New York-listed International Seaways easily outperformed analyst expectations in a solid third quarter and is returning $1.25 per share to investors, mostly in the form of another special dividend.
The Manhattan-based diversified tanker owner continues to benefit from a balanced financial strategy that also saw it reduce fleet operating breakeven by $1,000 per vessel per day over the quarter, owing to lower debt costs.
Meanwhile, the company is moving on fleet renewal, as it declared two LR1 options for scrubber-fitted, dual-fuel LNG newbuildings at South Korea’s K Shipbuilding.
TradeWinds reported the order for two initial units in August for delivery in the latter half of 2025, but the buy was not confirmed by Seaways at the time. The company said the options were declared in October and will deliver in the first quarter of 2026. The total project cost is $231m.
Seaways reported third-quarter spot rates for its VLCC fleet near $41,000 per day. This fell short of the $44,700 per day number reported on Monday by VLCC specialist DHT Holdings and the $42,250 logged by Euronav, its partner in the Tankers International (TI) pool.
And the guidance reported by Seaways for the current quarter was less encouraging. It showed 51% of days booked at an average $33,400 per day, which is well below the $41,500 rate cited by DHT and slightly under Euronav’s $34,000 average.
Stifel analyst Ben Nolan questioned Seaways CEO Lois Zabrocky and CFO Jeff Pribor about the lower guidance on the company’s investor call on Tuesday. The two effectively shrugged off the result.
“Rates have definitely picked up,” Zabrocky said of the current VLCC market. “The team at TI is booking quite strong numbers for the remaining days.’
Added Pribor: “The percentage is pretty low for the fourth quarter....there’s a lot of quarter left at this point.”
In other forward guidance, Seaways said it had booked 52% of suezmax days at an average $38,200, 57% of aframax days at $33,300, 47% of LR1 availability at $39,900 and 46% of MR capacity at $30,100.
The MR numbers caught the attention of Jefferies analyst Omar Nokta, who said in a client note that MR and suezmax performance had been key to last quarter’s earnings surprise. He was further impressed by the MR guidance.
“[This] is notably above market index averages suggesting realizations should be closer to $25,000/day. Given Seaways’ MR fleet is relatively older, this is even more impressive,” Nokta wrote.
Low leverage
With debt reduction initiatives including a previously announced new $160m revolving credit facility, Seaways has reduced its leverage to a record low of 19%.
Seaways disclosed a net income of $98m, or $1.99 per diluted share, down from $113m, or $2.28 per diluted share in the third quarter of 2022.
However, this still topped analyst consensus estimates of a $1.66 per share profit.
Adjusted Ebitda of $151m easily beat the analyst consensus of $133m.
Shipping revenues of $241.7m for the quarter topped the $236.8m recorded in the third quarter of 2022.
Zabrocky highlighted the dividend payments and balanced strategy in Seaways’ earnings statement.
“Including this declaration, aggregate dividends during 2023 will be $6.29 per share increasing our cumulative returns to shareholders to over $320m,” Zabrocky said.
“Moving forward, we remain dedicated to a balanced capital allocation approach, which enables us to pay substantial dividends, execute opportunistic share buybacks, and reinvest in our fleet to maximize long-term shareholder value.”
The strategy places Seaways in a strong position to tap a tanker market that has some room to run, she suggested.
“We expect the tanker markets’ attractive supply and demand dynamics to continue to drive strong tanker earnings for the foreseeable future,” Zabrocky said, citing limited supply growth amid constrained shipyard capacity.
“Positive tanker demand fundamentals are supported by increasing oil demand and higher tanker utilization from the shifting global energy trade, with geopolitical tensions driving further focus on energy security,” Zabrocky said.
The company’s combined dividend includes a special declaration of $1.13 per share beside the $0.12 regular quarterly dividend. Both are to be paid on 27 December. This was slightly down on the $1.30 special dividend paid for the preceding quarter.
As of 1 November, Seaways had about $771m in outstanding debt, 30 unencumbered vessels and an undrawn revolving credit capacity close to $417m.
