Ladies and gentlemen, welcome to the International Seaways fourth quarter 2022 earnings conference call. My name is Glenn, I'll be the moderator for today's call. If you would like to ask a question during the presentation, you may do so by pressing star one on your telephone keypad. I will now hand you over to your host, James Small, General Counsel. James, please go ahead.
Thank you, Glenn. Good morning, everyone, and welcome to International Seaways earnings call for the fourth quarter of and full year of 2022. 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: the outlooks for the crude and product tanker markets and changes in 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 conflict between Russia and Ukraine, the company's strategy, the effects of the ongoing coronavirus pandemic, our business prospects, expectations regarding revenues and expenses, including vessel charter hire and G&A expenses, estimated bookings, TCE rates and/or capital expenditures in 2023 or any other period.
Projected scheduled dry dock and off-hire days, purchases and sales of vessels and construction of new-build vessels and other investments, the company's consideration of strategic alternatives, anticipated and recent financing transactions and any plans to issue dividends, the company's relationships with its stakeholders, the company's ability to achieve its financing and other objectives, and other economic, political, and regulatory developments globally.
Any such forward-looking statements take into account various assumptions made by management based on a number of factors, including experienced perception of historical trends, current conditions, expected and future developments, and other factors that management believes are appropriate to consider under the circumstances. Forward-looking statements are subject to risks, uncertainties, and assumptions, many of which are beyond the Company's control, which 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, in particular, those described in our annual report on Form 10-K for 2022 and in other filings that we have made or in the future may make with the U.S. Securities and Exchange Commission. Let me 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 for the fourth quarter and full year of 2022. We're gonna start out on page four. Today, International Seaways has reported our highest earnings in our history. Net income for the fourth quarter was $218 million, $4.40 per share, and $388 million or close to $8 per share for the full year of 2022. As a result, and building upon our solid track record of returning cash to shareholders, we have declared a combined dividend of $2 per share. We are continuing our disciplined capital allocation strategy. We have a demonstrated history of investing at low points in the cycle.
Vessel assets on our books are at less than $2 billion that are today worth over $3 billion. With $1 billion in debt and cash of nearly $325 million, our net loan to value is currently under 24%. In March, we will take delivery of our first dual-fuel VLCC, the Seaways Endeavor, which along with our two sister ships, expected to deliver in the first half of 2023, will commence long-term time charters to Shell. These ships are fully funded, creating another $172 million of debt in aggregate. We sold a 2008-built MR in the fourth quarter and we're delivering another to reliable buyers in the first quarter. This saves us about $4 million each from their 2023 dry docking and ballast water treatment installations.
We will allocate the estimated $28 million in combined net proceeds from these two vessel sales towards the $41 million net cash cost for two Aframaxes, where we have exercised below-market purchase options. These Aframaxes will not be further encumbered. We announced today unanimous commitment from the syndicate of our largest senior secured facility to amend terms to repay $100 million of the outstanding term loan and increase the revolver capacity to over $250 million. The amendment will also release 22 vessels from the collateral package. These 22 ships, combined with the two aforementioned Aframaxes and three LRs released as a result of repaying our Macquarie loan facility in the fourth quarter, positions Seaways with one-third of our fleet unencumbered. Highlights and recent developments, slide five. The hottest topic in tankers today is what's happening with Russian oil exports.
The chart on the left shows that while crude oil exports from Russia have been fairly consistent within a range over the last few years, Russian oil that was going to Europe is now traveling longer distances to Asia, primarily India and China, and absorbing crude tonnage for longer periods of time. On the right-hand chart, our data, reflected here through January 2023, shows that self-sanctioning has been limited on oil products, as much of Russian oil was still heading into the E.U. in the months leading up to the sanctions that were implemented on February 5th. We expect that the product sanctions will create displacement. It's early days, and we have a limited data set. However, the changes in trade flows are anticipated to be a positive for the busy product tanker market. Turning to slide six.
