Hello, everyone, and welcome to the International Seaways Q3 2023 results conference call. All lines have been placed on mute during the presentation portion of the call, with an opportunity for question and answer at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to turn the conference over to our host, James Small, General Counsel and Chief Administrative Officer. Please go ahead.
Thank you, Candace. Good morning, everyone, and welcome to International Seaways earnings call for the Q3 of 2023. Before we start, I'd like to begin 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: outlooks for the crude and product tanker markets, 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 effect of ongoing conflicts around the globe, the company's strategy, 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 the Q4 of 2023, during 2024, 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, perception 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 include those described in our annual report on Form 10-K for 2022, our quarterly reports on Form 10-Q for the first three quarters of 2023, 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?
Thank you very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call for the Q3 of 2023. Following Slide 4 of the presentation, which you can find on the investor relations section of our website. International Seaways' net income for the Q3 was almost $100 million, roughly $2 per diluted share, bringing our cumulative earnings over the last 12 months to over $640 million. Adjusted EBITDA was $151 million for the quarter and over $800 million in the last 12 months. Based on our strong results in the Q3 and the spot fixtures well above our breakeven level thus far in the Q4 , we declare a combined dividend of $1.25 per share.
Following this dividend payment in December, actual last 12-month returns to shareholders will include a cumulative $6.29 per share in combined dividends, as well as $14 million in buybacks, equating to over $320 million, a 16%+ yield on our average market cap during this period. We continue to enhance our balance sheet with our balanced capital allocation approach. Total liquidity at the end of the quarter was over $580 million, comprised of $215 million in cash and an undrawn revolver capacity of over $365 million. We added $160 million of revolver capacity after executing this new credit facility during the quarter.
This facility features a 20-year amortization profile, a margin of 190 basis points over SOFR, and a 5.5-year term, all of which are critical key outcomes for Seaways. We drew about $50 million on the revolver during the quarter, which has been repaid. The final result on our major senior credit facility allowed us to repay $100 million. We now have a total undrawn revolving capacity of over $400 million and 30 unencumbered ships. Our fortress balance sheet highlights the success of our balanced capital allocation strategy over time. We have acquired assets. These assets are on the books for $2 billion, where the value of the fleet today is nearly $3.3 billion. Our net loan to value is 19%. Our cash break even for the next 12 months is under $15,000 per day.
This is an exceptionally low level and a key differentiator for International Seaways. This includes about $3,700 per day of our fixed contracted revenue, that in aggregate amounts to over $344 million through to charter expiry. It excludes any profit-sharing element on applicable time charters. This low break-even level paves the way for enhanced free cash flow during 2024. We have exercised two optional LR1 new building contracts. We now have four LR1 new buildings, with delivery scheduled beginning in the second half of 2025 through to the Q1 of 2026. These four ships are designed to be scrubber-fitted, and they are certified as dual-fuel ready. The aggregate price is $231 million for the four vessels.
Upon delivery, these ships will trade in our niche Panamax International Joint Venture, which has earned over $64,000 per day on average in the last 12 months. Turning to slide Five . We've updated our standard set of bullets on tanker demand drivers with the subtle green up arrow next to the bullet represented as positive for tankers, and the black dash representing neutral impact, and a red down arrow, meaning the factor is not positive for tanker demand. Pulling some highlights. Oil demand increased in 2023, on average, about two million barrels per day over 2022, and is projected to increase another 1.5 million barrels per day in 2024.
Scheduled growth in oil supply is about 1.5 million barrels per day over the next two years, each of the two years, mostly coming from the West in the United States, Guyana and Brazil. A relevant question for the tanker space is: when will OPEC decide to turn some of the pumps back on and increase production? We believe this will bring positive sentiment and lift average time charter equivalents. On the flip side, during the duration with OPEC keeping production at bay, we are drawing inventories in the Q4 based upon present demand levels, which we believe benefits a longer-term horizon on tankers. As the chart on the lower right shows, current levels of commercial inventory are well below their 15-year high. Previously, key events caused big builds and draws, such as COVID in 2020 and 2021.
