Good morning, and thank you all for standing by. I would like to welcome you all to International Seaways first quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, we will conduct a question and answer session. Please press star followed by one on your telephone keypad to ask a question. Please press star two if you do change your mind and would like to remove your request to speak. For operator assistance at any point, it's the star zero key. Thank you. I'll now turn the conference over to your host, James Small, General Counsel. Please go ahead, James.
Thank you, Brica. Good morning, everyone, and welcome to International Seaways earnings call for the first quarter of 2023. 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: the outlooks for the crude and product tanker markets and changes in trading patterns, forecasts of world and regional economic activity and 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 during 2023 or in any other period, projected scheduled dry dock and off-hire days, purchases and sales of vessels, construction of newbuild 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 management's experience and perceptions of historical trends, current conditions, expected and 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, 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 those described in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and in other filings that we have made or in the future may make with the U.S. Securities and Exchange Commission. Now, let me turn the call over to our President and Chief Executive Officer, Ms. Lois Zabrocky. Lois?
Thanks very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call for the first quarter of 2023. Following slide four of the presentation found on our investor relations section of our website, net income for the first quarter was $173 million or $3.47 per diluted share, bringing our cumulative earnings over the last three quarters to over $500 million. Adjusted EBITDA, which removes the gain on the sale of an MR, was $209 million. Based on our strong results in the first quarter and strong spot fixtures thus far in the second quarter, we have declared a combined dividend of $1.62 per share.
Following the dividend payment in June, Seaways year-to-date dividends are nearly as high as the previous three years combined, as found in the chart on the upper right-hand corner of the slide, surpasses $360 million in cumulative returns to shareholders since the start of 2020. Finally represents over $5 per share returned to shareholders over trailing 12 months. Our success today is clearly demonstrated in our balanced capital allocation approach. Two of the three dual-fuel VLCCs have been delivered with the third newbuild and final delivery expected later in the second quarter. We ordered these ships in 2021 at a contract price of $96 million per ship, today's vessels value has these ships worth nearly $150 million each.
These ships will be on time charter for the next seven years to an oil major with a fixed rate component plus a profit share. They are financed at a 64% loan to current value at a fixed interest rate of 425 basis points. We also exercised the purchase options on two vessels under sale-leaseback arrangements for a net price of $41 million combined, representing a discount to current values of about 45%. One vessel delivered in March and the other in April. We sold an MR during the quarter, and that resulted in a $10 million gain on sale, evidencing our successful investments at low points in the cycle. The balance sheet remains strong with total liquidity ending the quarter at $519 million.
This is after our $98 million in dividends and $97 million of repayment toward our term loan. With the repayment on the term loan, we amended the facility to increase our revolving credit to nearly $260 million and released 22 vessels from the collateral package. Today, we have 27 unencumbered vessels representing 35% of our total fleet. Lastly, we fixed four ships on two- to three-year time charters during the quarter, increasing our contracted revenue to about $337 million, excluding any profit share component on the newbuild V. These additional time charters increase our fixed coverage to over 10% of the fleet and reduce our cash break-even levels. On slide five, Russian oil exports remain in focus. Trade flows to Europe are displaced due to the ongoing sanctions and creating higher ton-mile demand while soaking up tonnage.
On the left-hand side of the slide, it's clear that Russian crude is primarily heading to Asia, particularly India and China. The chart shows that crude seaborne exports have remained relatively stable and constant at 4.5 million-5 million barrels per day, while the composition of the destination on the right axis has narrowed significantly to essentially Turkey and Europe and increased significantly to Asia. Product exports from Russia in a similar graph on the right-hand side of the page are not as clear in terms of displacement since the sanctions began only in February. Turkish imports in the Mediterranean are all that remain for Europe, while volumes to Asia and Africa have increased. While this story continues to develop, including the concept of double handling via STS transfers, International Seaways and its commercial managers remains constant on our self-sanctioning of lifting Russian oil.
Turning to slide six, we have updated our standard set of bullets on tanker demand drivers with the subtle green up arrows next to the bullet representing good for tankers. The black dash represents neutral impact on tankers and a red arrow, meaning the topic is not presently positive for tanker demand. I won't read each of these bullets individually, but we'll pull some highlights for you. While the consensus of oil demand growth for 2023 is around 2 million barrels per day, most believe that the growth in oil demand is weighted to the second half of the year. In the chart on the lower left of the slide, the average of the EIA, the IEA, and OPEC forecasts for oil supply and demand reflects a slight oversupply in the first half of 2023 that is then more than offset in the second half of the year.