We updated our standard set of bullets on tanker demand drivers with the subtle green up arrow next to the bullets represented as good for tankers, the black dash representing neutral impact, and the red down arrows, meaning the factor is not positive for tanker demand. Pulling some highlights. In total, oil demand is expected to grow about 2% in 2023, a good portion of which is attributable to Chinese demand reopening after relaxing the zero-COVID policies that had been in place. This has continued with higher congestion in major Chinese cities. If you look at the chart in the lower left-hand corner, Chinese demand should increase nearly 5% or almost 700,000 bbl per day in 2023.
This is especially important for the Crude Tanker market, where Chinese imports about 10 million bbl per day. It's also very helpful for the Product Carrier market as China has increased its product export quota. Crude oil production is expected to increase primarily from the Americas by around 1 million barrels per day. While OPEC announced their production cuts in 2022 using a reference point at peak production levels, there have been some noticeable cuts from Saudi, Iraq, and the UAE that have been offset by some of the countries that do not have limits, such as Libya, where production has now resumed a more consistent level. The last key point that I'd like to bring up on this page is the inventory levels.
On the bottom right-hand chart, slide six, you can see that we have separated the OECD crude and product inventories, which have grown recently to above their averages from 10 years ago. We expect that some of the build has been ahead of the sanctions on Russian oil and natural ebbs and flows around the regional oil demand, refinery turnaround schedules, and other geopolitical factors. These charts are commercial inventories only. They do exclude the OECD strategic reserves, which, as we know, are at historic lows. On slide seven, we updated our tanker supply statistics as we see them developing. Tanker supply remains constrained due to a lack of orders and a rapidly aging fleet. Yards are busy with other shipping sectors, keeping new build prices high and limiting economic decisions on ordering.
The industry is expected to face more environmental regulations ahead, further limiting conventionally fueled new buildings for tankers. We're likely to see more opportunistic partnering with sponsors along the supply chain. The worldwide oil tanker fleet's age is now above 12 years old, with more than one-third of the fleet above 15 years old. As we show in the charts below for the crude and product sectors, vessels over 20 years old are not going to be replaced in the coming years based on the order book we have today. The charts reflect the millions of deadweight tons that are either 20 years old today or will be in the given years aligned with the millions of deadweight tons that are scheduled during those years for delivery.
On the crude side, there is a more complete mismatch and dearth of orders, while on the product side, we have seen some MR and LR2s ordered in recent months. The supply outlook for tankers in the near term is incredibly positive. Combined with higher oil demand, low inventories, and disrupted trade flows, the overall outlook for tankers remains strong, barring global economic slowdown. At International Seaways, we are well-positioned to capture the strong rate environment with our operational leverage from our diversified fleet of 77 tankers in both Crude and Products. With our healthy balance sheet and our liquidity, we expect to continue our balanced capital allocation strategy, investing in the fleet opportunistically, reducing our debt, and very importantly, returning cash to shareholders. I will now turn it over to our CFO, Jeff Pribor, to provide the financial review. Jeff?
Thanks, Lois. Good morning, everyone. Let's go straight to reviewing our record earnings in greater detail. We turn to slide nine. Adjusted net income for the full year 2022, reflected in the upper left-hand chart, was $380 million, which eclipses our next highest earnings from 2020 on an adjusted basis. We provided in the appendix reconciliation from reported net income to adjusted net income, but it's largely familiar non-recurring items such as gains or losses on vessel sales, write-off of deferred financing costs, and impairments. Similarly, on the upper right chart, adjusted EBITDA, which removes these items as well, for the full year 2022 was nearly $550 million. These results clearly show the significant operating leverage of our 77 vessel fleet.
On the bottom of the page, you can see our TCE revenues by segment, along with our spot earnings for Q4 2022. The full year 2022 TCE revenues were $854 million, you can really see the tremendous contribution of product tankers to that record sum, highlighting again the benefits of the Diamond S. Overall, spot earnings in all of our asset classes, apart from VLCCs, were the highest in five years, reflected in the charts. Not only are earnings per day higher, we have significantly more assets in each class than we had in prior years due to the successful execution of our capital allocation strategy, renewing the fleet at the bottom of the cycle. Slide 10 reflects our historical earnings sequentially over the last five quarters.
