International Seaways Inc (INSW) 2020 Q3 法說會逐字稿

Good morning, and welcome to the International Seaways Third Quarter 2020 Earnings Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to James Small, General Counsel. Please go ahead.

Thank you. Good morning, everyone, and welcome to International Seaways Earnings Conference Call for the Third Quarter of 2020. Before we begin, I would like to start off by advising everyone on the call with us today of the following.

During this call, management may make forward-looking statements regarding International Seaways or the tanker industry, which may address, without limitation, the following topics: Outlooks for the crude and product tanker markets; changing oil trading patterns; forecast of world and regional economic activity and of the demand for and production of oil and other petroleum products; the effects of the ongoing COVID-19 pandemic, the company's strategy, purchases and sales of vessels and other investments; anticipated financing transactions; expectations regarding revenues and expenses, including vessel charter hire and G&A expenses; estimated bookings and TCE rates in the fourth quarter of 2020 or other periods; estimated capital expenditures in 2020 or other periods; projected scheduled drydock and off-hire days, the company's consideration of strategic alternatives; the company's ability to achieve its financing and other objectives; and other economic, political and regulatory developments around the world.

Any such forward-looking statements take into account various assumptions made by management based on a number of factors, including management's experience and perception of historical trends, current conditions, expected 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 those statements.

Factors, risks and uncertainties that could cause International Seaways' actual results to differ from expectations include those described in the company's annual report on Form 10-K and its quarterly reports on Form 10-Q and in other filings, the company has made or may in the future make with the U.S. Securities and Exchange Commission.

With that out of the way, I would like to turn the call over to our President and Chief Executive Officer, Ms. Lois Zabrocky. Lois?

Thank you very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call to discuss our third quarter 2020 results.

Before we turn to our slides, I want to take a minute and I want to thank our seafarers.

We rely on our seafarers to ensure our safe, reliable and efficient transportation of energy cargoes for our customers. Admits this global pandemic, the ship's crews are doing a remarkable job, adhering to the highest level of not only safety but professional standards. We're grateful at Seaways, and we're proud of the service of our seafarers.

Our highest priority remains keeping our seafarers safe and getting them home to their families safely and on time. This continues to be a challenge with shifting national and local quarantine restrictions and now increasing COVID case numbers worldwide.

In this dynamic situation, we have taken important steps to repatriate our crews, such as deviating ships to more convenient ports for our seafarers, implementing extra measures to prevent the spread of the virus and keep it off our vessels, arranging for private charter flights when necessary. In these unchartered waters, we have made good strides in reducing the numbers of overdue crew, and we will continue to look for every opportunity to get these men and women back to their families.

Now going to our prepared remarks. If you'll turn to Slide 4, we take a look at our third quarter highlights and our recent accomplishments, starting with the first bullet.

Following 2 consecutive quarters of record earnings as a public company, again, in the third quarter, we generated strong results in a weakening rate environment. Notably, the third quarter results reflect the strong performance of our sizable fleet of crude and product tankers as well as the 4 favorable time charters executed earlier in this year at very strong rates.

For the quarter, we earned a net income of $28 million, excluding onetime items related to asset sales and debt refinancing or $0.98 per share.

Our third quarter adjusted EBITDA was $55 million. This represents a year-over-year increase of $31 million.

Turning to the second bullet. We highlight our strong period coverage and our favorable position to optimize revenue during the current period of oil inventory destocking. This week, we announced that our FSO joint ventures signed a 10-year contract extension for the FSO Asia and the FSO Africa with North Oil Company. We look forward to continuing to support the North Oil Company's operations in the Al Shaheen Field, whose shareholders are Qatar Petroleum and Total. These 10-year extensions through 2032, lock in the commercial values contributed by our joint ventures. These high-specification custom-build FSOs allow International Seaways to both generate significant contracted revenues and lock in the value of these important assets. Based on our 50% ownership in the joint ventures, we expect to generate in excess of $322 million of contract revenues over the 10-year term of these extensions.

In addition to the joint venture contract extensions, the 4 VLCC time charters that we signed earlier in the year averaged $63,700 per day during the fourth quarter and create further earnings support and visibility during the current challenging rate environment.