It took us time to draw these inventories down. We look at the five-year average all the way from 2010, since it predates events, and have included the average of 2019 and 2022 separately, as these two periods match better with oil demand. The bottom line is that inventories are historically low, especially when combining commercial and strategic reserves. Before moving on from this slide, there are a number of outstanding geopolitical events that are sadly affecting our current tanker environment. Over the last few years- over the last few months, the price cap imposed on the Russian oil has been effectively priced out due to rising crude oil costs from OPEC, plus production cuts. We have seen an impact on the tanker market, as many ships in the Gray Fleet migrate into the commercial fleet.
An upside over time is that we see the loosening of sanctions on 800,000 barrels per day of Venezuelan crude oil. Moving to slide six. The supply side continues to be compelling. This component is very strong for tanker fundamentals. On the lower left-hand chart, we break down the order book by each vessel class relative to the total fleet. More specifically, potential candidates in the next few years that will be, at the very least, removed from intensive commercial trading, which we categorize as becoming somewhat marginalized around 20 years of age or older. In aligning the dark bars on the graph, vessels on order do not meet the need to replace the existing fleet.
On the lower right-hand chart, the limited replacement of the fleet over the next few years is expected to increase the average fleet age to levels that we have not seen in 30 years. 15% of the tanker fleet today is over 18 years, and by 2027, we anticipate that figure to double to 30%. The average age of the fleet, if this were the case, would be about 15 years old. We believe that in order to meet growing demand in the next few years, that ships over 15 years old will need to stay in service beyond the next few years as we transition to a multi-fuel future. The candidate pool for recycling will then be very high. Overall, we expect a great run for tankers over the next few years.
Regional imbalances of oil should continue to increase the need for tankers, as the growth in oil production is coming from the West, and largely the growth in oil demand is driven by emerging markets in the East. At Seaways , we will continue to capture the strength of the tanker market today and tomorrow. With our balanced capital allocation approach, we continue to utilize all possible levers that builds upon our track record of returning to shareholders, maintaining a healthy balance sheet, and growing the company. I'm now going to turn it over to our CFO, Jeff Pribor, to provide our financial review. Jeff?
Thanks, Lois, and good morning, everyone. Looking at slide 8, on the upper left, net income for the Q2 was $98 million, or $1.99 per diluted share. On the upper right, you can see Adjusted EBITDA for the Q3 of 2023 was $151 million. In the appendix, we provided a reconciliation from reported to adjusted earnings. While our expense guidance for the Q3 mostly fell within the range of expectations, I'd just like to point out a few items of note within our income statement. Vessel expenses were a bit higher than expected, with the largest variance due to some repairs and maintenance on one VLCC and some increased spend for crew training on the new dual-fuel VLCCs. G&A expenses were also higher due to increased costs for legal and regulatory matters.
On the revenue side, our lightering business had another strong quarter, earning about $11 million in revenue. With $2 million in vessel expenses, $3 million in charter hire, and $1 million of G&A, the lightering business contributed about $5 million in EBITDA in the Q3 and has contributed $15 million in EBITDA year-to-date. Turning to our cash bridge on slide 9. We began the quarter with total liquidity of $493 million, composed of $236 million in cash, $257 million in an undrawn revolving capacity.
Following along the chart from left to right on the cash bridge, we first add $151 million in Adjusted EBITDA in the Q2 , less $54 million in debt service, composed of scheduled debt repayments and cash interest expense, less our dry dock and capital expenditures of about $15 million in the quarter, and a working capital benefit of about $22 million. This comprises our definition of free cash flow of about $104 million for the Q3 . The remaining bars, moving to the right on the cash bridge, show our capital allocation for the quarter. Incremental deleveraging reflects a net prepayment of $54 million in connection with our executing our new revolving credit facility or RCF, as I'll call it for short.