In Q4, adjusted net income nearly doubled over the previous record level from Q3. They had over $200 million. Adjusted EBITDA came in at $254 million for the quarter, which was higher than any prior full year in our history. Regarding expenses, during our Q3 2022 earnings call, we advised that vessel expenses would be approximately $57 million, which was at the high end of the range for Q4 2022. Actual vessel expenses for the quarter were approximately $62 million. The $5 million increase is primarily due to timing of stores and spares on board and higher repairs and maintenance opportunistically performed during drydocks.
Total G&A was approximately $13.5 million during the fourth quarter of 2022, which was about $2 million higher than expected due to the timing of certain projects and costs for other shareholder matters. All remaining expenses fell within the guidance previously. Turning to our cash bridge on slide 11. We finished the third quarter with $254 million in cash and $200 million in revolving debt.
Following the chart from left to right, the cash bridge, we add $254 million in adjusted EBITDA in the fourth quarter, plus $58 million in debt service, which is composed of scheduled debt repayments, cash interest expense, less our drydock and CapEx of $16 million in the quarter, and a working capital build, i.e., use of cash of $51 million, which gets us to free cash flow of about $130 million in Q4. Continuing on, we sold one 2008-built MR for net proceeds of $14 million and a minor reduction of about $3 million in our revolving debt related to that. During the fourth quarter, we repaid our highest margin credit facility, the Macquarie loan of about $18 million, which had the effect of unencumbering two vessels.
Lastly, as announced during our last earnings call, in the fourth quarter, we paid $1.12 dividends, $1 supplemental and $0.12 regular, amounting to approximately $55 million. These components led us, then lead us to the ending liquidity you see on the right of over $550 million, with $324 million in cash and short-term investments, plus $217 million in undrawn revolving debt. Moving to slide 12, we talk about our balance sheet. We continued to enhance our already strong balance sheet in 2022. Cash increased dramatically from the prior year at, going from $98 million- $324 million.
Vessels on the books stand at approximately $1.9 million at the end of 2022, similar to the prior year, but far less than the current market value of about $3 million. Net loan also is low. As mentioned, net loan- to-v alue is under 24%. Net to total cap is approximately 33%. One last point I'd like to make on the balance sheet is the accounting treatment of the two Aframaxes, for which we exercise our purchase options during the fourth quarter for delivery of those vessels in back to us in Q1 2023. The accounting treatment for these vessels up to the date of the exercise of the options was grandfathered under previous account rules as operating leases or right-of-use assets. Corresponding liability was the rate to expiry.
On the date of the exercise of the options, they on the asset side, these moved to financial lease right-of-use assets for about $44 million you see on the at year balance sheet and a current corresponding current portion of advancing these $43 million in 2022. Sorry, this is a little granular, but just important for you modeling. The after delivery payment of approximately $41 million, which will be in the first quarter of 2023, the accounting changes again, as these two vessels will move from right-of-use assets to the vessels line. That amount that we're paying goes on the books as a 44%-45% discount approximately to current market values.
There'll be no corresponding debt for the first two more vessels added to our fleet. Now turning to slide 13, the last slide that I'll cover before turning it back to Lois, reflects our forward-looking guidance and booked to date TCEs along with cash breakeven balance. Starting with the TCE fixtures for the first quarter of 2023, I'll remind you, as I always do, that the TCEs we actually report during our next earnings call will be different, one way or another. However, the important point is that the market continues to be strong in the first quarter. Blended average TCE, $45,000 per day, divided amongst the various classes as you see in the chart.
This segues well to the right side of the slide where you can see our cash breakeven, which show pro forma for the additional debt profile for both our new building program and the proposed amendment to our $750 million credit facility. As Lois mentioned, we expect all the dual-fuel VLCCs to deliver in the first half of the year. They're fully financed, they're adding approximately $172 million of both assets and debt. These assets, these vessels will be on time charter, therefore decreasing the breakeven from fixed revenue. In connection with the commitment from our banks to amend the $750 million credit facility, we expect to make a nearly $100 million cash repayment.
In turn, the capacity of our revolving credit facility will increase by approximately $40 million. Therefore, the net reduction of liquidity will be about $60 million in total. The scheduled debt repayment of this facility going forward for your modeling will be approximately $28 million per quarter, down from $31 million. We also expect to free another 22 vessels for the collateral package, which along with the exercise of purchase options on the two Aframaxes and repayment of the Macquarie loan as before, means we'll have a total of 27 vessels unencumbered during the last six months. The net impact of the amendment is expected to reduce our cash breakeven by about $600 a day, down to $17,500 per day.