If you move to the third bullet, we continue to implement our disciplined and accretive capital allocation strategy, following our success, significantly delevering our balance sheet and strengthening our capital structure. Starting in the first quarter of 2020, we returned capital to shareholders in the form of both dividends and share buybacks. Since the beginning of the year, we've repurchased nearly 5% of our outstanding shares while paying $0.18 per share in quarterly dividends. We have further strengthened our balance sheet and our cash generation potential with our recent agreements to sell 3 older vessels, which are expected to deliver to buyers between November and January 2021, generating $62 million in cash for INSW. This combined with our success extending the FSO contracts.

Our Board has authorized the increase of our share buyback program to $50 million. We intend to continue to act opportunistically for the benefit of shareholders and find our shares to provide attractive value.

In terms of the dividend, following the payment of our regular quarterly dividend of $0.06 in September, our Board has approved another regular quarterly $0.06 dividend to be paid in December.

We also continued to delever. We repaid the full $40 million outstanding under our transition term loan facility during the third quarter. This lowered interest expense by $1.7 million. Importantly, we have reduced our breakeven rate going forward to approximately $17,500 per day, which takes into consideration the VLCC time charter that I mentioned earlier as well as the contributions from our FSO joint venture and our debt repayment.

Turning to the last bullet. We have continued to increase our financial strength. This bodes well for effectively operating through the tanker cycle and creating value for shareholders. With net loan-to-value at 39%, we continue to have one of the lowest leverage profiles among our tankers peers, and this excludes the value of the FSOs. We ended the quarter with $194 million in total liquidity, including cash and our $40 million undrawn revolver. This is an increase of about $10 million from the prior quarter end. We have 11 unencumbered older vessels remaining after the sale of the 3 older vessels that were also unencumbered.

Turning to Slide 5. We provide an update on oil supply and demand. The IEA has increased their demand forecast to 96 million barrels for the fourth quarter of 2020 and 99 million barrels by the end of 2021. With demand recovering and rising in the fourth quarter, the IEA anticipates a 4 million barrel per day stock draw throughout the quarter, helping to decrease the surplus inventories that have been built up during the second quarter, when the economic impacts of COVID-19 dramatically reduced the demand for oil, as you can see in the chart. We believe that stock drawdowns are needed to set the stage for our tanker market recovery.

On the supply side, OPEC currently intends to produce an additional 2 million barrels per day during the first quarter of 2021, which we expect should increase tanker demand. Although OPEC discussions are ongoing, the IEA also expects diesel and gasoline demand to be at 98% of 2019 levels by the end of the year. Combining the inventory destocking process and OPEC's increased supply, these more normalized levels of demand are supportive of stronger rate.

Turning to Slide 6. We provide an update on ship supply. The overall tanker order book has continued to decline to historical lows, as can be seen in the chart at the top right-hand of the slide. Only 16 VLCCs have been confirmed ordered in 2020 to date, although we understand a handful of additional orders are currently under discussion. This follows 2019 when only 31 VLCCs were ordered.

We believe uncertainty regarding the market as well as decarbonization regulations and suitable propulsion systems questions to meet decarbonization goals continues to limit new ordering.

Moving into the bottom half of the slide, we highlight the potential for vessel recycling, with over 1/4 of the existing VLCC fleet now were 15 years old, as shown in the chart at the bottom right of the slide. It's worth noting, an additional 22 Vs (sic) [VLCCs] will reach 20 years old during 2021. As we have stated consistently, once vessels reach 15 and 20 years of age, they are more expensive to operate with significant investments required to continue to trade.

These ships will reach ballast water treatment deadlines and even greater capital expenditures required. Due to the strong rate environment earlier this year, in 2020, there have been no VLCCs recycled thus far. However, given the fleet continues to age, recycling is likely to increase, particularly given the low rate environment we are presently in.

I'll now turn the call over to Jeff. And Jeff will provide additional details on our third quarter results. Jeff?

Thanks, Lois, and good morning, everyone. Let's move directly to reviewing the third quarter results in more detail.

Before turning to the deck, let me quickly summarize our consolidated results. In the third quarter, we achieved EBITDA of $54.6 million. Net income for the third quarter was $14 million or $0.50 per diluted share compared to a loss of $11.1 million or $0.38 per diluted share in the third quarter of 2019. However, excluding the impact of $12.8 million impairment charge and loss on sale of vessels and a $0.7 million write-off of deferred financing costs and fees associated with the extinguishment of debt, net income was $27.6 million or $0.98 per diluted share.

