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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and thank you all for standing by. I would like to welcome you all to International Seaways First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, we will conduct a question-and-answer session [Operator Instructions].
I'll now turn the conference over to your host, James Small, General Counsel. So please go ahead, James.
Thank you, Brica. Good morning, everyone. And welcome to International Seaways earnings call for the first quarter of 2023. 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: the outlooks for the crude and product tanker markets and changes in trading patterns; forecasts of world and regional economic activity and of the demand for and production of oil and other petroleum products; the effects of the ongoing conflict between Russia and Ukraine; the company strategy; the effects of the ongoing coronavirus pandemic; our business prospects; expectations regarding revenues and expenses including vessel, charter hire and G&A expenses; estimated bookings, TCE rates and/or capital expenditures during 2023 or in any other period; projected scheduled drydock and off-hire days; purchases and sales of vessels, construction of newbuild vessels and other investments; the company's consideration of strategic alternatives; anticipated and recent financing transactions and any plans to issue dividends; the company's relationship with its stakeholders; the company's ability to achieve its financing and other objectives; and other economic, political, and regulatory developments globally.
Any such forward-looking statements take into account various assumptions made by management based on a number of factors, including management's experience 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 the statements. Factors, risks and uncertainties that could cause International Seaways' actual results to differ from expectations, include those described in our annual report on Form 10-K, our quarterly reports on Form 10-Q and in other filings that we have made or in the future may make, with the US Securities and Exchange Commission.
Now, let me turn the call over to our President and Chief Executive Officer, Ms. Lois Zabrocky. Lois?
Thanks very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call for the first quarter of 2023. Following Slide 4 of the presentation found on our Investor Relations section of our Web site, net income for the first quarter was $173 million or $3.47 per diluted share, bringing our cumulative earnings over the last three quarters to over $500 million. Adjusted EBITDA, which removes the gain on the sale of an MR, was $209 million. Based on our strong results in the first quarter and strong spot fixtures thus far in the second quarter, we have declared a combined dividend of $1.62 per share. Following the dividend payment in June, Seaways’ year to date dividends are nearly as high as the previous three years combined, as found in the chart on the upper right hand corner of the slide, and surpasses $360 million in cumulative returns to shareholders since the start of 2020. And finally, represents over $5 per share return to shareholders over trailing 12 months. Our success today is clearly demonstrated in our balanced capital allocation approach. Two of the three dual-fuel VLCCs have been delivered with the third newbuilding and final delivery expected later in the second quarter. We ordered these ships in 2021 at a contract price of $96 million per ship, and today's vessel's value has these ships worth nearly $150 million each. These ships will be on time charter for the next seven years through an oil major with a fixed rate component plus a profit share. They are financed at a 64% loan to current value at a fixed interest rate of 425 basis points. We also exercised the purchase options on two vessels under sale leaseback arrangements for a net price of $41 million combined, representing a discount to current value of about 45%, one vessel delivered in March and the other in April. Additionally, we sold an MR during the quarter and that resulted in a $10 million gain on sale, evidencing our successful investments at low points in the cycle.
The balance sheet remains strong with total liquidity ending the quarter at $519 million. This is after our $98 million in dividends and $97 million of repayment toward our term loan. With the repayment on the term loan, we amended the facility to increase our revolving credit to nearly $260 million and released 22 vessels from the collateral package. Today, we have 27 unencumbered vessels, representing 35% of our total fleet. Lastly, we fixed four ships on two to three year time charters during the quarter, increasing our contracted revenue to about $337 million, excluding any profit share component on the newbuild [deal]. These additional time charters increase our fixed coverage to over 10% of the fleet and reduce our cash breakeven levels. On Slide 5, Russian oil exports remain in focus. Trade flows to Europe are displaced due to the ongoing sanctions and creating higher ton mile demand while soaking up tonnage. On the left hand side of the slide, it's clear that Russian crude is primarily heading to Asia, particularly India and China. The chart shows that crude seaborne exports have remained relatively stable and constant at 4.5 million to 5 million barrels per day, while the composition of the destination on the right access has narrowed significantly to essentially Turkey in Europe and increased significantly to Asia. Product exports from Russia in a similar graph on the right hand side of the page are not as clear in terms of displacement, since the sanctions began only in February. Turkish imports in the Mediterranean are all that remain for Europe, while volumes to Asia and Africa have increased. While this story continues to develop, including the concept of double handling via FTS transfers, International Seaways and its commercial managers remain constant on our self sanctioning of lifting Russian oil.