This figure would actually be even lower by about $350 factored in interest income, which from now on will be a percent of cash in short-term deposits. When you compare this pro forma, even pro-pro forma breakeven to our fixtures to date, it certainly looks like the first quarter should shape up to generate strong free cash flows. On the bottom left-hand chart, we up-provide updated guidance for our expenses in Q1 and all of 2023, we will continuously update them through the year. We include in the appendix our quarterly expected OpEx and CapEx schedules for 2023. No need to go through them line by line, but encourage you to use them for modeling purposes and call with any questions. That concludes my remarks.
I'd now like to turn the call back to Lois for her closing comments.
All right. Thank you so much, Jeff. On slide 14, we provide you with Seaways' investment highlights, which I encourage you to read in its entirety. Summarizing briefly, International Seaways, in our history as a public company, has grown a proven track record of building value without sacrificing the balance sheet. We're good stewards of capital, balancing our consistent returns to shareholders with future-forward fleet growth and healthy financial metrics. We have a focused and flexible operating model that has allowed us to expand and contract at appropriate moments in the cycle under a disciplined approach. The company is positioned today with significant operating leverage to capitalize in what we expect to be a robust tanker cycle over the next few years.
Regional imbalances of oil are expected to continue and to grow in distance from sources to consumer, creating seaborne demand while the supply of vessels remain limited and likely to shrink as vessels age and eventually are removed from the commercial trading fleet. We're staying in front of the growing ESG mandate, investing in the fleet to reduce our carbon footprint, keeping our seafarers safe, and building a corporate culture of diversity with appropriate checks and balances. We're willing to back this message up with transparent ESG reporting and sustainability-linked incentives in our debt portfolio. We strive to continue to evolve these principles and to provide a meaningful platform for all of our stakeholders. Thank you very much. With that said, Glenn, we'd like to open it up for questions.
Thank you. Ladies and gentlemen, if you would like to ask any question, please press star followed by one on your telephone keypad now. When preparing to ask your question, please ensure your phones are muted locally. We have our first question comes from Chris Robertson from Deutsche Bank. Chris, your line is now open.
Thank you, operator. Good morning, Lois and Jeff. How are you?
Good. Thank you. Good morning.
Great. Thanks.
Good. Yes. Lois, you mentioned the potential for having partners or sponsors, I guess, for new buildings in the future, not just as it relates to Seaways, but also others as well. As you think about the future of the tanker market here, do you think that the new building order future, is gonna happen when ships are being de-risked to some degree with these medium to long-term time charters? I guess the point of my question is that I'm trying to figure out how will the next ordering cycle be different compared to the 2007, 2008 periods?
Yeah, no. I think that You know, the industry has an opportunity and you know, trying to work more closely with customers so that together we can, you know, decarbonize and de-risk some of the new technology that's on the horizon. I do think there will be some conventional orders placed, but I think there will be many owners like ourselves that are gonna be very reluctant to order a conventional engine in the market today.
Okay. Yeah. That makes a lot of sense. Jeff, this might be a question for you, but I guess going over to the dividend, which looks like the shares are up today. The market's responding well to that announcement. As I know you guys don't have a formula-driven approach, but looking at the combined dividend here, roughly 45% of adjusted net income. When thinking about it, are you coming at that from the perspective of looking at adjusted net income, or are you assessing it based on free cash flow after debt repayment? Is there a minimum cash balance that you're trying to target and kinda in order to hold back enough cash to fund potential growth in the future and kinda how do you think about balancing all that?
Chris, what if I just said yes?
I know. I was gonna say yes.
Yeah, you hit the points. There, we do always look at do we have what we consider to be sufficient cash and liquidity balance to be able to make capital allocations like we've done. There's not a specific target published number, but yes, we make sure first of all that we have a good cash position. Then I say we look at all metrics. You know, we, but it's clear that if you look at this quarter or what we're declaring, is our allocation in Q1 based on Q4 results, and also look at what we did in Q4 based on Q3 results, it's in the neighborhood of just about 50% of net income and 75% of free cash flow, which is laid out there for you.