Now if you could turn to Slide 8. I'll first discuss the results of our business segments, beginning with the Crude Tankers segment. TCEs for the Crude Tankers segment were $80 million for the quarter compared to $49 million in the third quarter of last year. This increase primarily resulted from the impact of higher average blended rates in the VLCC, Suezmax and Panamax sectors.

Turning to the Product Carrier segment. TCE revenues were $14 million for the quarter compared to $16 million in the third quarter of last year. Higher period-over-period average daily blended rates earned by the LR2 and MR fleets were offset by a decrease in MR revenue days in the third quarter, primarily as a result of the redelivery of 4 time charters and MRs to their owners between the third quarter of 2019 and July 2020.

Overall, as reflected in the chart top left, consolidated TCE revenues for the third quarter 2020 were $94 million compared to $66 million in the third quarter of 2019. The increase was principally driven by a substantially higher average daily rates earned across the crude fleet this quarter compared to last year's third quarter.

Looking at the chart at the top right of the page, adjusted EBITDA was $55 million for the quarter compared to $24 million in the same period of 2019.

And again, the increase is principally driven by higher daily crude rates. On the bottom half of the page, we look at results sequentially, i.e., quarter-to-quarter. Consolidated TCE revenues and adjusted EBITDA for the third quarter were down from the second quarter, each decreasing by $41 million. Despite the decline, it's important to highlight that our latest 12-month adjusted EBITDA, as shown on the right-hand side of the page, was $297 million.

Now turning to Slide 9. We provide a third quarter review and fourth quarter earnings update as of this point. For bookings in Q4 thus far, we have 50 -- we've booked 59% of our available Q4 spot days for VLCCs at an average of approximately $19,600 per day, 58% of available Suezmax spot days at an average of $14,400 per day, 38% of available Aframax and LR2 spot days at an average of approximately $9,400 per day and 37% of available Panamax spot days at an average of approximately $19,000 per day.

On the MR side, we have booked 29% of our third quarter spot days at an average of approximately $11,000 a day. As Lois mentioned previously, our strong period coverage from the 4 favorable time charters we executed earlier this year for VLCCs with very strong rates and as well the new 10-year extensions on the FSO contracts provide this with earnings visibility and a level of stability even during a challenging rate environment. And as a concrete example, if you look at number on the top right-hand side of the page, you'll see that the combined spot and time charter rates for VLCCs were $38,600 for Q4 with 72% of days accounted for.

Now if you could turn to Slide 10. The cash cost TCE breakevens for the 12 months ended September 30, 2020, are illustrated on this slide. International Seaways overall breakeven rate was $19,600 per day for the 12 months ended September 30, 2020. These rates are the all-in daily rates our owned vessels must earn to cover vessel operating costs, drydocking costs, cash G&A expense and debt service costs, which means scheduled principal amortization as well as interest expense in that figure.

Of note taking into consideration distributions from our FSO JV and the fixed time charter revenue, the overall breakeven rate for the last 12 months for our spot revenue days drops to $16,500 a day.

On the far-right side of the bar chart, we have included the all-in daily breakeven rates for the forward 12 months ending September 30, 2021. Taking into consideration, contracted revenue from the FSO, JV and the 4 time charters, the overall breakeven rate is $17,600 per day for the spot revenue days during the next 12 months.

Also at this time, as I normally do, I'd like to reaffirm our cost guidance for the year for modeling purposes. For the fourth quarter, we expect regular daily OpEx, which includes all running costs, insurance, management fees and other similar and related expenses for our various classes to be as follows: For VLCCs, $8,400 per day; for Suezmax, $7,700; for Aframax $8,100; Panamax $7,900; MRs $7,500 per day. In each case, excluding any impact attributable to COVID-19.

For details on projected drydock, CapEx and off-hire days by quarter, you can refer to Slide 15 in the appendix for an update.

Continuing with cost guidance for your modeling, fourth quarter cash interest expense is expected to be $7 million, taking into consideration the payoff of the transition loan, which reduced our scheduled quarterly principal payments, also reduced our principal payments from $20 million per quarter to $15 million per quarter beginning in this most recent quarter.

For the fourth quarter, we expect cash G&A to be in the region of $5 million. And finally, we expect $6 million in equity income and about $18 million for depreciation and amortization in the quarter.