Turning to Slide 6. We have updated our standard set of bullets on tanker demand drivers. With the subtle green up arrows next to the bullet representing good for tankers, the black dash represents neutral impact on tankers and a red arrow meaning the topic is not presently positive for tanker demand. I won't read each of these bullets individually, but we’ll pull some highlights for you. While the consensus of oil demand growth for 2023 is around 2 million barrels per day, most believe that the growth in oil demand is weighted to the second half of the year. In the chart on the lower left of the slide, the average of the EIA, the IEA and OPEC forecast for oil supply and demand reflects a slight older supply in the first half of 2023 that is then more than offset in the second half of the year. We saw inventories grow in the first quarter, some of which seasonal, but we remain cautious on near term views of global recession. With these considerations, it seems logical that OPEC+ announced cuts to their production targets. However, we are a bit skeptical on compliance as these targets, as evidenced in the lower right hand chart, are very close to actual recent OPEC+ production level in the past few months. We believe sentiment has been impacted particularly on the VLCC earnings and we continue to monitor oil supply and oil demand as the year progresses.
On Slide 7, the tanker supply side remains a compelling story to our fundamentals. The supply side remains constraints with an aging fleet and barriers to ordering new ships. Yards are still quite busy over the next two years with other shipping sectors. This is keeping newbuilding prices high and limiting economic decisions on ordering. We expect new environmental regulations to continue to evolve and to further pause a wave of newbuilding orders. In the chart on the lower left of the page, contracting has been somewhat limited this year and there is a significant downward trend over the last few years for tanker vessels that are taking longer to bill with 2026 a reasonable estimate for the early delivery on certain newbuilding contracts today. The oil tanker fleet age is now about 12 years old with more than one third of the fleet above 15. As you can see in the lower right hand chart, expected new tonnage over the next few years is well under the candidates that could be removed from the commercial trading and we may see negative fleet growth in the near future. The supply outlook for tankers in the near term is incredibly positive. Combined with higher oil demand and disrupted trade flows, the overall outlook for tankers remain strong, particularly in the medium term. There maybe near term recession, which could affect tanker rates or we may return to our regular seasonality in the summer months. In either case, we remain positive on tankers and we believe that Seaways is very well positioned to capture strong markets with our low operating leverage and our diversified fleet of 76 tankers in both crude and product sectors. With our healthy balance sheet and our liquidity, we expect to continue building upon our track record and on our balanced capital allocation strategy, investing in the fleet opportunistically, reducing debt and returning cash to shareholders.
I'm going to now turn it over to Jeff, our CFO, to provide our financial review. Jeff?
Thanks Lois, and good morning, everyone. Turning to Slide 9. Net income for the first quarter was $173 million or $3.47 per share. Adjusted net income, which essentially removes the gain from the sale of vessel, was $163 million, representing the third consecutive quarter of earnings over a $100 million and over $550 million of net income for the latest 12 month period. Similarly, on the upper right chart, adjusted EBITDA for the first quarter of 2023 was $209 million, bringing trailing 12 month EBITDA over $730 million. In the appendix we provided a reconciliation from reported earnings to adjusted earnings. While our expense guidance for the first quarter fell within a range of expectations, I'd just like to point out a few items of note with our income statement. First, other income for the quarter was over $4 million and that consists largely of interest income on the significant cash balances that we are holding. On the revenue side, our lightering business had a very strong first quarter with $11 million in revenue. Given $2 million in vessel expenses, $3 million charter hire and $1 million of G&A, overall, the lightering business contributed about $5 million in EBITDA for the quarter. Also on the revenue side, our LR1 pool, Panamax International, continues to outperform the general market with earnings in excess of about $5,000 a day above the broader market indices. As you can see in our TCE revenues at the bottom of the page, LR1 spot earnings for the quarter were nearly $71,000 per day.
Turning next to Slide 10 for our cash bridge. You can see we began the year with liquidity of $541 million, which was composed of $324 million in cash and $217 million in an undrawn revolving credit capacity. Following along the chart from left to right on the cash bridge, we added $209 million in adjusted EBITDA for the first quarter, less $57 million in debt service composed of scheduled debt repayments and cash interest expense, less our drydock and maintenance capital expenditures of [$23 million] in the quarter, and a working capital bump of about $40 million. We therefore, achieved our definition of free cash flow of just about $169 million for the first [quarter]. The remaining bars in the cash bridge show all the levers we pulled in our capital allocation strategy for the quarter. For instance, we sold one 2008 built MR for proceeds of $10 million and we opted to repay more of the term loan rather than reduce capacity on [Technical Difficulty] credit facility. We exercised the purchase options on two Aframaxes that had been on sale leaseback. $24 million of that amount was paid in March for the vessels and $18 million was put in escrow as of the end of March for the final payment on second vessel, which was made in April. We repaid $97 million on our term loan portion of our main senior secure facility, which will reduce our scheduled amortization by about $3 million per quarter and save over $600 a day on our forward cash breakeven ups.
