other synergies and benefits from our merger with Diamond S Shipping, any plans to issue dividends, our prospects, purchases and sales of vessels, construction of new build vessels and other investments, anticipated and recent financing transactions, expectations regarding revenues and expenses, including vessel charter hire and G&A expenses.
The estimated bookings and TCE rates in the Q4 of 2021, in 2022 or in other periods, estimated capital expenditures in the Q4 of 2021, in 2022 or in 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 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 statements. Factors, risks, and uncertainties that could cause International Seaways' actual results to differ from expectations include those described in quarterly reports on Forms 10-Q for the first, second, and Q3 of 2021, our 2020 annual report on Form 10-K, and in other filings that we have made or in the future may make with the U.S. Securities and Exchange Commission.
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?
Thank you very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call to discuss our Q3 results. We have positioned Seaways to take best advantage as the tanker market recuperates. Rystad has the Q4 global oil demand growing by three million barrels per day. Worldwide oil inventories have destocked to pre-COVID levels, and refinery margins have increased in both the east and the western hemispheres. OPEC+ continues to bring an additional 400,000 barrels per day of oil supply every month back onto the market. If we turn to slide four of our deck, we recap the benefits we are realizing from our merger with Diamond S. We share our focus on fleet optimization and our success in returning capital to shareholders. Starting with the first bullet, the merger is both transformational and accretive to International Seaways.
We have nearly doubled our net asset value and tripled our fleet size. Seaways is now established as the largest U.S.-listed diversified tanker company. By bringing together these two leading U.S.-based tanker owners, both with a long-term focus on customer relationships, both with deep cultures of achieving stringent safety standards and strong governance, we are well on our way to delivering compelling strategic and financial benefits to all of our stakeholders. We solidified our power alley in the large crude sector with 28 combined Vs and Suezmaxes, and we created a new power alley with over 50 product carriers. Our increased scale, capability, and operating leverage have significantly strengthened our ability to take advantage of the recovery in crude and product tanker demand for the benefit of shareholders.
In the month of October, even as we just are beginning the rate recovery in the tanker sector, on vessel values, our fleet value rose by $50 million, equating to $1 per share. This just illustrates the upside potential of our asset base. Our integration is progressing as planned and the teams have come together well. We remain on track for achieving annual cost synergies of $23 million and revenue synergies of $9 million. We expect to achieve this within 2022 by sticking to our plan and our lean and scalable model. Turning to the next bullet, we have maintained a strong balance sheet. Our diverse capital structure is a pillar of our success, and our progress in this critical area differentiates Seaways. Our loan-to-value is a solid 46%, and our access to capital is strong.
We recently entered into a $375 million facility of long-term financing at attractive terms. And as we head into the emerging tanker market recovery, Jeff will discuss our financing in more detail later on the call. I would like to highlight that with our current total liquidity of roughly $300 million, we are well-positioned to operate effectively in all tanker markets and to take advantage of attractive opportunities as they arise. In the next bullet, we highlight our return of capital to shareholders. This remains a central part of our disciplined approach to capital allocation. Combining the $31.5 million or $1.12 per share special dividend that we paid in the Q3, as well as our regular quarterly dividend, we have now returned a total of $73 million to shareholders since 2020.
Our $50 million share repurchase authorization remains in place to further act opportunistically for shareholders. Turning to our Q3 results, our net loss was $29.4 million or $0.63 per share, excluding merger-related costs and gains on vessel sales. In a sustained weak rate environment during the quarter, we generated an adjusted EBITDA of $8 million. At the quarter's end, we had $133 million in cash and $173 million in total liquidity. And as I noted earlier, current liquidity is approximately $300 million. Moving to the final bullet, we outline our ongoing fleet optimization program, which is focused on monetizing older non-core ships. Year-to-date, we have sold or agreed to sell 14 ships with an average age of 17 years at attractive prices, reflecting the higher steel values that underlie ship values today.
