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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by and welcome to the International Seaways First Quarter 2021 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Mr. James Small, General Counsel. Please go ahead.
Thank you. Good morning, everyone, and welcome to International Seaways earnings release conference call for the first quarter of 2021.
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: outlooks for the crude and product tanker markets; changes in oil trading patterns; forecasts of world and regional economic activity and of the demand for and production of oil and other petroleum products; the effects of the ongoing coronavirus pandemic; the company's strategy; the timing and likelihood of the completion of our announced merger with Diamond S Shipping; any plans to issue dividends; any anticipated synergies or other benefits from the proposed transaction and the party's respective prospects; purchases and sales of vessels, construction of newbuild 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 first quarter, second quarter of 2021 or other periods; estimated capital expenditures in 2021 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 that could cause actual results to different material -- 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 its quarterly report on Form 10-Q for the first quarter of 2021, our 2020 annual report on Form 10-K, our recently filed registration statement on Form S-4 and in other filings that we have made or in the future may 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 first quarter 2021 results. The first quarter was transformational for International Seaways. We took important steps to unlock significant value for our shareholders. This includes our highly accretive merger agreement that will create an industry bellwether with enhanced scale and capabilities. We are, again, capitalizing on an attractive opportunity to further renew our fleet at a cyclical low point for the benefit of shareholders.
If you would turn to Slide 4, we review the compelling value-creating transactions in our first quarter financial results. Starting with the first bullet, our all-stock merger agreement with Diamond S brings together 2 leading U.S.-based diversified tanker owners with long-term customer relationships, deep cultures of achieving stringent safety, operational standards and strong governance. With this, we expect to deliver a number of compelling strategic and financial benefits to our shareholders and to stakeholders of both companies. The combination of International Seaways and Diamond S doubled our net asset value and tripled the size of our fleet to 100 vessels. We are creating the second largest U.S.-listed tanker company by vessel count and the third largest by deadweight. We expect to solidify our power alley in the large crude sector, focused on Vs and Suezmaxes and to create a power alley in the MR product sector.
Among other notable benefits, we expect the merger to be highly accretive, to both earnings and cash flow per share, with the estimated annual cost of synergies of $23 million and revenue synergies of $9 million. We will increase our equity market capitalization and our liquidity, which we anticipate will provide an opportunity for a re-rating of our equity evaluation. We preserve our significant financial strength and maintain one of our lowest -- the lowest net leverage ratios in global shipping.
As part of this attractive transaction, we have continued to ensure the return of capital to our shareholders. This is highlighted by the $31.5 million special dividends to be paid to shareholders immediately prior to completing the merger. We reaffirm our commitment to paying the quarterly dividend and opportunistically executing on our $50 million share repurchase program following the close.
On the second bullet, we highlight our dual-fuel VLCC project. We have contracted to build 3 dual-fuel LNG VLCCs from top tier Korean shipyard DSME for delivery in early 2023. We are executing our balance and accretive capital allocation strategy. Adding these state-of-the-art vessels on 7-year time charters to Shell provides a strong stable cash flow with a base rate and profit sharing that allows us to capture upside. Importantly, these tankers are well-suited to adhere to future environmental regulations throughout their life. They're 40% more fuel efficient than a 10-year-old VLCC and 20% more efficient than a modern ECO VLCC. In line with our ESG principles, these are highly efficient ships that will surpass today's IMO Energy Efficiency Design Index, and they will substantially outperform the 2025 EEDI targets. This builds on our signing of the first sustainability-linked refinancing in the industry, which was completed at the beginning of last year. We're proud to continue to be at the forefront of sustainability initiatives in the maritime sector. We believe the addition of these vessels at attractive prices represents a compelling opportunity to once again renew our fleet at the bottom of the cycle. Newbuilding VLCC prices have risen by close to 10% subsequent to our contract date. This purchase is consistent with our track record of opportunistically deploying capital for growth since becoming an independent public company more than 4 years ago.
On the final bullet of this slide, our first quarter net loss was $13 million or $0.48 per share. In a weakened rate environment, where oil inventory destocking adversely impacted tanker demand, we generated an adjusted EBITDA of $11 million. It's important to note that as of the end of the quarter we had ample total liquidity of $212 million, including $172 million in cash.