We saw inventories grow in the first quarter, some of which is seasonal, but we remain cautious on near-term views of global recession. With these considerations, it seems logical that OPEC+ announced cuts to their production targets. However, we're a bit skeptical on compliance as these targets, as evidenced in the lower right-hand chart, are very close to actual recent OPEC+ production levels in the past few months. We believe sentiment has been impacted, particularly on the VLCC earnings, and we continue to monitor oil supply and oil demand as the year progresses. On slide seven, the tanker supply side remains a compelling story to our fundamentals. The supply side remains constrained with an aging fleet and barriers to ordering new ships. Yards are still quite busy over the next two years with other shipping sectors. This is keeping new building prices high and limiting economic decisions on ordering.
We expect new environmental regulations to continue to evolve and to further pause a wave of new building orders. In the chart on the lower left of the page, contracting has been somewhat limited this year, there is a significant downward trend over the last few years for tanker vessels that are taking longer to build with 2026 a reasonable estimate for the early delivery on certain new building contracts today. The oil tanker fleet age is now above 12 years old, with more than one-third of the fleet above 15. As you can see in the lower right-hand chart, expected new tonnage over the next few years is well under the candidates that could be removed from the commercial trading, we may see negative fleet growth in the near future. The supply outlook for tankers in the near term is incredibly positive.
Combined with higher oil demand and disrupted trade flows, the overall outlook for tankers remains strong, particularly in the medium term. There may be near-term recession which could affect tanker rates, or we may return to our regular seasonality in the summer months. In either case, we remain positive on tankers, and we believe that Seaways is very well-positioned to capture strong markets with our low operating leverage and our diversified fleet of 76 tankers in both crude and product sectors. With our healthy balance sheet and our liquidity, we expect to continue building our upon our track record and on our balanced capital allocation strategy, investing in the fleet opportunistically, reducing debt, and returning cash to shareholders. I'm gonna now turn it over to Jeff, our CFO, to provide our financial review. Jeff?
Thanks. Thanks, Lois. Good morning, everyone. Turning to slide 9, net income for the 1st quarter was $173 million, or $3.47 per share. Adjusted net income, which essentially removed the gain from the sale of vessel, was $163 million, representing the 3rd consecutive quarter of earnings over $100 million and over $550 million in net income for the latest 12-month period. Similarly, on the upper right chart, adjusted EBITDA for the 1st quarter of 2023 was $209 million, bringing trailing 12-month EBITDA over $730 million. In the appendix, we provided a reconciliation from reported earnings to adjusted earnings.
While our expense guidance for the first quarter fell within the range of expectations, I'd just like to point out a few items of note with our income statement. First, other income for the quarter was over $4 million, that consists largely of interest income on the significant cash balances that we are holding. On the revenue side, our lightering business had a very strong first quarter with $11 million in revenue. Given $2 million in vessel expenses, $3 million in charter hire, and $1 million in G&A, overall, the lightering business contributed about $5 million in EBITDA for the quarter. Also on the revenue side, our LR1 pool, Panamax International, continues to outperform the general market with earnings in excess of about $5,000 a day above the broader market indices.
As you can see in our TCE revenues at the bottom of the page, LR1 spot earnings for the quarter were nearly $71,000 per day. Turning next to slide 10 for our cash bridge. You can see we began the year with liquidity of $541 million, which was composed of $324 million in cash and $217 million in an undrawn revolving credit capacity. Following along the chart from left to right on the cash bridge, we added $209 million in adjusted EBITDA for the first quarter, plus $57 million in debt service composed of scheduled debt repayments and cash interest expense. Less our dry dock and maintenance capital expenditures of $23 million in the quarter, and a working capital bump of about $40 million.
We, therefore, achieved our definition of free cash flow of just about $169 million for the first quarter. The remaining bars in the cash bridge show all the levers we pulled in our capital allocation strategy for the quarter. For instance, we sold 1 28-built MR for proceeds of $10 million. We opted to repay more of the term loan rather than reduce capacity on credit facility. We exercised the purchase options on 2 Aframaxes that had been on sale-leaseback. $24 million of that amount was paid in March for the vessels. $18 million was put in escrow as of the end of March for the final payment on second vessel, which was made in April.