Now if I could ask you to turn to Page Slide 11 for our cash bridge. Moving from left to right, we began the third quarter with total cash and liquidity of $185 million, during the quarter we generated $55 million from adjusted EBITDA. This amount includes $5 million in equity income from the JVs, which is noncash. So therefore, we deduct it to reach a cash figure, but then add back the cash distributions from the JVs, which were $3 million from the FSO JV this last quarter. We expended $9 million on drydocking and CapEx. Cash interest and scheduled principal payments under debt was $22 million.

Finally, taking into account the $40 million optional repayment of the transitional loan -- transition loan, the quarterly dividend, any positive impact of working capital and other changes of $29 million. The net result was that we ended the quarter with approximately $154 million of cash and a $40 million undrawn revolver yielding total liquidity of $194 million.

Now turning to Slide 12, I'd like to briefly talk about our balance sheet. As of September 30, we had $1.7 billion of assets compared to $489 million of long-term debt. In addition, as mentioned, we had a $40 million revolving credit facility that remained undrawn as of September 30.

As you can see on the right side of the slide, our net debt to total cap stands at 27%. Our net loan-to-value of our conventional fleet stands at 39%. As footnote 1 tells you that it's not taking account the FSO. So if you include the FSO's book value, the net debt to value number drops to 34%.

Further, our last 12 months EBITDA was a very strong $297 million, and therefore, our net debt to LTM EBITDA was just 1.3x.

Importantly, the 10-year FSO joint venture contract extensions, which are expected to generate in excess of $322 million of contract revenues for the company, lock-in value of these assets and provide us with significant optionality going forward.

Before turning the call back over to Lois, I'd like to discuss our success in implementing our disciplined and accretive capital allocation strategy this year. We continued to significantly delever our balance sheet and strengthen our capital structure, which positioned us to begin to return capital to shareholders. First, putting in place a regular quarterly dividend than executing share buybacks. Notably, we have repurchased nearly 5% of our outstanding shares in 2020 while paying $0.18 per share dividend so far.

As Lois mentioned, in light of the extension of our FSO JV contracts and the sales of 3 older vessels, which further strengthened our balance sheet and cash generation visibility, our Board has authorized the renewal of our share buyback program for a further $50 million. I'd simply say that we find that at these valuations relative to NAV, we find our share price to be a very attractive value.

That concludes my financial remarks. I'd now like to turn the call back to Lois for her closing comments. Lois?

Thanks a lot, Jeff. We want to wrap up the call, leading you on Slide 13, reiterating some of our highlights from the third quarter. With our sizable fleet of crude and product tankers as well as our substantial contracted revenue from our favorable time charters executed earlier this year during the strong rate environment. We posted a solid quarter despite challenging rate environment. Notably, our third quarter EBITDA of $55 million was more than double that what we generated during the same period last year.

In addition to the 4 time charters that we signed earlier this year, averaging $63,700 per day for the fourth quarter, the 10-year contract extensions on our FSO joint ventures provides a strong period coverage in a challenging market.

In addition to locking in the value of these important assets, we expect to generate in excess of $322 million of contracted revenues during the extension period. This strengthens our position to continue to optimize revenue throughout the tanker cycle and provides us with significant optionality. During the third quarter, we continue to deliberately execute on our disciplined and balanced capital allocation strategy, creating value and providing returns to shareholders.

Our Board has authorized the increase of our existing share buyback program from $30 million to a total of $50 million. We continue to act opportunistically for the benefit of shareholders, and we find our shares to present an attractive opportunity. During a time when we have continued to delever and reduce our breakeven level to $17,600 per day, our overall financial strength has improved. This is highlighted by a net loan-to-value of 39%. This represents one of the lowest leverage profiles among our tanker peers, and we have $194 million in total liquidity. Going forward, we remain in a position to return capital to shareholders and to take advantage of strategic opportunities as they arise.

Thank you very much, and we would now like to open it to questions.

(Operator Instructions) The first question comes from Randy Giveans of Jefferies.

Yes. First, obviously, congrats on the FSO contract extension. Based on our math, I think the new EBITDA contribution for your 50% is more than $20 million per year for 10 years. So clearly, that is a noncore asset for INSW. So what are the thoughts on either selling your portion of the joint venture or maybe even the opposite, right, buying the other 50% some year on at?