In addition to generating expected net proceeds of $83 million after repayment of $57 million of debt, we will also preserve approximately $12 million of cash saved on dry docking and ballast water treatment system installations that will now be avoided. The ships we have sold for recycling were sold in compliance with the Hong Kong Convention. Combined with enhancing our balance sheet, the additional liquidity provides further capital allocation flexibility for International Seaways. Details on the sale may be found in the appendix. Turning to slide five. We update the oil supply and demand balance. Oil production continues to increase. U.S. hurricane-related shutdowns have recovered and come back online, and OPEC+ is gradually and systematically ramping up their output. With 7.3 billion vaccinations administered globally, up from just four billion a quarter ago, we are seeing stronger economic growth resuming in the world.
And Q3 oil demand has improved to an estimated 97.8 million barrels per day. This is up from 95.2 million barrels per day in the Q2, and it's almost six million barrels per day up year-over-year of much-needed demand recovery. The IEA has upwardly revised its 2022 expectation of oil demand. They now forecast an increased demand of 3.3 million barrels per day in 2022 over 2021. In the chart on the right-hand side of the slide, consistent with the recovery in demand, oil inventories have rapidly declined in the world and are now below the 2016-2020 averages. These stock draws are needed to set the stage for the tanker market recovery and are very encouraging markers.
Combined with the OPEC+ relaxing output cuts and each month, the surge in demand for oil as global economies reopen and start to grow. Air travel rebounds and vaccinations are administered globally. We are optimistic that all of these signals together are strengthening for our rate environment. On slide nine, we look at ship supply. The overall tanker order book continues to be low, with tanker supply curves projecting fleet decline in the medium term. Shown in the top right chart, there have been very few new buildings placed and no new buildings on the VLCC front since June. Ordering has been tempered by the combined uncertainty around propulsion ship types, higher steel input costs, and increased new building prices.
Recycling has the potential to limit fleet growth based on the aging VLCC fleet, and we have now seen 14 vessels have gone to the recycling market on the VLCC fleet. So we started the year very low and the pace has picked up in the last couple of months. 17% of the existing VLCC fleet is now at least 17.5 years old, and 8% is at least 20 years old. Contrast this to the 9.5% VLCC order book. As ships age and reach their ballast water treatment system deadlines, substantial capital investment is required to keep them trading. Based on these dynamics, recycling activity has been building in the market, particularly given the current low spot rate environment and the record steel prices. I now wanna turn the call over to Jeff to give us our financial review. Jeff?
Thanks, Lois, and good morning, everyone. Let's move directly to reviewing the Q3 results in some more detail. Before turning to the slides, let me just summarize our consolidated results. For the Q3, we had adjusted EBITDA of $8 million. Net loss for the Q3 was $68 million or $1.44 per diluted share, compared to net income of $14 million or $0.50 per diluted share in the Q3 of 2020. When excluding the impact of the disposal of vessels, including impairments and merger-related charges, net loss was $29 million or $0.63 per diluted share. Now, if you could turn to slide eight.
This slide summarizes the results of our business segments for Q3 2021 versus Q3 2020 at the top of the page and on a last twelve months basis on the bottom. The decrease in Q3 and last twelve months revenue and EBITDA primarily results from the impact of lower average blended rates in both the crude oil and product sectors. Now, turning to slide nine, we provide a Q3 review and Q4 2021 earnings update.
For a look at results in Q4 thus far, we've booked 59% of our available Q4 spot days for VLCCs at an average of approximately $16,100 per day, 58% of our available Suezmax spot days at an average of $13,900 per day, 47% of our available Aframax LR2 spot days at an average of $11,100 per day, and 45% of our available Panamax spot days at an average of approximately $16,800 per day. On the product side, we booked 46% of our Q4 MR spot days at an average of approximately $9,400 per day, and 42% of our Handysize spot days at $7,300 per day.
These Q4 rates are encouraging and consistent with our view of market fundamentals as we've seen a rebound in almost every asset class since the latter part of Q3. Now, if you turn to slide 10. The estimated cash cost TCE breakevens for the forward 12 months beginning in October 2021 are illustrated on this slide. International Seaways overall breakeven rate is estimated to be $18,100 per day over the next 12 months. As always, these rates are the all-in daily rates our own vessels must earn to carry to cover vessel operating costs, dry docking costs, cash G&A expense, and debt service costs, which means scheduled principal amortization as well as interest expense. On this slide, we've also shown breakevens which exclude principal amortization.