On Slide 5, we discuss our disciplined and accretive capital allocation track record. This chart highlights our success investing over $900 million to renew our fleet at the low points in the tanker cycle. As the chart on the slide shows the 9 ships acquired at the bottom of the cycle, which includes 6 VLCCs acquired 2018 for $434 million and 2 Suezmaxes and 1 VLCC acquired in 2017 for combined $169 million, have materially appreciated in value since their acquisition on an age-adjusted basis.
Most importantly, these 9 ships contributed a cumulative $225 million in operating income through the end of the first quarter, further illustrating our ability to adeptly identify attractive fleet renewal opportunities. You can see that we ordered our Shell project newbuildings at a cyclical low point as well. And as I just mentioned, newbuilding prices are on the rise.
If you'll turn to Slide 6, we provide an update on oil supply and demand. OPEC has announced increased production, and Saudi Arabia will roll back its voluntary cuts. This will amount to an additional 600,000 barrels per day in May, 700,000 in June and 800,000 barrels per day in July. Based on its April forecast, the IEA estimates that 2021 oil demand will be up by 5.7 million barrels per day. This is actually an increase from their last report of 300,000 barrels per day. The EIA's 2021 demand forecast is even more robust. They expect demand to average 97.7 million barrels per day this year. Consistent with this recovery in demand, the EIA expects global oil inventory will fall by 1.8 million barrels per day in the first half of 2021. We believe that this continued stock drawdown is what was needed to set the stage for tanker market recovery. And when combined with the OPEC+ production increases, a surge in demand for oil as the world begins to open up and vaccinations are administered globally, this all signals improvement in the tanker market. Our positive view of the long-term outlook for crude and product tanker demand is one of the major reasons that we are so excited for our merger with Diamond S.
On Slide 7, we examine developments in the Clean Products market. Due to the COVID-19 slowdown in global demand during the first half of 2020, refinery outages globally approached almost 12 million barrels per day. Recovered somewhat in the second half of the year. Record cold temperatures in the United States in the first quarter led to a similar increase in refinery outages. These outages have since decreased, and refineries are running close to 5-year highs. The U.S. Gulf refinery utilization rate only yesterday popped over 90%. This is a very strong indicator. This allows for increased diesel oil exports from the U.S. Gulf, and we're also seeing increases in gasoline demand in the United States where we're very close to 9 million barrels per day. We've been seeing over 1 million barrels a day of gasoline imports into the East Coast. All of these recent moves bodes very well for the MR sector. And we see that the spot market is starting to increase.
Turning to Slide 8, we take a look at Ship Supply. We've mentioned this previously, and it continues to be the case, that overall tanker order book remains at historic lows. This is reflected in the 31 VLCC orders in 2019, same amount in 2020 and 27 ordered to date this year. We believe that uncertainties regarding the market as well as decarbonization regulations and higher steel input costs and increasing newbuilding prices are tempering the orders.
On the bottom half of the slide, we take a look at the potential for recycling. There's a number of candidates based on the aging global fleet. You can see in the chart on the right-hand side of the slide, nearly 20% of the existing VLCC fleet is now at least 17.5 years old and 8% are 20 or older, representing the majority of the VLCC order book. Another 9 Vs will reach 20 years old in 2021. As each ships reach these deadlines, the expenses increase in ballast water treatment installation balloon. This greater capital investment is required to keep them trading. Based on these combined dynamics, the potential for recycling has been building. Only 4 VLCCs were recycled in 2019 and 2020. We expect to see recycling increase, particularly given the current low spot rate environment and the increase in recycling prices.
I would now like to turn it over to Jeff to give the financial review. Jeff?
Thanks, Lois, and good morning, everyone. Let's move directly to reviewing the first quarter results in more detail.
Before turning to the slides, let me quickly summarize our consolidated results. In the first quarter, we had an adjusted EBITDA of $10.7 million. Net loss for the first quarter was $13.4 million, or $0.48 per diluted share, compared to net income of $33 million, or $1.13 per diluted share, in the first quarter of 2020.