Well, indeed, this -- the conclusion of this contract really represents years of hard work and, I think, exemplifies how these particular assets being on the field from 2010, Randy, and having absolutely 0 off-hire time. We're so pleased to have secured this renewal, especially when offshore markets are certainly not stellar at the moment. So for us, this is a huge conclusion and really makes this project shine for the joint venture. And having concluded it, we do have options. We do consider these assets to be noncore. And with our JV partner, we'll explore how to maximize and monetize these assets going forward.

Okay. And I guess segueing with that monetizing assets, can you provide us with a little -- maybe additional details on the decision to sell the 3 older vessels, what the aggregate sales proceeds are and the debt repayment associated with? Just trying to get the impact on liquidity from those?

Yes. The beautiful thing is Jeff's team paid down the $40 million loan that was transition loan on the older vessels. So these 3 vessel sales are unencumbered, and they will bring in $62 million in cash into International Seaways. If you're asking why did we sell those particular vessels, we felt that we were able to realize a healthy sales level and bring that money into the company and then utilize that for capital allocation in a better way.

Wow, all right. Well, it's a meaningful number. I guess just following up on that. You're increasing the share repurchase authorization even without using in the third quarter, is that the top use of cash? Or is kind of debt repayment still the top priority here?

Jeff, do you want to take that.

Sure. Yes. Yes, we've had a lot going on in the third quarter. So we were taking care of business. But I've been asked that question before about the deleveraging. We -- and Lois mentioned that we have done all 4 types of capital allocation this year. And we bought a ship very early on, but that was kind of a unique thing. But dividend, share repurchase and deleveraging, we delevered $70 million based on regular scheduled interest payments or will have by the end of the year, but an additional $70 million of voluntary or unscheduled additional debt pay down, including the $40 million of the transition that we paid down in August.

So we think that's a pretty healthy amount. It certainly -- it's kind of like saving money because you don't make a lot on your cash. So paying down debt, you see how it -- it's like putting money in the piggybank, and you can get it back out again when you sell a vessel and have all the proceeds available for whatever capital allocation. So I think -- and then you heard me comment final, last thing I'll tell you, Randy, is at less than 1.5x net debt to trailing 12 months EBITDA, we're at a pretty good level. So I don't think we need to prioritize further deleveraging. So I think Lois and I both said, we -- at these prices, we look at our share price being a pretty attractive value for using cash.

Next question comes from Ben Nolan of Stifel.

I have a couple. Number one is -- and I apologize if this is the way that it was, but I didn't think that it was that there -- looks like there's an awful lot of Panamax or LR1 drydocking in the fourth quarter. I was curious if some of that was brought forward or -- in general, and I know that it came up on a different call yesterday, I think, that owner was bringing forward drydocking to the extent that they could. Is that something that you guys are doing in this kind of a trough market here?

Ben, these vessels, many of them were due to drydock earlier in the year. There were significant congestion and very difficult for many of the repair yards to actually affect the drydocks because of COVID-19. And we were -- the market was earning beautifully. We were able to push some of those drydocks. And indeed, we are pulling a few.

So Q4 is a very heavy drydock period time for us. And that is a combination of implications from COVID having pushed them, but also from pulling and doing it at the time when the market is the lowest.

Okay. Very helpful. And then another thing that I'm curious about. You guys are in a relatively unique position on is, again, you're really just doing -- crushing it really on your Panamaxes, which is hard to really differentiate in shipping in a commoditized business, but you seem to be able to do that there. Although there's been -- there has been a West Coast refinery that's closed. There's talk of others. Is there any risk that maybe some of that Pacific Coast trade that really fits in well with your Panamax and Panamax International business. Is that at risk at all? Or is it more a function of where the crew is being sourced rather than where it's ending up?

Well, Ben, I would say it's a combination. And we're definitely following various refinery closures. And there have been some on the West Coast, but we have to watch very carefully because some of these refineries are trying to turn themselves into biodiesel facilities. And you may see continued movements in the marketplace. I don't think that we're going to see an asymmetrical or an inordinate amount of closures, particularly on the U.S. West Coast. I think we're going to see a smattering of closings like convent down in the U.S. Gulf.

Some of the refineries in Europe. So we're watching to see what the impact is. But presently, we don't see that too particularly disadvantage the Panamaxes.