$104 million was repaid on our $750 million facility to transfer collateral vessels, and $50 million was drawn on the new facility. With $160 million in overall capacity, we also added $110 million in undrawn RCF capacity, as shown in the dotted line, cash bridge. Also in the quarter, we paid $61 million in combined regular and supplemental dividends of $1.42 per share in September. These components then led us to ending liquidity of over $581 million, as you see on the far right, with $214 million in cash and short-term investments and $367 million in undrawn revolving capacity.
Moving now to slide 10, we have a strong financial position as detailed by the balance sheet you see on the left-hand side of the slide. Here are some key items. Cash remains strong at $214 million. Vessels on the books at cost are approximately $2 billion relative to the current market values of over $3 billion. And with about $855 million of gross debt at September thirtieth, you can see that we brought net loan-to-value below 20% to just about 19%, also illustrated in the bottom right-hand chart on the page.
In the upper right-hand table, our pro forma debt balances as of November 1 reflect our recent debt repayments of $71 million, comprised of $21 million on the $750 million facility, and $50 million pay down on the new RCF, which also increased our revolver capacity to $417 million. The new RCF, which we executed during the Q3 , was oversubscribed even as we increased the size of the overall facility. Now, because 85% of our debt portfolio is hedged or fixed, our weighted average all-in interest rate using current bank borrowing rates is about 6%, which is effectively a margin of just 50 basis points above today's benchmark SOFR rates. As we mentioned in our press release this morning, we expect to continue on this trajectory of balanced capital allocation approach.
We've already repaid $770 million of debt in this quarter. We've also announced our combined dividend of $1.25 per share, consisting of a regular dividend of $0.12 per share and a $1.13 of a supplemental dividend, which represents approximately 60% of net income in Q3. These payments will be made in the Q4 as we continue to build our track record of executing our capital allocation strategy. As Lois mentioned earlier, including this combined dividend, our total dividend yield for calendar 2023 would be approximately 16% based on average market cap year to date. On the last slide that I'll cover, slide 11, reflects our forward-looking guidance and booked to date time charter equivalent or TCE, aligned with our cash breakeven levels.
Starting with TCE fixtures for the Q4 of 2023, which I'll remind you, as I always do, that the actual TCE on our next earnings call may be different than what you're seeing here. But we have a blended average of about $34,000 a day so far this quarter, with the details provided on the upper left. On the right side of the slide, you can see our cash breakevens, which we've displayed for the next 12 months, reflective of the delivery of the last vessel in our currently building program of the dual-fuel VLCCs 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. Overall, we've reduced our breakevens by $3,700 per day.
Let me just say that again, lowered them by $3,000 a day from the Q3 of last year. When you compare this to the breakeven, to our fixtures to date, compare this breakeven to our fixtures achieved to date in the quarter, it certainly looks like International Seaways should generate substantial cash flows during the Q4 again. On the bottom left-hand chart, for the modelers out there, we provided some updated guidance for expenses in the Q4 and our estimates for 2024. We also include in the appendix our quarterly expected offhire and CapEx schedule for 2023 and 2024. I don't intend to read each item line by line, but encourage you to use these for modeling purposes. That concludes my remarks.
So I'd now like to turn the call back to Lois for her closing comments. Lois?
All right. Thanks so much, Jeff. On slide 13, we provide you with Seaways' investment highlights, which I summarize briefly. International Seaways has built a consistent track record of returning to shareholders, maintaining a healthy balance sheet, all the while growing our company. Our total shareholder return over this time is approaching 300%, surpassing many peers. Over the last 12 months, through regular quarterly dividends, supplemental dividends, and opportunistic share repurchases, we've returned $316 million in cash returns on earnings of $658 million, representing a nearly 17% yield. We've improved our balance sheet over the time with 75 vessels in the crude and product tanker markets. We have $2 billion in assets on the books that are worth over $3 billion in the market today. We've prepaid $215 million in debt and unencumbered 30 ships.
