International Seaways Inc (INSW)

International Seaways Inc.: A Comprehensive Overview

Company Profile:

Detailed history and background: Founded in 1999, International Seaways Inc. (INSW) is a major public shipping company engaged in the transportation of crude oil and refined petroleum products by sea. Headquartered in New York City, the company owns and operates a fleet of tankers, including Very Large Crude Carriers (VLCCs), Suezmax/Aframax tankers, and smaller tankers.

Core Business Areas:

• VLCC & Suezmax/Aframax Crude Tankers: These vessels offer transportation services on a spot market and through short-term and medium-term contracts.
• Clean Tankers: These vessels transport refined petroleum products and vegetable oils through short-term and medium-term contracts.
• Marine Service and Agency Business: INS also offers crew and technical management services and assists other ship owners and charterers with various ship operations.

Leadership:

• Chairman, President & CEO: Lois K. Zabrocky
• Chief Operating Officer: Jeffrey Pribor
• Chief Financial Officer: Steven Gefen
• Senior Vice President - Commercial: William P. Curry

Top Products and Market Share:

Top Products:

• Seaborne crude oil transportation with 17 VLCCs and 8 Suezmax/Aframax tankers
• Seaborne transportation of refined petroleum products and vegetable oils with 29 tankers

Market Share:

• Global Market Share: Due to the fragmented nature of the shipping market, it's difficult to pinpoint an exact market share for INSW.
• Specific Trade Routes: It holds a stronger presence in specific trade routes, especially those involving crude oil transportation from the Middle East and the US Gulf to Asia. However, the company faces stiff competition with other international and regional ship owners.

Comparison: While large players hold a bigger fleet size, INSW stands out with its modern fleet with an average age of 6.0 years. This modern fleet positions the company favorably for potentially securing more favorable long-term contracts amidst increasing environmental regulations regarding ship emissions.

Total Addressable Market:

Global Crude Oil Tanker Market: The market was valued at USD 60.01 billion in 2022 and is expected to reach USD 102.56 billion by 2028, growing at a CAGR of 10.95% from 2023 to 2028.

• Key drivers: rising oil demand, global trade activities, and increasing offshore exploration

Global Product Tanker Market: The market size was USD 42.72 billion in 2022 and is projected to reach USD 79.54 billion by 2028, with a CAGR of 12.03%.

• Motivating factors: strict environmental regulations leading to fleet renewal and a shift toward clean tankers, growth in refined product trades

Financial Performance:

Recent Financial Performance:

• Revenue: As of Q3 2023, INSW achieved USD 263.2 million in total revenue, a decrease of 6.26% compared to the previous year.

• Net Income: The company reported a net income of USD 0.257 billion, up by 96% year-over-year.

• EPS: Despite a decrease in revenue, INSW saw an increase in EPS to USD 0.828 from USD 0.331.

• Profit Margin: The company's gross profit margin in Q3 2023 was 26.47%, compared to 31.53% in the same period of 2022.

• Cash Flow: INSW has maintained a positive operating cash flow and free cash flow during the last fiscal year.

• Balance Sheet: The company has seen a decline in total liabilities and an increase in total equity, indicating improved financial health.

Financial Analysis: INSW presents a mixed financial performance; despite slight revenue reductions, the company exhibits strong EPS growth and positive cash flows. The decrease in profit margins reflects the current difficulties in the crude tanker market. Nonetheless, the company seems to be navigating these challenges effectively.

Dividends and Shareholder Returns:

Dividend History: INSW initiated quarterly dividends in Q1 2022.

• Q4 2022: USD 0.20 per share
• Q3 2023: USD 0.20 per share
• Q2 2023: USD 0.15 per share
• Q1 2023: USD 0.10 per share
• Current annual dividend yield: approximately 1.98%

Shareholder Returns: Over the past year, INSW provided a positive total return of approximately 64%.

Growth Trajectory:

Historical Growth:

• Revenue has climbed from USD 661 million in 2019 to USD 929 million in 2022, representing a CAGR of 23.5%.
• Net income surged from USD 109 million in 2019 to USD 519 million in 2022, showing remarkable growth.

Future Growth:

• Industry forecasts project a robust growth in the crude and product tanker markets.
• INSW's initiatives, like fleet renewal and exploring LNG-fueled vessels, can potentially enhance competitiveness.
• However, global economic uncertainties and potential oversupply in the tanker market might pose challenges.

Market Dynamics:

Current Trends:

• Increasing global energy demands
• Rise in seaborne crude and product trades
• Stringent environmental regulations affecting fleet composition

Demand-Supply Scenarios:

• OPEC+ production cuts affecting crude oil supply
• Growth in refined product trades amidst increasing regulations on land-based refining
• Potential oversupply in the tanker market in the near future due to newbuilding deliveries

INSW's Positioning:

• Advantages: Modern fleet, diverse customer base, and exposure to long-term contracts mitigate market volatility to an extent.
• Adaptability:** Focus on fuel efficiency through new vessel acquisitions and exploring LNG solutions for future growth aligns with future regulations.

Competitors:

• DHT Holdings (DHT): 28 VLCCs, 27 Suezmax/Aframax tankers (larger fleet size)
• Euronav (EURN): 29 VLCCs, 46 Suezmax/Aframax tankers (strong presence in the Atlantic basin)
• Frontline (FRO): 64 VLCCs, 29 Suezmax/Aframax tankers (one of the largest tanker companies globally)

Competitive Advantages:

• Modern and fuel-efficient fleet
• Diversified business portfolio across various tanker segments and trade routes
• Contractual coverage mitigates spot market volatility

Competitive Disadvantages:

• Smaller fleet size compared to major competitors
• Limited exposure to LNG-fueled vessels

Potential Challenges and Opportunities:

Key Challenges:

• Market volatility and potential oversupply affecting freight rates
• Rising interest rates impacting financial costs
• Intensified competition in the industry

Potential Opportunities:

• Continued growth in seaborne energy trades
• Expanding presence in new markets and trade routes
• Adoption of cleaner technologies like LNG-fueled vessels
• Increasing focus on digitalization to optimize operational efficiency

Recent Acquisitions:

• In July 2021, INSW acquired
  • one VLCC (2018-built) for USD 85.5 million
  • two Suezmax tankers (2012-built) for USD 61 million and USD 62.05 million
  • three LR2 Aframax tankers (2012-built) for USD 28 million, USD 28.2 million, and USD 29.1 million
  • three MR product tankers (2007-built) for USD 21.75 million, USD 22.15 million, and USD 23.95 million
• This acquisition helped INSW strengthen its fleet with modern and eco-efficient vessels, enhancing their competitive position and market adaptability.