Finally, we paid $98 million in combined dividends, which was $2 per shares that we announced on our last earnings call. The $4 million of other is mostly composed of deferred financing costs or [taxespaidus.com]. Altogether, these components then led us to [energy] and liquidity of over $519 million with $261 million in cash at the end of the quarter and short term -- cash and short-term investments at the end of the quarter and $257 million in undrawn revolving capacity. As previously mentioned, the revolving capacity was increased during the quarter in connection with the amendment of the credit facility. Now moving to Slide 11. We continue to have a very strong financial position as shown by the balance sheet on the left-hand side of the page. Cash remains strong at $261 million. Restricted cash of $18 million, as I said, represents the amount of escrow related to the [MAX] vessel purchase with a corresponding lease liability. With the completion of the sale in April after the quarter, those will be eliminated. Vessels on the books stand at approximately $1.9 billion versus the current market values, which are well over $3 billion with about $950 million in gross debt that equates to a net loan to value of just about 21%. On the right hand side of the page, we wanted to show further strength of our operating leverage, which results in a significant cash flow generation over the last few quarters even after returning substantial cash to shareholders and paying down debt.
As we mentioned in our press releases this morning, we expect to continue on this trajectory of balanced capital allocation approach. Two newbuildings of our three dual-fuel VLCC program were delivered in the second quarter. We also intend to use some of our cash to repay existing debt. Currently, we are exploring options on which facilities of the portfolio we intend to repay, either in their entirety or in a portion. But overall, we expect the total repayment maybe around $75 million. We have also announced our combined dividend of $1.62 per share, which consists of our regular dividend of $0.12 per share and a $1.50 per share supplemental dividend. These payments will be made in the second quarter as we continue to build our track record of executing the capital allocation strategy.
The last slide I'll cover, Slide 12, shows our forward looking guidance and book to date time charter equivalents aligned with our cash breakeven levels. Starting with TCE fixtures for the second quarter of 2023. And as always, I'll remind you that actual TCEs that we will report on our next earnings call will probably be different than this. But as of now, we have a blended average spot TCE of nearly $48,000 a day fleet wide for the quarter. On the right hand side, you can see our cash breakevens, which we’ve displayed for the forward-looking 12 months, reflective of delivery of the last vessel on our newbuilding program and related payments on principal and interest as well as the new fixed revenues before any profit share on our increased long term time charters. Altogether, we have reduced our breakeven by $600 a day from the first quarter of last year. But if you consider the approximately 250 basis point increase in bank rates over the same period, the reduction to our breakeven was actually closer to $1,500 a day. When you compare these breakeven rates to our fixtures for the quarter-to-date, it certainly looks like second quarter could be another strong quarter for International Seaways. On the bottom left hand side of the chart for those modelers out there, we have given you some updated guidance for expenses such as in Q2 and the remainder of 2023. We also include in the appendix of this presentation our quarterly expected off hire and CapEx schedule for 2023. I won't read each item line-by-line but encourage you to use these for modeling purposes.
That concludes my remarks. I'd now like to turn the call back to Lois for her closing comments.
Thank you very much, Jeff. On Slide 13, we provide a comprehensive Seaways investment highlights. I encourage you to read and review in its entirety that we just summarized briefly for you here. At International Seaways, you will find that we execute on our commitment to all stakeholders and we have a recent track record. We strive to buy assets at low points in the cycle. Our track record and our balance sheet show that we have invested about $2 billion in assets that are now worth well over $3 billion today. We said that we have a balanced capital allocation approach. Last quarter, we generated over $200 million in earnings and we distributed nearly half to shareholders and the other half to reduce debt, and then we bought two ships at discounted prices. This quarter is much of the same, $170 million of earnings with $80 million to shareholders and another $75 million towards debt reduction. And our balance sheet remains very healthy, with significant liquidity, historically low net loan to asset value and 35% of the fleet [Indiscernible].