Our cash breakeven level is at $15,000 per day. We're strategically positioned for a sustained, robust tanker market with a growing need for seaborne transportation created by regional imbalances. At Seaways, our highest focus is always upon safe, reliable transportation in an industry that will only become more transparent with evolving environmental regulations. We remain focused on being a leader in ESG. I want to thank everyone for joining us, and with that, operator, we'd like to open up the lines for questions.
Thank you, Lois. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to withdraw your question, please press star followed by two. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question comes from the line of Ben Nolan of Stifel. Your line is now open. Please go ahead.
Great. Thank you. So, really good quarter. I have just a couple questions. First, just as I'm thinking about the Q4 , once again, things like the LR1s look really good. However, the VLCC rates booked to date were a little bit lower than what I was thinking, and I appreciate that several of them have time charter contracts on them. But, can you maybe just talk through sort of how the dynamics for the V's in the Q4 thus far?
Well, I guess I'd say then that, you know, rates have definitely, you know, picked up, and the team at Tankers International is booking quite strong numbers, you know, for the remaining open days in the Q4 . So overall, we're pretty happy with what it looks like there on the V.
Okay. So just timing-
Yeah.
kind of a thing, I guess.
Yeah.
All right.
Hey, hey, Ben, the other thing is, take a look. Our guidance is, you know, look at the percentage. You know, it's actually pretty low percentage of the Q4 , which is, you know, every company is gonna be a little different, but based on accounting and the particular voyages that they're experiencing. But, you know, there's a lot of quarter left on, based on what we reported at this point.
Sure. Yeah. Yeah, no, I appreciate that. And then I was gonna ask, the MRs in particular did really well, which, you know, is maybe a little surprising to me, given that the average age is solidly in the teens at this point. I know you kind of continue to thin out that fleet a little bit, ones and twos here. But it sounds like most of those assets are unencumbered, the older ones are unencumbered at this point. Seems like you're still doing really well with them.
And I know there's always a preference to have a little bit newer assets, but you know, I mean, given the strength of the market here, how do you think about where you think the average useful life within International Seaways of those assets are? I mean, do you think it's possible to sweat them out to 20 years or even longer? Or is that just not part of the DNA for you guys?
Actually, you know, we totally do think that that's you know, part of our strategic plan there. And if you really look at you know, the product part of our fleet, and you think about what demand has been and how it has increased on the products at a higher ton-mile demand level than it has on the crude, and I think the crude will catch up, but the products are just really earning. So we feel like these MRs are just a complete strength for us. And you know, we certainly see that they are trading very competitively in the market. We've maintained them very well, and they have you know, really strong potential.
Okay. And then last for me, and I know it's just something that you don't like to and probably can't talk to, but with respect to the strategic investor kind of, you know, issues that have been going on over the last, I don't know, year and a half or so, just curious if there's any incremental dialogue or if things are relatively quiet on that front.
You know, I guess what I would say is that, you know, we've been running and we'll continue to run International Seaways, you know, for all of our shareholders, all of our stakeholders. We've been posting extremely strong performance and, you know, very systematically engaging with our shareholders, and, we feel really good about, you know, the returns that we've been able to deliver to all of our shareholders.
Right. Well, there's no question about that, so, appreciate it. Thank you.
Thank you.
Thanks, Ben.
Thank you. Our next question comes from the line of Sharif Elmaghrabi of BTIG. Your line is now open. Please go ahead.
Hey, good morning. Thanks for taking my question. So,
Good morning.
During the quarter, you fixed a 2008-built MR, then you sold another MR last month. So and I think Ben's question touched on this, but looking at the fleet, there's still a handful of similar vessels or more than a handful. So I'm curious, what kind of time charter opportunities you're seeing for these 13- to 15-year-old MRs? And, and given where asset prices are, how do you balance that with the chance to recycle that capital elsewhere?