Now please turn to Slide 10. I'll first discuss the results of our business segments, beginning with the Crude Tankers segment. Time charter equivalent, or TCEs, for the Crude Tankers segment were $36 million for the quarter compared to $89 million in the first quarter of last year. The decrease primarily resulted from the impact of lower average blended rates in the VLCC, Suezmax, Aframax and Panamax sectors.
Turning to the Product Carriers segment. TCE revenues were $9 million for the quarter compared to $31 million in the first quarter of last year. This is due to lower period-over-period average daily blended rates earned by the LR2, LR1 and MR fleet. In addition, our product revenues were impacted by a decrease in LR1 revenue days as a result of increased off-hire for scheduled drydocks and a decrease in MR revenue days due to the redelivery of 4 time chartered-in MRs to their owners between March 2020 and July 2020.
Overall, as reflected in the chart top left, consolidated TCE revenues for the first quarter of 2021 were $45 million compared to $120 million in the first quarter of 2020. The decrease was principally driven by substantially lower average daily rates earned across the fleet for this quarter compared to last year's first quarter.
Looking at the chart at the top right of the page, adjusted EBITDA was $11 million for the quarter compared to adjusted EBITDA of $74 million in the first quarter of 2020. And again, the decrease was principally driven by lower average daily rates.
On the bottom half of the page, we look at our results over the last 12 months on a year-over-year basis. Consolidated TCE revenues and adjusted EBITDA for the last 12 months ended March 31, 2021, were $327 million and $157 million, respectively, compared to $356 million and $192 million for the prior year LTM period.
Now turning to Slide 11. We provide a first quarter review and second quarter 2021 earnings update. To look at results in Q2 thus far, with 63% of our Q2 spot days for VLCCs, they've been down at an average of approximately $15,200 per day; 75% of our available Suezmax spot days at an average of $16,000 per day; 37% of our available LR2 spot days at an average of $11,100 per day; and 49% of our available Panamax spot days at an average of approximately $21,000 per day.
On the MR side, with 65% of the second quarter accounted for, spot days are approximately $12,600 a day. When we look at it on a blended basis of time charters and spot, and as a concrete example of the benefits of our opportunistically executed time charters done last year, if you look at the number on the top right-hand side of this page, you'll see that the combined spot and time charter rates for our VLCCs are $19,800 for Q2 with 67% of days accounted for.
Now I'd like to turn to Slide 12. The cash cost TCE breakevens for the 12 months ended March 31, 2021, are illustrated on this slide. International Seaways' overall breakeven rate was $21,000 per day over the last 12 months. These rates are the all-in daily rates that our own 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. After taking into consideration distributions from our FSO JV and the fixed time charter revenue, the overall breakeven rate for the last 12 months dropped to $17,500 a day.
We've also now, on this slide, shown breakeven excluding principal amortization for reference. In this case, the overall fleet-wide breakeven fell to $15,000 a day. On the far right-hand side of the page, the bar chart shows the all-in daily breakeven cost for the next 12 months. Taking into consideration contracted revenue from the FSO and our time charters, the overall breakeven rate was $18,900 per day.
At this time, I'd like to give cost guidance for the year for your modeling purposes. Please note this does not take into account expected cost synergies following the anticipated close of the merger. For the remainder of 2021, we expect regular daily OpEx, which includes all running costs, insurance, management fees and other similar related expenses for our various classes to be as follows: for VLCCs, $8,900 per day; for Suezmax, $8,000 per day; for Aframax, $8,200 per day; for Panamax, $7,900; and for MRs, $7,600 per day, in each case, excluding any impact attributable to COVID-19. Further, we expect drydocking stock and CapEx expenses to be $24.9 million and $38.4 million this year. For details on that, you can look -- and off-hire days, you can refer to Slide 16 in the appendix for an update.
Continuing with the cost guidance, we expect 2021 cash interest expense will be about $24.8 million, which compares to an actual cash interest expense of $30.8 million in 2020. For the year, we expect cash G&A to be in the region of $25.9 million. And finally, we expect about $20.8 million in equity income from JVs, $65.7 million for depreciation and amortization, which is about $9 million below last year.