I think it's a pretty consistent allocation of the combined supplemental and regular dividend. We kind of look at everything, and it's up to the board, based on recommendations from management, but that's how we're looking at it. Hope that's clear.
All right. Yes, very clear. I'll turn it over. Thank you.
Thanks, Chris.
Thank you. Thank you, Chris. With our next question comes from Omar Nokta from Jefferies. Omar, your line is now open.
Thank you. Hey, guys. Good morning. congrats on a obviously—
Good morning.
— another record result. Morning, Lois. You know, between the VLCCs, the mid-size crude business, and your MRs, I think you've got all your bases covered here in this, in this market. Wanted to ask maybe just about the fleet and how it is now. You know, you sold an MR here recently, followed another one back in the fourth quarter. If I heard you correctly, Lois, you're gonna take the proceeds from those two sales and use those to exercise the option on the Afras.
Mm-hmm
What are you thinking kind of going forward with the fleet as it is? You clearly you've got the critical mass across the main segments, but do you look to sell more ships here to more of the older ones in the MR fleet? Are you looking to replace sales with acquisitions? How are you thinking about that big picture-wise?
No, absolutely, Omar. Thank you for giving me that opportunity. You know, these three VLCCs that we're gonna take in the first half of the year and then combine with those two Aframaxes brings onto our balance sheet $500 million worth of assets at today's market levels. That represents, you know, a couple of years of, you know, depreciation, amortization, CapEx. That's a nice tenet of our growth. You know, on the MRs, you know, we've been pretty judicious. The reason that we are targeting the MRs for sales is truly just because those are the 2008-built vessels, and we are earning a lot of money on them, and you make a lot of money when you sell them.
We're just, you know, we're really being very prudent in just doing that very judiciously, not in a big movement. I guess that's how I would respond to that. You know, at present, you know, every one of the shipsets, you know, on the water earning is, you know, earning very impressively. But we're still gonna be disciplined with making sure, you know, we are, you know, keeping that fleet competitive for the future.
No, makes sense, Lois. Thanks for that. You know, maybe, you know, one of the themes that we've noticed here over the past maybe year is, you know, at least on the bigger ships that go into dry dock, looking to install scrubbers, not a substantial amount, but there are a few companies that are doing one or two—
Right.
— here or there. How are you thinking about that? I think just looking at the grid in your appendix, you've got a few ships going into dry dock. Any interest in just taking maybe a flyer on a handful of scrubbers when those go in?
Yeah. You know, of course our 10 VLCCs that are on the water have scrubbers. We have two of our Suezmaxes that have scrubbers. One of those scrubbers we put on last year, you know, and it is providing a good return. We don't, you know, we like to target the largest vessels. That's where you're gonna get your biggest alpha from. We don't have any of the Suezmaxes going into dock this year, but we're constantly. That's an argument that I have with Bill all the time. We go back and forth on, you know, whether or not we would put in more at this juncture. Definitely the scrubber investment that we've done, we're very happy with that.
Yeah, definitely. All right, Lois. Well, thanks. I'll do one more if you don't mind.
Not at all.
Just the VLCC new building. Yeah. Those VLCCs that come on here in the next several months, you know, obviously you bought those at the absolute right time if we look back at the price level. Yet even though they're on time charter, they do have the profit share component, if I remember correctly. How should we?
That's right.
Can't remember. Yeah. I can't remember exactly. How should we think about the profit share? Should we just simply assume, is it 50% of the upside above, like, prevailing market spot rate averages or is there an LNG price component to that? How should we just model those profit shares?
You know, I basically, I don't think we've ever gone out with what the actual base was, but you can assume that the, that the base is, you know, has a three in front of it, but not a lot more. Then just as, you know, run a calculation on, you know, the monthly TD3, which is AG East, and 50% above that, run on low sulfur bunkers will come to the owner and half will go to Shell.
Okay. Is there a cap?
No.
There is no cap. Sorry.
No.
Okay. Thank you. All right. I'll turn it over.
Thank you.
Thanks, Omar.
Thank you, Omar. With our next question comes from Ben Nolan from Stifel. Ben, your line is now open.