Well, I'll flip it to Derek, our Chief Commercial Officer, in a second. And I'll just say that, you know, again, I mean, we're really feeling the strength in this MR fleet that we, you know, are lucky enough to have at International Seaways, and we've been executing time charters. We very carefully prune when we think it's opportunistic, and we have a very strong base to operate from. And then, Derek, do you want to chime in with any additional comments there?
Sure. Thanks, Lois. Sharif, thanks for the question. You know, I think you, you've kind of teed it up for us on the answer. You know, we're gonna continue our prudent asset allocation, especially in the MR sector. So because the rates have been so good on the MR side, we see increasing opportunities for, for charters. What we're looking for is multiyear charters for some of the ships around the 2008, 2009 vintage. And like you said, for us, you know, we, we've prudently sort of pruned the fleet in terms of selling them slowly. But to your question and to Ben's question, we want to keep the exposure in that MR side because the rates have been so good for us and for our shareholders.
All right, thank you. And then, turning to the LNG new build, the LR1, will those be able to run on LNG as soon as they hit the water, or is there some additional CapEx required to get them running on LNG? And then, more broadly, just in terms of bunkering, how extensive do you expect ports, fueling LNG fueling capability to be by 2026, considering LR1, for example, can call a more diverse set of ports than, say, a VLCC?
So I guess I would start with, you know, we have at Seaways already on the water, three fully dual-fuel LNG vessels, you know, VLCCs that are using LNG on a common basis, and it is definitely for sure that they have a lower need for multiple bunkering ports, and that is going very well for us. The three LR1s are certified for, or classified for dual-fuel suitability to turn them to being fully capable for LNG, and we contemplated that in our future. Bill, our Chief Technical Officer, Bill, why don't you jump in a little bit and just share a little bit more on that?
Sure, Lois. Thanks. Yeah, those four LR1s will not be able to run on LNG from day one, but will require a CapEx down the road as we see the fuel markets, the regulatory standards, the customer expectations all evolve over the next five-plus years or so.
Okay, that's helpful. I appreciate you guys taking my question.
Thank you, Bill. Mm-hmm.
Thank you. Our next question comes from the line of Christopher Robertson of Deutsche Bank. Your line is now open. Please go ahead.
Thank you, operator. Good morning, Lois and Jeff. Thanks for taking my questions today. Just turning to the current demand landscape, you know, we of course see the continued ton-mile demand expansion related to the dislocation of the Russian trade. But wondering if you could touch on anything else, maybe less known in the market that's impacting effective supply, including any congestion issues, bottlenecking. I guess, in other words, are there any short-lived or temporary factors impacting rates currently that could unwind in the next few months?
Well, it's interesting, you know, short-term factors, I don't know how short term, you know, we're definitely seeing an impact with the reduced draft at the Panama Canal, and that's a true bottleneck out there in the market. I do think that will persist for a few months here, and, you know, it does impact the tanker trade because, you know, you're getting a lot of congestion there, and that does drive a little bit of a longer ton-mile situation. I would say that's something of a temporary factor. I mean, definitely in Q4 from, you know, everything that we see, inventories are drying, and this is a really strong demand signal, which, you know, we appreciate on the tanker side.
Yeah, definitely. That makes sense. Turning to a little bit more esoteric question here on the balance sheet, Jeff, could you talk about the $75 million of short-term investments that sit there in terms of what those are, the duration, kind of how liquid are those investments, and when they might be converted to cash?
Yeah. Hey, Chris.
Go ahead, Jeff.
It's just our cash management. What we've been doing is, instead of just overnight money market funds, which are yielding quite well, but we laddered out some of the investments into time deposits with typically our facility banks, you know, our relationship banks. And per GAAP, if you go out a little bit, it just doesn't get to be listed as cash. It comes out of the short-term investment, but it's a CD, you know, so and our longest is six months. So, it looks and quacks a lot like cash, but it's listed as a short-term investment. So I-
Okay. I-
I conceptually see it as cash. Yeah, go ahead, sorry.