Now if I could ask you to turn to Slide 13, we look at our cash bridge. Moving from left to right, we began the first quarter with total cash and liquidity of $256 million. During the quarter, adjusted EBITDA was $10.7 million, equity income from JVs was a decrease of $5 million and the cash distribution from JVs was $3 million. We expended $12 million on drydocking and CapEx. Cash interest and scheduled principal payments on our debt was $21 million. And finally, taking into account the $2 million quarterly dividend and a negative impact of working capital and certain other charges of $14 million, the net result was that we ended the quarter with approximately $172 million of cash and a $40 million undrawn revolver, yielding total liquidity of $212 million.
Now please turn to Slide 14. I'd just like to briefly touch on our balance sheet. As of March 31, we had $1.6 billion of assets compared to $450 million of long-term debt. In addition, we had a $40 million revolving credit facility that remained undrawn as of March 31. As you can see on the right-hand side, our net debt to total capital stands at 26%, where our net loan-to-value stands at about 33%. And our last 12 months adjusted EBITDA was a strong $157 million, and therefore, our net debt to EBITDA for the last 12 months was 2.23x.
That concludes my remarks, Lois. I'd like to turn the call back over to you.
Thank you very much, Jeff. As I summarize our first quarter, suffice it to say, this has been a truly instrumental and transformational quarter for International Seaways. We signed a merger agreement with Diamond S and we contracted to build 3 dual-fuel LNG VLCC. Our all-stock combination with Diamond S will double International Seaways' net asset value. It will triple the size of our fleet. It will create an industry bellwether that will rank us the second largest U.S. tanker owner by ship count.
We anticipate significant accretion to our earnings and our cash flow per share. We have a forecasted annual cost savings of synergies of $23 million and revenue synergies of $9 million. We expect to maintain one of the lowest net leverage ratios in the global shipping market and enhance our trading liquidity through a larger market capitalization. We continue to demonstrate our commitment to returning capital to investors. This is highlighted by our intention to pay $1.10 special dividend to International Seaways' shareholders immediately prior to the completion of the merger.
In addition, we remain committed to paying a quarterly dividend and opportunistically drawing on our $50 million share repurchase program authorization to increase further value post merger. Complementing this highly accretive merger, we're excited to partner with Shell, market-leading counterparty, on our agreement to build 3 LNG dual-fuel VLCCs for delivery in early 2023. In addition to the 7-year time charters providing strong, stable cash flows and added upside, these highly-efficient vessels offer significant environmental benefits and further reflects our commitment to ESG in the maritime sector. This is the latest example of Seaways capitalizing on an opportunity to renew our fleet at a cyclical low point. This is consistent with our disciplined and accretive capital allocation track record.
Going forward, and based on the 2 important transactions we entered into in the first quarter, we are in a strong position to take advantage of positive long-term tanker fundamentals and further create enduring value well into the future.
This concludes our prepared remarks, and we'd like to open it up for questions. Operator?
[Operator Instructions] Your first question comes from the line of Randy Giveans from Jefferies.
2 questions for me. I guess, first, there's been some chatter on maybe your average fleet age, being a little older than peers. That said, it doesn't seem to be a material negative as you have now, I guess, much less obsolescence risk, right, when it comes to IMO 2030. So how do you feel about your fleet, a possible fleet renewal in terms of maybe some sales candidates and additional modern acquisitions?
Okay, Randy. So just kind of taking that and starting to address it first with fleet age. Since International Seaways became independent 4.5 years ago, Derek Solon and his team have sold over 21 older vessels, and they've done extremely well. So we've continued to modernize the fleet. And as we look forward -- right now, if you were to look at vessel values, which is just an independent service on ship valuations, you'll see that secondhand values are ticking north really daily. So as we look forward to 2021, we believe that the conclusion of the merger with Diamond S, the ships are going to start earning higher TCEs and also be at a higher valuation. And we will look all the time at every ship as to whether or not we selectively sell any vessel. So we'll just continue the same disciplined approach that we've had all along. And when we look at buying more modern ship, I would say that at the moment, I think, International Seaways, we will -- are focused on concluding our merger, building our newbuildings and that's going to put us in really good shape.