Okay. That's helpful. And that comment on cut me off guard this morning. I was not expecting that. But.

the -- and in general, I think I'm just curious as to your view that you're maybe a little bit more out of the product tanker guys, hey, this is all fantastic for these refinery closures are fantastic for the long-term outlook for especially larger product tankers. You guys kind of play both, right?

Right.

You're a little bit more heavily oriented towards crude. But how do you think without sort of necessarily having a bias towards one or the other. How do you think all of this is playing out? And what are you doing to position yourself for that?

We are watching everything as it's happening, obviously. You see that China has brought on over 2 million barrels a day over the last couple of years and still have more coming. That's clearly very ideal for the crude carriers, that once they put the refineries in, they are going to run them, whether they have enough demand or not, and then you see a lot of product exports out of China.

So a lot of this is linked. Certainly, in the Middle East, we see that there are going to be refineries coming online. That should be quite good for LRs.

Remembering now that there's a significant number of LR1s and LR2s that trade in the dirty market that we'd be perfectly happy to see them clean up and that should bolster the midsize of the fleet, whether you're clean or you're dirty.

So we are watching all of this with great interest and making sure that we're following the trends, so that the next dollars we spend are in the sectors that we think are going to have the most robust dynamics.

Okay. But you don't have -- or at least you're not willing to say that you have kind of line of sight as to what exactly that means right now?

No. I think we're pretty -- we are pretty opportunistic, and we're going to be looking for as we go forward here through this downside at where the opportunities are.

The next question comes from Omar Nokta from Clarksons Platou Securities.

Lois and Jeff, you guys made it pretty clear that you find the stock pretty attractive at today's prices and seem to be hinting up buying back pretty quickly. Out of curiosity, does the Board authorization come sort of hand-in-hand with the vessels you've agreed to sell. In other words, would you be buying back the stock, irrespective of whether you decided to sell ships or not?

Well, Omar, I'm not sure if that's such a simple question because in today's world, where you're in the middle of coronavirus and rates are not at stellar levels, I think as judicious company, you need to look at your whole picture. And what is your liquidity, what is your -- what's the best use of your capital and make sure that -- which we feel we're quite comfortable with financial strength of the company. So we are taking what we believe to be the right move, selling some of these older vessels when we can capture extra value above what a recycle level would be pretty significantly. And I think that then you look at where is the entire company and then you're comfortable with the $50 million buyback program. So ifs and buts, I think, will lead them aside as to what would have happened if we weren't in a position where we have the type of liquidity we do.

Could I just add, Lois and Omar? Another aspect that goes into it, for example, is the time charters, right? So the time charters we entered into as well as the FSO, which we have, of course, will be extended the test later, but the contracted revenue brings down the breakeven. So when you look at the breakevens we highlighted in our deck, which includes debt amortization, right? So that's not before the amortization. It's inclusive in that number of debt amortization. So that gives you a number a bit of a window into what you think you can do in terms of generating cash in a weak market. So that's part of it as well. So it's -- like Lois said, it's not any one thing. It's all the piece as you look at your capital allocation choices.

Yes. That's pretty clear. I just -- and it's good to hear -- it's definitely a bigger picture, holistic view. I was just wondering if I had comment about as, hey, our stock is cheap, okay, let's sell some ships to buy some stock, and it's clearly not that one?

No, no. You know what's interesting, in fact, some of these sales, particularly on vessels that are 15-plus years old, these are many, many months in the development. So we try to do what we believe is the right -- take the right moves for the right time in the cycle. And then it just kind of serendipitously works out that it happens to be an amount similar to what we're able to buy back or we believe we may be able to.

Yes. A little verbal clue, Omar. We called that part of our loan facility. We did in January that secured the older vessels transition loan with a lower amount, and it was not older vessels. It's the job of these older vessels to, at the right time, exit stage left, right? And that's their best use at some point is get a good last act as far as revenue goes and then leave the stage. And that's for the benefit of the company entirely. So that would be happening in their normal course.

Yes. No, they -- it looks like they definitely had a very nice closing act.

Yes, they contributed beautifully in Q1 and Q2, just -- yes, very strong.