Definitely. Yeah, just wondering if, I guess, is that the continued strategy to kind of ladder those over time while the interest rates are attractive?
Well, sure. I mean, I think, you know, you, you've heard Lois describe it. We have a balance of cash and revolver. We think that that's a good mix for security and optionality, but, it's nice, you know, getting, you know, above 5%, you know, on our money market funds, and then when you extend out a little bit with CDs, you know, we're, we're lately, you know, moving at another 50 basis points or thereabout. So we actually have a lot of our cash is earning more than a substantial part of the debt that we have that's either fixed or swaps. So, you know, that's kind of a nice situation to be in.
We're sort of happy with that extra interest income we're making these days, and the Treasury Department is working hard on that, and we'll keep, you know, sweating those assets like we do the ships, you know?
Yeah, makes sense. Last question for me is just turning back to the four LR1s. Can you talk a bit about the cadence related to the installment payments, for those four vessels?
Yeah, I'll take that just to start, Jeff. You know, you know, what I would say is that the installment payments are attractively weighted to the backside of the vessel's construction cycle and they're toward their delivery. I don't know if you want to say anything more than that, Jeff.
You know, maybe we'll try to make sure we can, they have an FD safe way to explain that, but it's very typical back-end loaded, where it's not too much upfront. I'd say we probably only have the first two will require deposits, maybe that in the coming quarter. So for near-term modeling, I would, I think it's I'd go with that. And then we'll, the rest will be back-end loaded, and we'll, to the extent we can with confidentiality, we'll get more information out on it. But pretty typical, you know, new build schedule, but of the back-end loaded variety, let's say.
Got it. All right. Appreciate it. Thank you.
Thank you.
Thank you. Thanks, Chris.
Thanks.
As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. I would now like to open the line for Omar Nokta of Jefferies. Your line is now open. Please go ahead.
Thank you. Hi, Lois and Jeff, Derek. I did want to—I had a couple questions, but then maybe just perhaps just a quick follow-up to the last one from Chris about the LR1s. I did notice, at least the way it reads on the balance sheet, that perhaps there wasn't a deposit made on those two initial LR1s that were ordered last quarter. Is that right, or were those sort of accounted for differently?
No, no, you're correct, Omar. It's a very clever pickup there. You know, we have received the refund guarantees, and those are fully in place. And of course, that is the time at which, you know, you make your down payment, so that will be made in the Q4 .
Okay. Got it. Thanks, Lois. And then, just sort of maybe, you know, talking about the, you know, the capital returns, you've obviously, you know, generated a good amount of cash flow consistently now for the past several quarters. You've been paying out supplemental dividends. And Jeff, in your comments, you talked about how the ratio is basically 60% of quarterly earnings. That looks to be a bit higher than the, say, 40% to maybe 50% in the past few quarters.
I know obviously, it's a board decision, but just in general, as we kind of think about future payouts, you know, obviously subject to strong numbers coming from, from International Seaways, but in general, is 60% like a new threshold we should think about when we, when we consider what the potential supplemental dividends will be like in strong upcoming quarters?
Just go ahead, Jeff.
Thanks, Lois. Hi, Omar. Yeah, I would just review our history. To answer your question, review our history, we over the last four quarters really wanted to balance incrementally deleveraging versus you know, the scheduled amortization on the one hand, to lower our costs and lower our break even and give out a good dividend yield. You know, and it typically is examined or analyzed or, as you have, by way of payout ratio. But you know, as Lois and I both point out in our remarks, it's added up to $6.29 pro forma for the last dividend for the calendar year. So it's been a good yield.