Well, if I can just add one comment. Randy, I think we're really happy with what I would call the portfolio of ages we have in our fleet. It's a really nice mix of [indiscernible] newbuildings, other modern vessels, sort of 8- to 10-year vessels, 13-, 14-year-old aged vessels. It really is the fleet we want to put together at this point of the cycle.
Okay. Makes sense. And then, I guess, lastly, following up on the upcoming merger with DSSI. What are your updated thoughts on the FSO venture? I know you've asked about it before. But at these levels, are you more likely to sell your 50% ownership, buy Euronav's 50% ownership or just kind of keep your current 50% as is?
So regarding the FSO, we've been -- we continue to work very closely with our joint venture partner, Euronav, and it's a very positive discussion with them. And we are -- we look at opportunities to monetize the FSO, and we're continuing to do that. We're not in any particular rush. And we believe that there is significant value potentially to be unlocked on those FSOs.
Your next question comes from the line of Omar Nokta from Clarksons Platou.
I sort of have just a general question about -- this is maybe a bit bigger picture, but sort of like the use of pools in the future, especially as it's really a big part of how you deploy your ships and soon to be the 100 ships you'll have following the proposed merger with Diamond S. We're getting to a place where ships are becoming much more differentiated, more so, I think, than in the past. You've got eco versus non-eco, scrubber, nonscrubber and now dual fuel as you're investing versus traditional bunkers. How do you see that just affecting pools and how they operate going forward and particularly for Tankers International? Any thoughts on that?
Omar, that's a great point. Tankers International has been around for over 20 years, and the International Seaways owns half, Euronav owns half. And I think for pools in the future to be successful they actually will have to look a lot the way that TI does, which is a pool that is really a lower cost overhead-type pool and has to be -- it has to be a very close relationship between the owners and the pool because as we need to capture more data on vessel performance, we have to enhance how those ships are performing for the company's technical and commercial need to be closer than ever. So I think TI is actually extremely well positioned, and there's a high level of collaboration between the owners in the pool and the commercial and the technical teams. And you're going to have to see that in order for pools to thrive in the future.
Yes. That makes sense, Lois. And I think it's -- how do you think the potential for say carbon tax to play into this? We've got the -- EU is discussing it. The U.S. is increasingly coming on board with that idea. And, I guess, it sort of seems that you'll have the pool-making decisions on maximizing rates and earnings potential. And then the owner might be seeing an outsized carbon tax bill. So I guess in this -- as a discussion on carbon tax starts to really gain steam here as there's more clarity, do you see that as being like a risk within pools? Or I guess it just sort of comes down to what you just said, which is closer collaboration between the pool owner -- operators and the owner.
Well -- and you know what, Omar, I think, in our industry, there is a lot of innovation and the pools are populated by really sharp commercial people. And we're starting to see carbon monitoring desks within the pools themselves and -- because all of us as owners realize that we need to be paying close attention and be part of the solution here moving forward. So I think that you're hitting on what will be the biggest growth area in trading problem in the future, which is going to be carbon tax and how critical it is for all of us as owners to be part of that conversation as this develops.
Yes. No, definitely very interesting to see how things develop on that front. And just maybe one follow-up, just maybe to Randy's question about the FSOs. It's been this ongoing discussion. I feel like every quarter it comes up. But is there a way maybe that the JV is leaning when it comes to monetizing it? Have you -- is it outright selling the ships? Or do you think securitizing them with -- securitizing the cash flow with some sort of debt facility? And any way you're leaning so far?
It's funny, Omar, because it does seem like a long time, but we actually just concluded these 2 JVs for an additional 10 years to 2032 in the fourth quarter. So it's a fairly recent achievement. And I would say that we are still evaluating all different opportunities, and we're going to work together with our partners to make sure that we maximize our outcome on the FSO. So like I said, we've got 2 really strong teams working on that, and we'll look at whatever is going to bring us the absolute best value.
Your next question comes from the line of Magnus Fyhr from H.C. Wainwright.
A couple of questions here. First, going to Slide 11. Thanks for [Technical Difficulty] It looks like you're able to capitalize on the spread between low sulfur and high sulfur. Can you talk a little bit -- I mean this is the first quarter I've seen that breakout. Can you talk a little bit about the challenges over the last year with -- since the IMO 2020 came into regulation? And what you expect going forward there as far as -- if there are any challenges that you can address?