We repaid $97 million on a term loan portion of our main senior secured facility, which will reduce our scheduled amortization by about $3 million per quarter and save over $600 a day on our forward cash break-even levels. We paid $98 million in combined dividends, which was a $2 per share that we announced on our last earnings call. The $4 million of other is mostly composed of deferred financing costs for taxes paid on stock. Altogether, these components then led us to an ending liquidity of over $519 million, with $261 million in cash at the end of the quarter, and cash and short-term investments at the end of the quarter, and $257 million in undrawn revolving capacity.
As previously mentioned, the revolving capacity was increased during the quarter connection with the amendment of the credit facility. Moving to slide 11. We continue to have a very strong financial position, as shown by the balance sheet on the left-hand side of the page. Cash remains strong at $261 million. Restricted cash of $18 million, as I said, represents the amount in escrow related to the Aframax vessel purchase with a corresponding lease liability. With the completion of the sale in April after the quarter, those will be eliminated. Vessels on the books stand at approximately $1.9 billion versus the current market values, which are well over $3 billion. With about $950 million in gross debt, that equates to a net loan-to-value of just about 21%.
On the right-hand side of the page, we wanted to show further strength of our operating leverage, which results in a significant cash flow generation over the last few quarters, even after returning substantial cash flow to shareholders and paying down debt. As we mentioned in our press release this morning, we expect to continue on this trajectory of balanced capital allocation approach. Two new buildings of our three dual-fuel VLCC program will deliver in the second quarter. We also intend to use some of our cash to repay existing debt. Currently, we're exploring options on which facilities of the portfolio we intend to repay, either in their entirety or in a portion.
Overall, we expect the total repayment may be around $75 million. We've also announced our combined dividend of $1.62 per share, which consists of our regular dividend of $0.12 per share and a $1.50 per share supplemental dividend. These payments we made in the second quarter as we continue to build our track record of executing capital allocation strategy. The last slide I'll cover, slide 12, shows our forward-looking guidance and book-to-date time charter equivalents aligned with our cash breakeven levels. Starting with TCE fixtures for the second quarter of 2023, and as always, I'll remind you that actual TCEs that we will report on our next earnings call will probably be different than this.
As of now, we have a blended average spot TCE of nearly $48,000 a day fleet-wide for the quarter. On the right-hand side, you can see our cash breakevens, which we've displayed for the forward-looking 12 months reflective of the delivery of the last vessel on our new building program and related payments on principal and interest, as well as the new fixed revenues before any profit share on our increased long-term time charters. Altogether, we have reduced our breakevens by $600 a day from the first quarter of last year. If you consider the approximately 250 basis point increase in bank rates over the same period, you know, the reduction to our breakevens is actually closer to $1,500 a day.
When you compare these breakeven rates to our fixtures for the quarter to date, it certainly looks like second quarter could be another strong quarter for International Seaways. On the bottom left-hand side of the chart, for those modelers out there, we've given you some updated guidance for our expenses in Q2 and the remainder of 2023. We also include in the appendix of this presentation our quarterly expected off-hire and CapEx schedule for 2023. I won't read each item line by line, but encourage you to use these for modeling purposes. That concludes my remarks. I'd now like to turn the call back to Lois for her closing comments.
Thank you very much, Jeff. On slide 13, we provide a comprehensive Seaways investment highlights. I encourage you to read and review in its entirety, but we just summarize briefly for you here. At International Seaways, you will find that we execute on our commitment to all stakeholders, and we have a recent track record. We strive to buy assets at low points in the cycle. Our track record and our balance sheet show that we have invested about $2 billion in assets that are now worth well over $3 billion today. We said that we have a balanced capital allocation approach. Last quarter, we generated over $200 million in earnings, and we distributed nearly half to shareholders and the other half to reduce debt. We bought two ships at discounted prices.
This quarter is much of the same, $170 million of earnings with $80 million to shareholders and another $75 million towards debt reduction. Our balance sheet remains very healthy, with significant liquidity, historically low net loan-to-value, and 35% of the fleet unencumbered. We have strategically positioned the company today for a sustained, robust tanker market with our low cash breakeven levels and flexible operating model. We are set to take advantage of the compelling tanker fundamentals on the horizon. The growing distances between oil supply and consumption, creating high demand for seaborne transportation across a globally aging fleet that has barriers towards replacement, much less the expected growth we anticipate to come in demand. On this, we are mindful of the environmental regulations ahead and remain focused on being a leader in ESG.