But also towards answering your question, with the debt pay downs that we described, you know, from the last quarter's new facility and the payments already in Q4, and kind of where we are with a lot of this really, what I call high quality debt, that's at rates that are either fixed or swapped at lower than we're earning on our interests on our cash. It makes sense that we're sort of able to pay a little more in terms of payout ratio, this quarter. You know, I think that that's kind of a situation or a healthy situation that we'll remain in.
We've got a good amortization and a good, healthy amount of amortization still there in our schedule, in our debt, so it'll be naturally reducing quite a bit during the course of 2024. So, you know, if the market continues in the good place that it is, I think you should expect dividend payouts to continue, like, like we are doing them now. I hope that's the response.
Yeah, that's, that's very good. I was actually surprised you were willing to actually answer the question.
Come on, Omar, you know us.
Yeah. Yeah, no, no, that was very good. Very, very good and constructive. I mean, clearly, the balance sheet is in much stronger shape, and it just seems to continue to go in that direction. You know, maybe just one kind of final one, just regarding the new buildings-
Mm-hmm.
On the, you have the four LR1s now. You know, you have the niche trade in South America, where those trade and are expected to trade. Do you have options for more? Is there potential more to add to that fleet beyond just the four new buildings, or is this it, you think?
Well, you know, Omar, I think what's really important for us was that we felt that, you know, with this, this really strong base of cargo and relationship that we've built over the years, that we wanted to have these four as our foundational units. And then, you know, we consistently have had, you know, in charters and different ways within the pool to optimize results, and we'll continue to do that.
Got it. Well, thank you, Lois, and thanks, Jeff. I'll turn it over.
Thank you.
Thanks, everyone.
Thank you. Our final question comes from the line of Liam Burke of B. Riley. Your line is now open. Please go ahead.
Thank you. Good morning, Lois, Jeff.
How are you, Liam?
Good. Thank you, Lois. For the Q4 , your partial fixtures on the Suezmax are on a daily rate basis, are outdistancing the VLCCs. You mentioned earlier that the VLCCs have, you know, moved up on off of those partial fixtures, but are you seeing the same move with the Suezmaxes, and are they continuing to outdistance as the VLCC rates?
Yes. So, you know, what I would say is that, you know, you've seen the whole crude space pick up, you know, consistent with the last 18 months. You know, the middle part of the space, you know, the Panamax, Aframax, and the Suezmaxes, you know, that are kind of focused on delivering into Europe, shorter-haul crude, you know, have really been superstars, and that continues. So we've seen the Suezmax pick up. They're still very strong, and the whole crude space moved up after really the first cyclicality we saw this summer, you know, in a long time.
Jeff, you highlighted the $3,000 per day per vessel decline in OpEx and cash cost per vessel. How much of that is operating savings, and how much of that is financial related in terms of lower principal payments, interest, et cetera?
Hi, Liam. It's mainly the latter. You know, yeah, I think we gave guides that we're working hard to keep expenses, you know, in a good place, but the achievements are in terms of lower break-evens are primarily from reducing interest costs and debt and also reducing amortization on debt. When you lower the principal amount that's due, the amortization goes down as well. And the new revolving credit facility, shifting more to that from term, you know, it also does that. So it's primarily the balance sheet. And
Great.
But also the time charters. You know, as you can tell from the chart, it's, we're talking about break-evens on spot vessels, so it's also benefited from the commercial department putting on incrementally more time charters. So it, it's those two factors.
Okay, great. Thank you, Lois. Thank you, Jeff.
Thank you.
Thanks, Liam.
Thank you. As there are no additional questions waiting at this time, I'd like to turn the conference call back over to Lois Zabrocky for closing remarks.
Thank you, Candice. I just want to thank everyone for joining International Seaways. And, we're broadcasting here from Bahri Dubai International Tanker Week, where we're seeing customers, and we really appreciate your interest in International Seaways, and wish everyone to stay well. Thank you very much.
Ladies and gentlemen, this concludes today's International Seaways Q3 , 2023 results call. Have a great rest of your day. You may now disconnect your lines.