Magnus, I would say that one challenge is that true to form shipping never does exactly what you think. And the original differentials that we had expected to be between the low sulfur fuel oil and the conventional fuel were more narrow. However, presently, and it has been maybe now for about 4, 5 months, maybe that's overstating slightly, we've been at about $100 per ton. So as you can see, the differential is something like $5,000 to $6,000 per day between the scrubber-fitted Vs and the nonscrubber-fitted Vs. So that critical outperformance is just when we need it most at this moment in the cycle. And then, Bill, maybe I would ask you -- our Head of Operations, Bill Nugent, from a fuel perspective, I mean, the fuel has been available, the heavy sulfur and the low sulfur fuel has been available. Have we seen quality issues or have we been able to overcome these largely to date?
Thank you, Lois. The -- on the heavy fuel side for the ships with exhaust gas cleaning systems, we've been very fortunate. We've not had any issues getting fuel or any quality issues there. It's actually been quite stable and quite okay. On the very low sulfur side, on the IMO 2020 fuels, we've seen a lot more variation in the nature of the fuels, which is something that was anticipated by the market and we certainly anticipated it. But again, with some good planning, we've been able to manage through those issues. So no, Lois, I think generally, we've come through okay.
Thank you, Bill.
And can I just add. Magnus, before you move on, just because this is for -- help everybody and planning purposes that scrubber days in Q2, that's just going to be 27 days -- sorry nonscrubber days in Q2, just 27. So I wanted to get that out there -- or 24, I apologize if that's the correct number.
Okay. I mean do you -- with the spread now a little over $100, do you guys take a view on that? Or is there maybe some thoughts on locking in that spread?
We constantly monitor it. I wouldn't say that we're looking to lock it in at the moment, only because as you've seen in 2021, oil prices have been rallying and increased significantly and the spread tends to widen as you see the prices move up. So at the moment, I think we'll let it rise, but we do monitor it.
All right. Good. And just lastly, I was looking through the slide deck here. I can't find anything on Lightering business here, I guess, in the last couple of years. But maybe you can touch a little bit on what's going on there -- I mean what's going on there during the last year, I mean, as far as activity level. It seems like the U.S. crude exports are still pretty robust, and, I guess, we've addressed a lot of the pipeline capacity issues.
So we closed 2020, I believe our EBITDA was over $4 million for Lightering. However, we have seen Lightering be COVID affected as you've seen the U.S. demand numbers were down. I mean this week, just yesterday, we see that the United States exported over 4 million barrels per day of crude in the last week. Now that's the first time we've seen that in a very long time. In the United States, we're looking at GDP maybe 6.5% in 2021, a high level of vaccination penetration and gasoline usages, as I mentioned, almost 9 million barrels a day. It's up 2 million barrels a day from last year but still down 1 million from 2019. So when you look at Lightering, it is picking up and it's getting busier. It was certainly COVID affected just like the rest of the world where when you saw fewer imports and lower exports in and out of the United States. It was COVID affected as well.
Your next question comes from the line of Greg Lewis from BTIG.
Lois, I guess, I just wanted to follow up on Magnus' question, and welcome back, Magnus, around the Lightering. It seems like it's funny how time flies. It seems like forever ago we had heard a lot about whether it's an oil company or an alternative investor thinking about building VLCC export terminals. Any kind of update there in terms of as we think about that push and pull on the Lightering business? Have those projects move forward? Or they have all kind of been kind of pushed to the right like everything else?
Yes. A lot of those projects have been pushed to the right, Greg. We do see there Suezmaxes can now load and also go out and [ sell it to V ]. But a lot of those projects have been pushed aside. It's interesting. We do a lot of Lightering in Panama, very busy in the Bahamas. The West Coast was affected by COVID and imports, which is now starting to pick up. And of course, the U.S. Gulf is the biggest hub for Lightering and there are projects that -- to deepen and widen, but each one is specific. And I have to follow up with you, Greg, to kind of get into the specific different projects. But a lot of them, there were really too many that were on the board and then with COVID, a lot of those have gotten delayed.