Thank you. Hey, Jeff, Lois. you guys once again crushed it on the LR1 s or Panamaxes. That's a pretty nice sweet spot for you. I did notice in the appendix that I think three of the charter in vessels are coming up for renewal. How should we think about sort of your position there? I mean, obviously it costs more to charter in vessels today, so you'd be taking a long position, but you'd make a lot of money on. Simply put, should we model in that you'll continue to be chartering in vessels for the LR1 trade?
We're working on it, but I almost would model them falling off and then let us surprise you know, when we manage to secure some renewals. It is a frothy market out there, Ben. We're working on it.
Yeah. I'm sure it is. Okay. Well, to the extent that it's a frothy market, I mean, do you put any of your other assets on longer term? I know you have a handful, but, you know, take advantage of the froth in the other direction.
Yes. No, absolutely. As the market has increased, you know, the team is starting to, you know, layer that in. In Q1, we put out, you know, one Supramax for a couple of years, you know, and it's just building on itself. Yes, we will. We don't have a huge target, somewhere between, you know, 10%, 15% at the moment that we would look to put on time charter.
Okay. Lastly for me is sort of in keeping with the charter-in aspect of things. On again, I think it was page 21 of the presentation, there was a note about chartering in or the work boats for lightering.
Oh, yeah.
I'm just curious. It made me think a little bit about sort of where, how you think about the lightering business. It's always been this little sort of quiet add-on.
Yeah.
Where does that fit into the profile for you guys going forward?
Well, you know, Basically, the lightering is a very low cost base. You know, it takes a small amount of capital, and it's essentially a very high touch business, so it keeps us very close to customers, and they really outdid themselves to the upside in 2022. Now a piece of that, you know, the SPR, you know, released a tremendous amount of barrels and, you know, also created a lot of activity there. You know, when we're looking at the lightering and we say, okay, how does that fit into everything? In Q1, you know, if you were to put $1.5 million of EBITDA in Q1 for lightering and try to, you know, keep that steady, that could be a potential plug number.
I think trying to build it up from the workboats is really very fraught because the lightering business is, you know, responds to the tanker market as well, right? When you have a tremendous amount of, you know, exports, imports, you know, in not only in U.S. Gulf, but in Panama and the U.S. West Coast, it's really been a little gem for International Seaways and it's a team that's really pulling more than their weight. That would be my plug number if you wanted to model that.
Okay. very helpful. I appreciate it. Thanks, Lois.
Thank you, Ben. With our next question comes from Greg Lewis from BTIG. Greg, your line is now open.
Hi. Good morning. Thank you, everybody. Hey, Lois, I was hoping you could talk a little bit about EEXI, you know, realizing that I guess it's kind of this is more of a data year than an actual execution year. As we think about, you know, the outlook and the potential impact for what that has on the fleet, you know, any thoughts you can share with us about vessel efficiency as really EEXI kind of flows through the Crude Tanker fleet?
Yeah, absolutely. In fact, Greg, I'm gonna throw that one to Bill Nugent, who is the Head of our Technical Department.
Hi, how are you today?
I'm doing great, thanks.
EEXI. Great. EEXI is really interesting. It is a one-time measure, right? All ships are measured this year against that benchmark, and Most ships have to implement some sort of power limitation on the engines. I could say for our fleet, the impact of that on current trading speeds and profiles, minor if non-existent, right? It, it's something we have to do. It's a good thing to do. It's gonna affect other shipping segments more than it's going to impact tankers. Efficiency, which goes, you know, every dollar we spend on trying to save a fuel goes right back to the bottom line in terms of, you know, fuel costs and everything else that comes back. You know, that's been an ongoing focus for us for a long time.
That really carries forward in the form of the CII measures, which is our the carbon intensity measures. You know, I think we're in a good place for that. We're working closely with our commercial partners. We're working with our technical partners to make sure that every day we're focused on, you know, the, all the little bits that add up to, you know, that ton of fuel that gets saved and the 3 tons of emissions that get saved as a result of that. I hope that was that answered your question.
Yeah, absolutely. Great. Then Lois, I did wanna talk, you know, follow up on Ben's question around the chartered-in vessels in your, you know.
Mm-hmm
Your West Coast Panamax trade. In the event.