In this case, the cash breakeven for the next twelve months is estimated to be $12,200 per day. At this time, as I normally do, I'd like to reaffirm our cost guidance for the year for modeling purposes. For the Q4, we expect regular daily OpEx, which includes all running costs, insurance, management fees, and other similarly related expenses for our various classes to be as follows. For VLCCs, $8,800 per day; for Suezmax, $7,600 per day; for Aframax, $8,200; for Panamax, $7,900; for MRs, $7,200; and for Handymax, $7,400 per day. For details on projected dry dock, CapEx, and off-hire days by quarter, you can refer to slide seventeen in the appendix for an update. Continuing with cost guidance.
Q4 cash interest expense is expected to be about $12 million per quarter, and cash G&A is expected to be about $9 million. As previously stated, full cost synergies are expected to be achieved in 2022. And finally, we expect about $6 million in Q4 equity income from our FSO JV and $29 million for quarterly depreciation and amortization. Now, if we could turn to slide 11 for our cash bridge. Moving from left to right, we began the Q3 with total cash and liquidity of $174 million. During the quarter, our adjusted EBITDA was $8 million. Equity income from JVs decreased cash by $6 million, and cash distributions from JVs were $3 million from the FSO JV.
We expended $15 million on dry docking and CapEx and $14 million on the second installment of our, as part of our agreement to build three dual-fuel LNG VLCCs. Next, we acquired $44 million in cash related to the Diamond S Shipping transaction, net of merger and integration-related costs. We received $62 million in proceeds from vessel sales, and cash interest and scheduled principal payments on our debt were $56 million. We also gained $20 million from the issuance of a credit facility. Finally, taking into account the $31.5 million special dividend issued in July prior to the merger and the $3 million regular quarterly dividend in September, as well as the negative effect of working capital and other charges in the quarter of $13 million.
The net result was that we ended the quarter with approximately $133 million of cash and a $40 million undrawn revolver, yielding total liquidity of $173 million. As Lois noted, as of today, total liquidity stands at approximately $300 million. Now turning to slide 12, I'd like to briefly talk about our balance sheet. As of September 30, we had $2.4 billion of assets, which is reflective of the recent merger. This compares to $1.5 billion of assets as of June 30. As of the end of the quarter, we had $888 million of long-term debt.
As you can see on the bottom of the slide, our net debt to total capital at the close of the quarter was 45%, while our net loan to value of our fleet was 45.7%. Turning to slide 13, we look at the pro forma combined company debt as of November, accounting for the merger and also recent financing activities. As we announced in October, we recently entered into lease financing arrangements with Ocean Yield ASA for the six VLCCs that previously collateralized our Sinosure credit facility. The net financing amount of $375 million represents 90% of the six VLCCs' fair market value. The proceeds of this refinancing were used to prepay the $228 million outstanding loan balance under the Sinosure facility, and therefore increased our overall liquidity by approximately $150 million.
I'd like to take this opportunity to say that we appreciate the strong report-support we've received from Sinosure, Export-Import Bank of China, Bank of China, and Citibank, who originally extended the project construction loans that we assumed in 2018 when we acquired these vessels. However, we are very pleased to enter into this attractively priced long-term debt facility to further diversify our capital structure with terms that harmonize well with those in our other corporate loans, while also unlocking additional liquidity. As you can see, our total debt balance pro forma for our two most recent financings is approximately $1.24 billion, with $40 million currently undrawn on an overall $225 million of revolving capacity.
We expect to utilize some of the proceeds of the Ocean Yield financing to pay down revolvers, lowering interest while still maintaining higher liquidity. As we continue to maintain a healthy balance sheet, our debt reflects a highly competitive cost of capital and a long-term maturity profile with the vast majority of debt due in 2024 or later. That concludes my remarks, and I'd like to turn the call back to Lois for her closing comments. Lois?
Thanks a lot, Jeff. The steps we've taken to enhance our scale, our capabilities, and our operating leverage have put us in a favorable position to unlock significant value for shareholders. We will take advantage of the tanker market recovery that is underway. The completion of our transformational and accretive merger has doubled our market cap, tripled our fleet size, and significantly strengthened our earnings power. Importantly, we have solidified our power alley in large crude, and we created one in the product sector. During the quarter, in addition to concluding our merger, we executed on key strategic priorities, maintaining significant balance sheet strength during this downturn. And we kept optimizing our fleet, which we will continue to do as we disposed of ships that were on average 17 years old at a time in the cycle where secondhand values were buoyed by underlying steel prices.