Yes. Yes. And then just maybe on the JVs. I mean really, if we look over the past year, it seems that the JVs have been sort of like this consistent, nice positive surprise. And of course, the tanker market itself, at least, for most of the past year had a nice run. When you think about further investing, do you see yourself -- and Lois, you had mentioned this as you guys are evaluating opportunities now that the markets come in. Do you guys see yourselves making outright purchases at the company level? Or are you thinking more about partnering with other companies to acquire maybe specific certain project-type assets or doing some sort of project-level investments on a joint venture basis? Any sort of color that you can give on that type of thinking.

Well, I guess the first part of an answer there would be speaking specifically about the FSOs. And we've had a wonderful joint venture partner on that and contract partners. However, we will not be looking to expand in the offshore space. I mean that is something that you should not expect from international Seaways. And when you look at the tanker side, I think when you start talking about joint ventures and things, I do believe that there's going to be a higher level of innovation required from all of us shipowners. And when you start talking about joint ventures, to me, there could be a place for that in research and development and trying to figure out what does a decarbonized future look like, and what will be the most effective technology because that's going to take a lot of really bright minds to achieve that.

The next question comes from Greg Lewis of BTIG.

I guess I'm going to ask it a little differently. Clearly, over the last year, you guys have done everything you've said, you've strengthened the balance sheet. You've started to return cash to shareholders. The balance sheet is probably where you want it to be. At what point -- or should I ask Lois, how are you thinking about -- and as you look at the market and see how the market is developing, at what point do you use this fact that you've really strengthened the balance sheet to maybe get a little bit aggressive and start buying ships because it does seem like asset, prices have kind of come down. I mean, I guess they can always go lower. Clearly, you guys have a bullish outlook in the market, maybe not in the next 6 months, but maybe longer term, has to wait. So I'm just kind of curious, how -- is there anything you -- how are you thinking about that? Because it does seem like you guys are in a great position to kind of really load up a little bit here.

We would agree. And as we look at the market, obviously, we're constantly following and looking at where are the opportunities. It seems to us that destocking will probably continue, say, for maybe about a 6-month period. And you never can call the perfect media or the bottom of the market, but we think that, that will be coming, and then we'll be looking at opportunities accordingly.

And so just to tie it in, I mean, clearly, just stocks trading below NAV. So obviously, the best use of the dollar is to buy the stock. But when you think about the fact that you can -- you're probably not going to use your balance sheet to buy stock or you can use your balance sheet to buy ships. So I'm just kind of curious, is there a level of discount to NAV that just -- I mean, I guess, how -- as you think about the stock pricing, and we can all agree that it's at too much of a discount to NAV. As you think about that, is that -- does that come into the discussion about whether or not you think about going after and adding to the fleet?

We're not -- you're not going to get a formula out of us, but you definitely when we -- yes, no, it's okay. But as we look at everything, we look at what does our share price represent as a ship purchase price, right, which I think is what a lot of people do. And as Jeff always says, we're never going to do one thing. And I think that a little bit of balance is wise. And then I'll let Jeff come in and talk a little bit about that.

Well, sure. I mean -- thanks, Lois. I mean, Greg, balance is the keyword with us. That's how we see it. I think you should be -- any company with a good capital allocation strategy should be looking at a mix of things and evaluating them continually. So that's how we do it. And there isn't other formula, as Lois said. I definitely agree with something you said. It's not borrowing to buy -- to just to do sort of financial engineering. That's kind of -- that would be capital speculation as opposed to capital allocation. So I like the term capital allocation, allocating amongst a few different areas. So that's how we look at it.

But I think the other thing that's always in the equation is when you're valuing your stock versus NAV, you want to look forward and make sure that if -- as is the case now where values maybe falling a little more, as Lois said a minute ago, you could see that could have an effect. But again, without giving a formula where we are is sort of got to be safely below any estimate of current or forward NAV.

Okay. Yes, sure. Perfect. And then just one more for me. Just looking at the October OPEC volumes. Not a big increase, and we know that they're still really have their foot on the brakes. But I guess production did go up 0.5 million barrels a day versus September. Did that have -- I mean just -- I mean looking at rates, it didn't look like it does, but did that -- what -- was that noticed in the market at all? And really, what I'm trying to get at is, I think we can all agree that at a certain point in time, OPEC is going to ramp production. And I'm just trying to understand as that ramp happens, how should we be thinking about that in terms of really starting to tighten the market?