Mm-hmm
In the event INSW does not opt to charter in those vessels, those vessels then just given that relationship with, what is it, FLOPEC, those vessels then are kind of pushed out of that trade. Is that the right way to think about that? I.e., someone else just can't throw them into that trade and run them.
Well, let's put it this way. You know, in Panamax International, which is a joint venture with Ultra of Chile and FLOPEC of Ecuador and International Seaways, that's a joint venture. We don't look to grow that pool in particular, per se. There are many vessels, you know, Panamaxes and Aframaxes that trade on the West Coast and lift cargos in and out of Ecuador. It's an open trade, that's for sure. You know, if, you know, some of our charter ins are for some European-based owners, those vessels, you know, may trade here, but they were also trading clean before we chartered them in.
You know, there's a real strength in LR1s right now, and that's whether they're being traded clean or dirty, with a lot of opportunity. In particular, you know, I've mentioned before, United States was importing 600,000 bbl a day from Russia. A lot of that was heavy, VGO fuel, you know, that was going into the refineries. That's really helped keep not only the Aframaxes and the Suezmaxes very strong, but the Panamaxes as well.
Okay. Then just following up on that, I know in the past we've talked, you know, there's always that balance between, you know, the chartered-in vessels and the, you know, the ability to buy vessels. I mean, clearly the balance sheet is in a good position at this great position at this point. You know, you did mention that whether you're chartering in or buying, maybe the market's a little bit frothy, you know, and I guess it's gonna stay that way for, you know, the foreseeable future.
Yep.
You know, I'm kinda wondering as we look farther ahead, I mean, are we kind of agnostic, you know, maybe whether we're gonna, you know, for that trade, whether we decide to charter in or buy?
Yes. Agnostic. Yes. Just look for the opportunity.
Okay. Okay, great. Thank you for the question. Thank you for the answers.
No, thank you, Greg.
Thank you, Greg. As a reminder, ladies and gentlemen, if you would like to ask any further question, please press star followed by one on your telephone keypad now. Our next question comes from Liam Burke from B. Riley Securities. Liam, your line is now open.
Thank you. Good morning, Lois. Good morning, Jeff.
Hey, Liam.
Lois, is there any interest as some of these vessels or classes start getting frothy rates to start time chartering certain ones out, or do you like prefer to ride them into the spot market?
Well, you know, we love having that spot market presence at the moment, obviously. We, you know, we will opportunistically look to lay in some of these time charters, remembering that, you know, the three VLCCs that are coming into the fleet, yes, they have a profit share, but they do have a base time charter rate, so we sort of put those in the time charter bucket. Then we look to, you know, add some other vessel classes into that, some MRs, potentially some Suezmaxes. That's sort of our approach at the moment. I was saying, you know, probably 10%-15% we would look to put on. One-year time charter doesn't really do a lot at the moment.
You know, maybe a, you know, multi-year time charter as provided we can get enough, you know, alpha in that to make that look very good on our balance sheet.
Great. Thank you. Jeff, on the variable component of the dividend, I mean, you don't have to share with us, but do you have any percentage of cash flow that you allocate to that variable dividend? Or how do you think about that internally?
Yeah. Yeah. Hi, Liam. So we'll stick with the terminology of a regular dividend with a supplemental dividend, quarter by quarter as the board sees fit for a combined total. You know, what we would point out from our presentation is that, you know, we had free cash flow of about $130 million that's in that cash bridge in the deck. If you look at the combined dividend, it's, you know, it's just right around 75% of that. It's a substantial portion of free cash flow, and that's very similar to what we did in the prior quarter. You know, everyone's net income is a little different relative to their cash flow based on their balancing and their depreciation.
You know. I also think we look at this as a, you know, percentage of the share price, and we find that it's very competitive that way as well. I think mainly look at the free cash flow, Liam. That's a good guide to what we've done the last two quarters.
Great. Thank you, Lois. Thank you, Jeff.
Thank you, Liam.
Thank you, Liam. We have no further questions on the line. I will now hand back to Lois for closing remarks.
Thank you very much, Glenn. Thank you everyone for your interest in International Seaways, the tanker company for today and tomorrow. Thank you very much.
Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your line.