We distributed $38 million in dividends to shareholders during the Q3. This included the $1.12 per share special dividend, as well as our regular quarterly dividend. This increased our total returns to shareholders since 2020 to $73 million. I wanna pause for a minute as I do our conclusion and just acknowledge the silent and steady, reliable seafarers at International Seaways. We're particularly proud to share that we reached the milestone of having 70% of our seafarers, both at home and on board, of 2,500 strong vaccinated. This is a number that we're working to increase every day. As we enter the Q4, our prospects remain strong. We're encouraged by our fourth-quarter bookings to date, which show improvement over the Q3.
We have significant liquidity of approximately $300 million and a high-quality fleet of product and crude tankers, and we are on track to achieve the synergies from our recent merger. That concludes my formal comments, and we'd like to turn it over to the operator to take questions.
Thank you. We will now start our Q&A session. If you'd like to ask a question, please press star followed by one in your telephone keypad now. If you do withdraw your question, please press star. Please ensure that when preparing to ask a question, your telephone is unmuted locally. Our first question comes from Randy Giveans from Jefferies. Randy, please go ahead. Your line is open.
Howdy, Lois and Jeff. How's it going?
Very good, Randy.
Great.
How are you today?
Good, good. Nice to see the quarter-to-date rate guidance at better-than-expected levels. So clearly the market is improving here. But separate from that, you know, your balance sheet, right? Obviously in great shape, keeps getting better. I guess, what is the plan for some of the incremental liquidity from these recent sale and leasebacks and the vessel sales? I know, Jeff, you mentioned debt repayments kind of going forward. Is there a specific leverage ratio that you were targeting?
Jeff, why don't you-
Yeah, hi, Randy.
Jump in there.
Sure. Thanks, Lois. Yeah, Randy, look, I think it's part of a big picture here, that we, you know, post the Diamond S merger. We have the benefits of scale in this regard are that, you know, we have lots of opportunities to do what I'll call balance sheet optimization. You know, we're doing fleet optimization, but we're also doing balance sheet optimization. So that's different facilities that are related to different assets, different loans to value, you know, increasing liquidity, as you mentioned. You know, so I think it's, it's, you know, you caught us partway through and stay tuned. There's more to come.
It's just really exciting, frankly, to have the opportunity to use this sort of almost like a financial whiteboard, and start to optimize the balance sheet. In terms of the last part of your question, you know, I think Lois and I both mentioned that we're down to the mid-40s in, in net loan to value. You know, that's, you know, we feel really good about that, you know, after having completed, you know, a merger that doubles the size of our fleet, you know, in deadweight tons. So that's naturally gonna work down to below 40 where it was before, just in the course of natural amortization and capital allocation that we'll do.
So, you know, I think we're at a good spot, but we'll probably look to be lowering the leverage a bit from here just to get into that below 40 area where we were pre-merger.
Okay. No, that makes sense. And then you mentioned just now fleet optimization, and you've certainly done the right thing to take advantage of the kind of current disconnect between high asset values, and low rates, right? Selling some of your older vessels, chartering in some vessels. With that, are there still maybe, additional sales candidates remaining in the fleet? Are you kind of happy with your current ownership there? And is there another specific asset class you'd like to maybe gain some operating exposure through additional time charter ins?
Yeah. Okay, Randy. So, you know, what you'll notice is, you know, where we've chartered in and where we have recycled ships is in that Panamax space. So the vessels that we recycled, you know, really performed extremely well and were actually approaching 20 years of age. And we have chartered in that space where, you know, we want to make sure that we have enough commercial presence there to really take advantage of that niche where we earn a premium. And then you know, we constantly, you know, look at the entire fleet and, you know, what we have coming up.
And I think one of the things that's been really good. I noted in my comments that, you know, in the month of October, you know, you saw asset value start to pick up a little bit, in an increase. And that's a very good position to just continue looking at the fleet all the time and making those decisions on, you know, pruning and then still looking opportunistically in the market, you know, for potential in charters so that we're set up really well for the recovery.