We have backed this up with sustainability clauses in our cost of borrowing. We strive to continue to evolve these principles and to provide a meaningful platform for all stakeholders. Thank you very much. With that, operator, we would like to open up the lines for questions.
Operator, we can't hear you.
I apologize. Please press star one to ask a question. I can confirm the first question on the line is from Greg Lewis of BTIG.
Yes, thank you, and good morning, everybody, and thanks for taking my questions. you know.
Hi, Greg.
Hey, guys. Yeah. I do want to talk about the cash balance, but Lois, before, could I could we clarify, you mentioned that with the newbuilds, you know, on the back of the strong contracts, you mentioned this, the 60%+ on the LTV. Was that on the purchase price which was in the $90 million, or was that on the current market price of the 150-ish?
That is on the current market price.
Okay. So I mean, we're pretty much, you know, based on when we bought it. Okay, great. As I think about cash and Lois and Jeff, you know, you've seen more cycles than me. Cycles can be, you know, challenging as we know. As we think about and realizing we're not in a market like that, but you never know.
As, as we think about the cash balance and, you know, realizing that interest rates are higher, so you're actually making some good income on that money now. Like, should we be thinking about kind of like a more of a sustained cash balance around these levels, realizing that, you know, as I look ahead next into the back half of this year, and when we see, you know, in an expected rate recovery, it's, you know, without any real forward CapEx going forward, you know, it seems like that cash balance should really just continue to melt higher. Is that kind of a fair way to think about it?
Well, you know, Greg, you know, I think that presently, you know, we're still in, you know, really strong market. Yet we have very structural fundamentals for a strong market in the future. You know, the, you know, spot market has reacted, you know, to the sentiment with OPEC cutting and yet we still believe that there's going to be strong demand in the second half. You know, I'm gonna let Jeff expound on it, you know. Presently, we think that the way that our balance sheet is set up and the way that we've been focused on, you know, unencumbering ships and paying down debt, as well as returning to shareholders, we have this, you know, sweet spot, hopefully, of where we're really striking a very good balance and, you know, are prepared for whatever the market brings to really surf very well through that.
Yeah. Like you said, Greg, I've been through a couple cycles and actually remember when it was sort of normal to be getting interest rates on your cash, right? We all forgot about that for the last 10 years. You know, I don't think it fundamentally changes our view, which is, you know, we wanna have a good cushion between cash on drawn revolver and frankly, unencumbered vessels, which are themselves a great cushion, you know, against whatever that next downturn might be and however long or short it might be. It's just nice to be paid for net cash, which we want to have net cash as a portion of the clear that we want to keep. I think returns, as Lois was talking about, returns to shareholder, paying down debt, you know, that all stays the same.
You know, it's the right thing to do at this point in the cycle, we'd continue with it. I think it's kind of like back to the future. It's back to a fairly normal time where, you know, interest rates on your debt are a little higher, but you know, that's why we've hedged out a significant portion or have fixed portion of our debt. Interest on your cash is commensurately a little higher. Just is what it is, Greg. I think it's okay.
Yeah, no, it's. That's, I mean, you kind of have built this, it looks like a three-cycle company with the, you know, the cash gives you flexibility. I just kind of wanted to kind of hear your thoughts on that. Then I was hoping, Lois, you called out, you know, the benefit or Jeff maybe it was about the benefit in the lightering and, you know, we're continuing to see those weekly SPR releases to some degree. Could you know, I guess there's a two-part question there is, you know, how much of the SPR releases is helping the lightering? Then beyond the lightering, once, you know, we've executed the lightering that, you know, those volumes then go on ships farther afield. Like, any way to kind of quantify what that SPR release is actually doing to the market over the last couple months?
That's interesting. I mean, we certainly know last week, you know, 4.7 million barrels a day exported out of the U.S. Gulf. We know that, you know, those releases really bolster, you know, the exports and put more barrels on the water seaborne for the tanker side. It's pretty tough to give you a quantification of how that assists. On lightering, I would say that their Q1 was bolstered by that level of activity as well as by the very robust rates. You know, we don't look for them to be able to repeat that $5 million in EBITDA for Q2. We would think that it would be, you know, more moderate in the second quarter reflecting seasonally a little bit lower volumes and lower jobs.
You know, I think that, half of that SPR, it's like 11 out of like 25, 26 barrels has been put on the water. We probably can look forward to seeing that over the next, you know, probably 30 to 60 days, kind of helping volumes a little bit as well.