Okay. Great. And then I wanted to follow up on what Omar was discussing but from a different angle. Clearly, the transaction with DS -- Diamond S hasn't closed yet. But I mean, you are going to be taking on a large pool of MRs, and I'm realizing that those were already managed. How are we -- how is INSW thinking about the management and the opportunities for those vessels just given that some of those MRs are a little bit older and might be facing issues? Is there any thought about the company kind of partnering with one older MR owner? Or -- I mean how are we thinking about that, I guess, is probably my question.
Yes. Well -- and as I'm sure many of you are aware, Diamond S MRs are commercially managed by Norient in a pool and also another contingent ship that's commercially managed by Capital. And I think on both fronts, you've seen them be able to increase their marketability or to stand pretty strong. I think Norient has been posting quite strong results. So we are always looking and benchmarking at the best places to trade the ship. I think that you -- as the market recovers, you will see International Seaways take a larger portion of our fleet to look at time charters as the market strengthens into itself. When you aren't running 100 vessels, maybe we won't have such a high percentage of spot exposure. And then we will opportunistically look at [indiscernible] as you do all the time. So there's not one answer. It's a part of an approach that involves making sure while you have the ships, they're absolutely earning the best they can and then in best hands they can be and then you look at opportunistically pruning the fleet moving forward.
Your next question comes from the line of Liam Burke from B. Riley.
Lois, if we look at your VLCC partnership with Shell and the charters associated with it and potential upside with those charter agreements, how does that translate to your return on capital profile and your return on capital discipline?
Jeff, why don't you jump in there?
Yes. It fits [indiscernible] very nicely. We've discussed this before. The combination of the low purchase price, which Lois mentioned in her remarks, really at the low point of the cycle, combined with a very well thought-out collaborative contract with Shell that provides a base rate and a profit share, it's going to work out well for both parties. I said it before and I'll say it again, with that profit share, the way it works, which I can't go into details, but we're expecting it to be a double-digit return type of contract. So it's going to be -- it fits perfectly well with our capital allocation strategy.
And I mean, obviously, post DSSI merger, how does these types of projects fit into your overall fleet management strategy?
That's a really good question. And I think that going forward, and we will continue and welcome these types of projects, it's really great to see the oil companies and owners coming together because that's what it's going to take to innovate and decarbonize the propulsion moving forward. So I think that we will welcome these types of projects and we'll evaluate each one on the merits and the projected returns, Liam.
[Operator Instructions] Your next question comes from the line of John Konrad from gCaptain.
Congratulations on navigating a difficult year. My question is about inflation. The Fed Reserve said that inflation is transitory, but a lot of the banks are wondering about inflation in the long term. I wonder how your company is positioned and also the overall tanker market if inflation gets out of hand and exceeds the Fed's expectations?
Well, that's an interesting question. I think that when you're in an inflationary environment, it's good to be in hard assets. I think that we're certainly away from seeing that flowing through. But when you have periods of strong GDP, and to be clear, it's projections if we can hold the coronavirus at bay. I mean, again, we're looking at over 6% in the United States GDP growth, over 8% in China. India had been looking at 12%, which is massive, and I'm sure that will be moderated now by COVID. But when you start to see strong GDP growth, oil consumption growth is a derivative of that. In other words, we're usually about oil consumption growth will grow at a little bit less than half of GDP growth. So for the tanker market, where we're headed here with increased GDP growth in the world in the back side of 2021 is quite welcome. And then from Jeff's perspective regarding our debt, maybe just talk about how much of our debt is hedged, Jeff? It's pretty significant.
Yes. It's right there on Page 14 of the deck, 96% of our debt is either fixed or hedged. And most of that is floating rate that has been hedged. So we feel we're pretty -- very well protected on that front.
There are no further questions at this time. I will turn the call back to Lois Zabrocky, CEO, for closing remarks.
Well, thank you, everyone, for joining us for our first quarter wrap-up call in our earnings today. And at International Seaways, we're going to be laser-focused on getting our merger completed and driving the business forward. So thank you very much.
Ladies and gentlemen, thank you for your participation. This concludes today's conference call, and you may now disconnect.