Got it. Makes sense. Well, looking forward to seeing the continued development of the new and improved INSW. Thanks again.
Thank you, Randy.
Thanks.
Thank you, Randy. Our next question comes from Omar Nokta from Clarksons Securities. Omar, please go ahead. Your line is open.
Hi. Thank you. Hi, Lois, Jeff, and David.
How are you, Omar?
I am good. I'm juggling a few calls, so I apologize.
Okay.
If I, If I ask a question that's been addressed already. I did wanna ask, Lois, I did hear you discussing just now the, you know, the Panamaxes, the-
Yeah.
Just in regards to that niche trade, now you're selling the older vessels, replacing them with the in-charters. Is that your thoughts going forward over the long term to service that trade with charters, or do you see yourself investing and owning assets outright for that area?
You know, we are opportunistic. You know, a couple years ago, we, we picked up an individual vessel, the Guayaquil, which added very nicely into that fleet. In this case, we had an opportunity to pull in a couple of charters. So, you know, we'll look opportunistically, Omar. We're not wedded to one particular methodology, and we like to be sure that we have enough presence there to defend what we think is a great niche trade.
Hello?
Sorry, Omar, we're not getting any audio. Oh, I pity that Omar has dropped his line.
Oh, okay. Very good.
We can always come back to him.
No problem. When he comes back, we'll reconnect him. In the meanwhile, we're going to move on to our next question from Magnus Fyhr from H.C. Wainwright. Right. Please go ahead.
Yeah. Good morning, Lois and Jeff. Just a question on the U.S. exports, if you're seeing any changes there. You know, there's some estimates for next year on with oil prices at seven-year highs. I'm seeing estimates increasing 800,000 barrels for U.S. production next year, and I guess it's a matter of time maybe until we see that materializing more exports. But can you? You have a presence there, and can you maybe talk a little bit about what you're seeing there as of late, and if you see any indications that exports are picking up?
No. Great question. You know, we're stabilizing, right? You know, in crude exports out of the U.S. Gulf, somewhere around three million barrels a day. But, you know, for sure, as rigs get added back in the U.S. Gulf, and I think, shale producers hedge their books forward, the prospects for increased production in 2022 are there. You know, they're projecting to be over 12 million barrels per day in 2022, which, you know, is ideal for U.S. crude production. You know, our lightering unit is quite busy right now, and, you know, we look at them as something of a leading indicator. And we also understand, some of that offshore production that had been offline due to Ida has been brought back online.
So, you know, I think that the formal numbers from the EIA have steadied out around three million barrels a day, but we look for that to, you know, increase going forward here.
Okay. But, no discussions yet on contract for next year? You know, I guess that's typically a spot trade.
Yes, yes. Absolutely. That's typically a spot trade and, you know, you'll see the listings vary and we, you know, we'd like to see more of the long V moves out of the U.S. Gulf going east.
Right. Good. Thank you. Just another question on your MRs. I know you're dealing now with you know completing the I mean I guess the integration of the Diamond fleet. Most of the ships
Mm-hmm.
Are in the Norient Pool. Can you comment a little bit on the performance in the quarter if there were any one-off items, the performance of the ships in the Norient pool versus the ships that were not?
Yes. You know, for sure the Q3 is a transition quarter for us. And as soon as we concluded the merger, the two things that we did from a commercial perspective was we did immediately, and we worked in close collaboration, you know, with the former Diamond staff to move the Suezmaxes into Penfield. And I think that those vessels did quite well, coming in at $10,700 per day for the quarter. And on the MRs, the vessels that we moved and we've had, you know, we're ahead of schedule by three months by a quarter on the technical transfers from capital over to our providers.
And on that front, the vessels that we moved out of Capital, we put some of those with Norient, and we put some of those with CPTA, which is our product carrier pool with Ultragas. And, you know, coming in at $10,000 per day for the quarter, and you know, even the $9,400, looking forward into the Q4, we feel that both of those pools are performing up to our expectations.
Okay. Thank you. That's all I had.
Mm-hmm.
Great. Thank you, Magnus. We will now move on to Liam Burke from B. Riley Financial. Liam, please go ahead. Your line is open.