Can I just add 1 observation? Greg, you know, in my opinion, a lot of people, observers kind of freaked out a little bit when OPEC made a surprise cut. Like, Oh, what does that mean about demand? Whereas a lot of that might have been, what does that mean about inventories? Inventories were probably relatively higher than they might otherwise have been because of SPR releases and sales, mainly last year, you know? That's where I think it comes in, Greg.
We've seen it come down already, like, in the US, the crude is, it's like 460 million barrels of inventory. A lot of what was there in Q1 is has been coming out week over week.
Yeah. Okay. All right. Hey, perfect. Thank you for taking my time. Have a great day.
Thank you.
Thanks, Greg.
We now have Ben Nolan of Stifel.
Yeah. Thank you.
Morning, Ben.
Thanks. Hey. good to talk to you guys. Thanks for taking Greg's time too. I have a couple of questions. The first relates to it's a little bit more of a macro type question. You guys talked a whole lot about the order book and fleet age and everything. There's been a little bit of ordering lately, though. What I think one of the interesting things is that as it relates to the crude tankers, it's been mostly Suezmaxes. Man, it's been like two years since a VLCC has been ordered. I'm curious what the dynamic is. Why are, what about the market makes people a little bit more optimistic about a Suezmax versus a VLCC that would be expressed in an order?
That's interesting. You know, I guess I would say that, you know, I almost thought you were gonna go to, you know, the ships that have been ordered are MRs and LR2s and of course, you've just seen incredible strength in both of those sectors, you know, with the Russian war. That doesn't, you know, that doesn't incredibly shock me. I mean, the Suezmaxes are, you know, they're a little more flexible, and you can build them in a few more yards. We still haven't seen very much on big crude. I mean, even on the Suezmaxes. It's been pretty reduced, I would say.
Overall, we're still below, I don't know, around like a 4%, you know, replacement or a full order book, in theory, you should be losing 4% to 5% of your fleet each year in normal times, which we're not in. We think that still looks pretty structurally low.
Yeah, I agree. I mean, clearly, I mean, the numbers have never been really this low, other than maybe a month ago or so. Okay, that's helpful. Along those lines, maybe just talking about new buildings, I mean, you obviously a few years ago, you guys did the VLCCs with LNG. I'm curious if there's been any level of reverse inquiry, whether or not you guys would be interested in doing it, I think it's a different conversation. Are you starting to see your customers getting a little bit more antsy and saying, "Hey, you know, what can you guys do? We know that we're gonna need a ship in a few years, so let's have a conversation." I mean, is that happening at all?
Yes. I mean, I would certainly say that I think oil majors are, you know, they're very forward-looking, they're very structured, you know, so, you know, we work to engage them and have discussions. I think it's still not 100% clear on exactly what type of dual-fuel, depending upon your vessel size, you know, you should be using. The dual-fuel LNG is super for the Vs. That may not work for all different sectors. There's a lot yet to be learned and innovated in this space.
You know, one thing that we've remarked on before, but I think it's appropriate to say it again as we come to the completion of delivery of this, the three vessel program is there's a lot of intellectual property in the company, in what we've gained as an asset from having spent the time, you know, building these vessels. T hrough to completion and sea trials and now putting them out with our customer. You know, I think that if there's gonna be reverse inquiry, we expect the phone to be ringing here.
Okay. Just the last one for me. I know you guys did the repurchase of some of the vessels that you had leased in. Are there any more of those in the fleet that you have purchase options on?
Yeah. We will be looking at, you know, our debt facilities and our sale-leaseback facilities, which are all accounted for as debt, for opportunities to, you know, reduce debt incrementally, as we talked about today. You know, there may be some of the low-hanging fruit that or the lower-hanging fruit that makes sense that even though we have a fixed, high fixed portion, fixed or hedged portion of our debt, you know, could pick off some of the more, slightly higher cost stuff. Yeah, there's, we can look for that.
Okay. I appreciate it. Thank you.
Thank you.
Thanks, Ben. Thanks.
Thank you. We now have Omar Nokta with Jefferies.
Thank you. Hi, guys. Good morning. wanted to just follow up.
Good morning.