There was a brief moment there for maybe a couple of weeks where rates did pick up a little bit. But I think that a lot of that increased volume is being taken on vessels that are coming off storage, which is a piece of what needs to happen for the market to become healthy. So I think we're just in this painful period where the destocking -- I mean if the IEA is right and you're coming down 4 million barrels a day in Q4, that's powerful. That's 360 million barrels. You see in the U.S crude -- commercial crude stocks are now somewhere around 490 million barrels. They were at 550 million barrels. They got to touch the 5-year average or coming close, that you want to see them around 460 million barrels. They're heading in that direction.

So I think that we continue to see the drawdowns and demand picking up and the unwinding of the storage. So you have all these factors coming together. So to us, we think that there will be a few months of pain while the destocking happens. And then you're going to see increased demand and the market will pick up. But we need -- as ships have unwound, they've absorbed that those additional barrels that came out.

The next question comes from Liam Burke of B. Riley FBR.

Lois, crude deployment has been both an operational and cost challenge for you. How much has that influenced your cash costs? And how quickly do you see it easing now that you've sort of got the deployment challenge in line?

You know what's interesting is what we're really -- I'll answer the second part of the question first. We really glad that we've taken measures we would not in a normal cycle to repatriate people because this just continues. COVID has not been resolved. So the idea of waiting for things to get easier would not bear fruit. So we continue to do that. So it's an ongoing challenge, I would say.

Operationally, what has that caused us? You have the fact that people weren't being able to be repatriated. So you had no flight cost. Now very often the flight cost is more extreme. But it hasn't had too extreme of an impact on our EBITDA or on our net income at this point, but you should continue to expect us, we do some occasional deviations to Manila, which would cost a couple of days. Certainly, at this point in the cycle, that is much less painful than when rates were really high. When we're sending these vessels for drydock, we are doing crew changes. So we're doing everything that we can when there is a moment to make these crew changes happen. I don't have an exact cost code broken out of what it has costed us. But it's -- we have deviated, but we don't have an exact number on what -- how that would have impacted things to date. I don't know, Jeff, if you want to add anything to that or Bill?

No, I think that's a good recap of.

Okay. Sorry, go ahead.

No, no, I think, Lois, you captured it perfectly. I mean it has -- we've been really fortunate to manage the crew changes that we have, and we see some associated costs, as you mentioned, but we're really on track. So…

Okay. Jeff, I hate to keep bringing up the capital structure, but you are operating in a high fixed cost business. Your debt to last 12 months EBITDA is 1.3x. Your loan to value is, we'll call it, 40%. Are you just content to just keep lowering those ratios? Or is there any balance you see on the debt side to maintain capital efficiency in your business?

We don't say you hate to bring it up, it's fine. Happy to always talk about it. I think I hit on this a little earlier that at these levels, and I'd call it maybe 35% loan to value to include the FSO at book value. So your mid-30s and you -- as you said, 1.3x net debt to trailing EBITDA. But if you went to kind of mid-cycle EBITDA based on sort of examples we put out there before, if you look at our decks that are on the website, it's -- you're looking at maybe 2x net debt to EBITDA. So it's a little higher than that. Those seem like good levels, right? I feel like we've achieved our objectives in terms of deleveraging.

So -- and you can see the benefit of it. It's concretely not -- it's not just about averages or percentages or multiples. It's about having -- if it becomes the right time to sell 3 older ships for $62 million like we did, you get all the proceeds, right? So it's -- I think we like where we are. And I think we're -- we've sized the share repurchase and dividend. So dividend $0.06 a share, but it's close to 2%. Right now, it's a pretty nice low dividend yield. And if you pro forma the 50 million share repurchase with the $30 million that we've already done. You look -- that's over 20% return to shareholders and close to 70% of last 12 months' net income.

So these are all the factors you take into place to balance it kind of a question that was asked before. There wasn't any one thing or one formula. You just try to strike a balance that makes -- what we feel like -- management and the Board feel makes the most sense.

This concludes our question-and-answer session. I would like to turn the conference back over to Lois Zabrocky for closing remarks.

Either way works. Thank you very much, everyone, for joining us today. Seaways is well positioned to not only weather this downturn but to actually add to shareholder value. We believe we can find that even at this point in the cycle. So thank you very much, and everyone, take care. Stay safe.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.