Thank you. Good morning, Lois. Good morning, Jeff.
Good morning, Liam.
Hi, Liam.
Lois, the OPEC production estimates are increasing, and I know there has been overcapacity on the VLCCs due to lower production. With new production numbers, do you see faster absorption of existing VLCC capacity?
Yeah. You know, it's clearly, you know. I mean, they're better. You know, the rates being booked at, you know, 16 in the Q4, but that's clearly, you know, still quite anemic, you know, when you look at things. But you see that there's a higher cargo count, you know, not only out of the Middle East, but really worldwide. And that's what we needed to see, you know, behind the scenes, you know, as I mentioned in the comments that, you know, year-over-year, today we have six million barrels per day higher demand than we did a year ago.
I mean, this is what we need to see for us to get to the tipping point of, you know, where we go into that higher utilization rate, and we really see where we get a steadier base to build upon, you know, on the entire fleet. In particularly, I think the Vs, because in October, the Chinese really had imported, you know, not even nine million barrels a day. They had an eight in front of it, so, like, the least amount that they had in several months. Now we know that demand is increasing and that inventories have been pulled down, so at some point that will shift and we will see those rates start to go up.
Fair enough. Same with the VLCCs. You've got the two new builds with the existing contracts. Is there any possibility that you'd consider doing more of those types of deals?
Yes. So it's three VLCCs that we're building at Daewoo with the dual-fuel LNG capability. And absolutely, you know, we would look together, you know, with customers. I think that's part of how tanker owners, you know, we will look to be successful going forward, you know, to work in collaboration with customers to build on it. You know, and ideally, you know, when you have a contract and you work closely with the customer, that really gives you enough confidence to be able to do that.
Great. Thank you, Lois.
Thank you.
Thank you, Liam. We will now move on to Ben Nolan from Stifel. Ben, please go ahead.
Hi, guys. Good morning. Thank you for the update today. My name is Prunella Bull from Stifel, asking a question on behalf of Ben Nolan.
Mm-hmm.
So my first question relates to the sale leaseback transaction and the relation to liquidity. You guys talked about how this transaction has had a significant improvement on liquidity. Clearly this flexibility can be used in a number of different ways, but should we think of this for now as just a defensive move to protect against the chance of a softer, longer market or just being opportunistic on capital availability?
Jeff, why don't you jump in there?
Yeah. Thank you and welcome to Seaways call. Absolutely the latter, opportunistic. You know, I made some comments earlier on the call and I would just underscore them that, you know, one of the benefits of the Diamond S merger in terms of the scale it provides Seaways is the opportunity to be opportunistic. Sorry to be redundant there, but the opportunity to look at what's really attractive financing. So, you know, we're very selective when we look at financings that are structured as leases. But this one, you know, ticked the boxes for us in terms of being long-term, attractively priced financing, you know, high loan-to-value, covenants that are completely harmonized with the rest of the debt in our capital structure.
And you know, a furthering of a theme we've been on, which is diversifying our capital sources is really important. So for us, that's it, you know, and it's very opportunistic. What we're going to do in the short term is use that excess of liquidity to pay down revolvers and save interest expense. So, you know, we've got a good use of proceeds, reducing interest costs and increasing EPS and increasing optionality for capital allocation going forward. I hope that answers the question.
Yes. Thank you. That helps. I also wanted to ask about the FSOs. Is there any update on how you guys are thinking about the long-term strategic fit of the two FSOs in the current operating fleet?
We, we continue to have the same, you know, outlook on our FSOs, where, you know, we're very happy with the fixed income they provide. And as of the Q3 of 2022, they will be mortgage-free and International Seaways will receive $21 million of free cash flow through that joint venture. However, we do continue to look at, you know, monetizing the assets with our partner, should we find someone who we feel values that appropriately. Okay.
Awesome. Thank you guys again.
Thank you.
Thank you.
Thank you very much. We currently have no further questions. I'll now pass over to Lois Zabrocky for final remarks.
So thank you everyone for joining International Seaways today. And, you know, we look forward to this tanker market recovery as we get deeper into the Q4. Thank you very much.
Thank you, everybody. You may now disconnect your lines.