With a couple things. Yeah, first off. Good morning, Lois. Just first off, obviously, the Panamax LR1 fleet continues to be a nice, you know, piece of business for you. It's niche overall. It's becoming a real contributor to your revenue, as we could see this past quarter and the one before it. You earned $70,000 a day in 1Q. You've guided to $79,000 so far in the second quarter. How should we be thinking about that segment as we move forward here? Whether the rest of this quarter or into the second half, how has that market been developing, and can we expect this type of elevated rate to continue for some time?
I think, Omar, I would say that, you know, right now, you know, across, and of course those LR1s are trading, crude and dirty DPP, you know, in the Americas. You know, presently, all the crude markets have backed off somewhat. However, we still anticipate that Panamax International will continue to post very strong rates. You know, of course, that's our joint venture with Ultranav and Flopec. We expect that it will mirror the broader market and continue to post that extra, you know, extra benefit beyond the spot.
Okay. Thank you. I guess I'm not sure if I'm pretty sure you've been asked this in the past, but I can't recall. Is there a sort of index or a route that we can sort of have a sense of being able to track how that business is doing? Is it really just the very kind of customer-to-customer relationship, and it's almost, I don't want to say a black box, but we just don't have a really good sense of being able to see how that's performing.
You know, what I would say is, maybe we'll follow up with Tom offline because we do have indices that, you know, our market indices that, you know, are benchmarks. If we could do that, I think that might be beneficial.
Yeah. Okay. Yeah. Sorry to get into the weeds, but it's just obviously remarkable how-
No, there are some reflective routes. Yeah. There are routes that, you know, we use as, benchmarks and et cetera, that, you know, reflect that trade.
Okay. Cool. All right. Look forward to that. Just as a follow-up to, you know, the discussion about the dual-fuel VLCCs that you've taken delivery of, you got the first two, the third one's coming up shortly. Wanted to ask.
Yeah
You know, clearly, you know, there's just a lot of, you know, what's the future type of propulsion and whatnot, but maybe just with respect to these VLCCs and wanted to get a sense of how so far as you've taken delivery of them, how they've been deployed in terms of, is the LNG portion of the fuel source being utilized? Are the ships being maybe used for lifting U.S. cargos and thereby having access to U.S. LNG at a cheaper price? Any color you can give on how these are currently being, yeah, operationally utilized.
Yeah. I mean, you know, the trading is, you know, the trading in typical VLCC trades, right? You know, on the bees, you know those routes, I mean, you need Singapore, you know, US Gulf is great, Fujairah, right? Those are sort of your bunker spots. They are using the LNG system, not fully for propulsion, that they're operating these on a mix, and you know, presently, and of course, we want that LNG system, you know, to be used so that we make sure everything is effective as we start to trade them and high, you know, operational and smooth for us, right? We're going to learn more as we get all three of them into steady service.
Yeah. Okay. I'll learn as well, watching, you guys.
Yes.
Maybe just one simple one. I just kind of thought of it as we were talking, but the LNG component of the vessel, does it always have to have LNG in it, or is it able to run without that?
Yeah, we don't have, you know, the one guy we don't have on.
Too scientific. I'm sorry.
It is able to run fully on conventional.
A blend, right? Sure.
Yeah. It's able to run, but it's able to run fully on conventional fuel.
Right.
You can run on a blend. We will likely always have some LNG in the bunker tanks that are on deck. Probably we need to. Then my head of ops and sustainability is traveling, and if there's anything additional to add, we'll share that with you.
Thank you. Thanks, Lois. Sorry, sorry to get into the nitty-gritty across all my questions.
No, no, it's great.
We now have Chris Robertson of Deutsche Bank.
Hey, good morning, Lois and Jeff. Thanks for taking the time and answering our questions today. Just on, Jeff, looking at the recent pullback, not only with your shares, but across the tanker space, can you talk about how you're thinking about the capital allocation strategy here as it relates to maybe doing some share repurchases over dividends in the coming months?
Yeah. Thanks, Chris. Yeah, I'm glad you asked that. You know, taking a step back, as you know, we have said we don't have a formula as to how we allocate capital. We look at everything, and but I feel that gives us a better ability to be flexible. I think that's true with respect to whether the returns that we do are dividends or share repurchase. You know, we're still proud of the $5 that we've returned over the last 12 months per share, but that includes some share repurchasing last year when that was the right thing to do. We think that the regular and supplemental dividends we declared these last three quarters were the right move.
Yeah, we're not, we are cognizant of the drop in prices that the whole peer group has had. I would say, looking forward, you know, we're generating cash flow in the second quarter, have a good cushion. At these kind of values, you know, we certainly, we have an open, available $40 million share repurchase program, and we won't be shy to use that to look at accretive share repurchase as part of capital allocation going forward.
Okay. Yeah. That's, that's pretty clear. Thanks for that, Jeff. You know, you guys spent a little time here talking about the OPEC production cut targets versus the actuals. I mean, it seems on a kind of a tangible impact, the volumes haven't really been impacted thus far. I guess looking ahead now that, you know, the Brent price is still trading below $80, I think the IMF has come out and said that Saudi Arabia needs $80 per barrel to balance the balance sheet there for the government. Is there any downside risks you think at the next meeting that either the cuts would be extended or deepened in some way or trying to get additional compliance to where we'll actually see, you know, volumes on the water impacted?
You know, it's possible, but, you know, the IMF also said on Monday that, you know, Asia, they raised the GDP to 4.7 or 4.6 from 4.3, and that will equal 70% of worldwide GDP growth this year. We love to see that, you know, because that's, you know. We see that China's a little bit uneven, but Golden Week here is starting out very strong with year-on-year transportation way higher than, you know, last year. You know, we're seeing pretty strong demand from the East. The Saudis, their pricing this month, they cut a little bit for Asian destinations, but very mildly. We're watching it very closely. Of course, it's possible, but we're still looks like Asia could pull with more strength certainly than the West as we head into the second half.
Okay. Yeah, thanks for that commentary, Lois. Last question from me. Just looking at the order book to fleet ratios for both segments, you know, you kind of highlighted that the crude segment is faring a bit better at a relatively lower basis, and you mentioned that there's been some ordering on the product side with LR2s and MRs. Do you think at least in the near term, kind of given the uncertainty in the market and the current sentiment, that ordering might take a pause on the product side? Or do you think there's more kind of downside risk to additional orders in the coming quarters?
You know, I think with, you know, we kind of said it in our remarks, you know, the regulations continue to evolve. You know, order books continue to move, you know, forward. The, the values are high. You know, the technology is a bit of a question mark. You know, I would think we would see a little bit of a, an abatement. Let's see if that comes to reality.
All right. Yeah, got it. Thanks. I appreciate the time.
Thank you.
Thanks, Chris.
Thank you. We now have our final question on the line from Liam Burke of B. Riley.
Thank you. Good morning, Lois. Good morning, Jeff.
Morning, Liam.
Hey, Liam.
Lois, as the older MRs begin to age and move to the 15-year and above level, are you satisfied to keep operating them, or do you consider selling them, or taking them out of the fleet?
You know, you see that we sold one here in the first quarter and that, you know, we continue to kind of prune them. You know, $31,500 a day, right? You know, it's a balance. You know, they're fully employed. They're highly marketable. They're well-maintained. You know, we're judicious in the way that we just kind of continue to do our fleet optimization that's just ongoing.
Great. Jeff, you've been very clear about not being formulaic in terms of capital allocation, but do you anticipate a dividend program that has the flexibility of providing the special component every quarter or during the next quarters?
Yeah, Liam, I think that's what we've done, is put in a program where we have the regular dividend. You know, it was not all that long ago that we raised it. I mean, we doubled it last year, so from $0.06 a share per quarter to $0.12. You know, we expect that to continue, and at some point in the future, we look at, you know, as someone else said in this call, as a through the cycle company, I love that, you know, we'll look at the whether we can at some point, you know, increase that regular dividend. Then you captured it right. I mean, you're getting what we're. Thank you for saying we're clear.
What we're trying to say is when we are in cycle, points of the cycle like we are now, where there's significant free cash flow, you know, in addition to paying down debt, we're gonna supplement that regular dividend, and that's why we use the word supplemental dividend, you know, so that we're sharing in that upside with shareholders. We don't have a particular formula, as you said, but all things being equal, if we, if that continues in the coming quarters, shareholders should expect that we will continue to pull the same levers. You know, we'll pay down some debt, and we'll share some via dividend, or as I said to the last question, you know, possibly share repurchase. We'll continue to share with shareholders.
Great. Thank you, Jeff. Thank you, Lois.
Thank you.
Thanks, Liam.
Thank you. I'd now like to hand it back to Lois for any final remarks.
I want to thank everyone for joining International Seaways today, INSW on the New York Stock Exchange. Thank you very much, and have a great weekend.
Thank you for joining. I can confirm that does conclude today's call. Please have a lovely day, and you may now disconnect your line.