We have strategically positioned the company today for a sustained robust tanker market, with our low cash breakeven levels and flexible operating models, we are set to take advantage of the compelling tanker fundamentals on the horizon. The growing distances between oil supply and consumption, creating high demand for seaborne transportation across a globally aging fleet that has barriers towards replacement, much less the expected role we anticipate to comp in demand. On this, we are mindful of the environmental regulations ahead and remain focused on being a leader in ESG. We have backed this up with sustainability clauses in our cost of borrowing, we strive to continue to evolve these principles and to provide a meaningful platform for all stakeholders. Thank you very much. And with that, operator, we would like to open up the lines for questions.
Operator, we can't hear you.
[Operator Instructions] The first question on the line is from Greg Lewis with BTIG.
I do want to talk about the cash balance. But Lois before, could we clarify? You mentioned that with the newbuilds on the back of the strong contracts, you mentioned the 60% plus on the LP [Indiscernible]. Was that on the purchase price which was in the $90 million or was that on the current market price of the 150ish?
That is on the current market price.
So I mean, we're pretty much -- based on what we bought it, we were -- okay, great. So then as I think about cash, and Lois and Jeff you've seen more cycles than me, cycles can be challenging as we know. As we think about -- and realizing we're not in a market like that, but you never know. As we think about the cash balance and realizing that interest rates are higher, so you're actually making some good income on that money now. What is -- like, should we be thinking about kind of like more of a sustained cash balance around these levels, realizing that as I look ahead next into the back half of this year and when we see an expected rate recovery, it's without any real forward CapEx going forward, it seems like that cash balance should really just continue to melt higher. Is that kind of a fair way to think about it?
Well, Greg, I think, that presently, we're still in really strong market and yet, we have very structural fundamentals for strong market in the future. The spot market has reacted to the sentiment with OPEC cutting. And yet we still believe that there's going to be strong demand in the second half. So I'm going to let Jeff expound on it. But presently, we think that the way that our balance sheet is set up and the way that we've been focused on unencumbering ships and paying down debt, as well as returning to shareholders, we have this sweet spot hopefully of where we're really striking a very good balance and are prepared for whatever the market brings to really surf very well through that.
Like you said, Greg, we've been through a couple cycles. And actually remember when it was sort of normal to be getting interest rates on your cash, right, I think we all forgot about that for the last 10 years. So I don't think it fundamentally changes our view, which is we want to have a good cushion between cash, undrawn revolver and frankly, unencumbered vessels, which are themselves a great cushion, against whenever that next downturn might be and however long or short it might be. And it's just nice to be paid more in that cash, which we want to have as a clear [Technical Difficulty] cash has a portion of the liquidity we want to keep. I think returns as Lois was talking about return to shareholders paying down debt, that all stays the same. It's the right thing to do at this point of the cycle, so we continue with it. So I think it's kind of like back to the future, back to a fairly normal time where interest rates on your debt are a little higher, but that's why we've hedged out a significant portion or have fixed portion of our debt, and interest on your cash is conventionally a little higher, just is where it is, Greg, I think it's okay.
I mean, you kind of have built this, it looks like a through cycle company with the cash gives you flexibility. So I just kind of wanted to kind of hear your thoughts on that. And then I was hoping, Lois, you called out the benefit -- or Jeff, maybe it was about the benefit in the lightering and we're continuing to see those weekly SPR releases to some degree. Could you -- I guess, there's a two part question there is, how much of the SPR releases is helping the lightering? And then beyond the lightering, once we've executed the lightering those volumes then go on ships farther afield. Like any way to kind of quantify what that SPR release is actually doing to the market over the last couple months?
That's interesting. I mean, we certainly know last week 4.7 million barrels a day exported out of the US Gulf. So we know that those releases really bolster the exports and put more barrels on the water seaborne for the tanker side. Pretty tough to give you a quantification of how that assists. On lightering, I would say that their Q1 was bolstered by that level activity as well as by the very robust rates. You know we don't look for them to be able to repeat that $5 million in EBITDA for Q2. We would think that it would be more moderate in the second quarter, reflecting seasonally little bit lower volumes and lower jobs. And then, I think that half of that SPR, it's like 11 out of like 25, 26 barrels has been put on the water. So we probably can look forward to seeing that over the next probably 30 to 60 days kind of helping volumes a little bit as well.
Can I just add one observation? Greg, in my opinion, a lot of people, observers, kind of freaked out a little bit when OPEC made a surprise cut. Like, oh, what does that mean about demand? Whereas a lot of that might have been, what does that mean about inventories? And inventories were probably relatively higher than they might otherwise have been, because of SPR releases and sales mainly last year. So that's where I think it comes in.
And we've seen it come down already, but in the US the crude is like 460 million barrels of inventory. So a lot of what was there in Q1 has been coming out week over week.
We now have Ben Nolan of Stifel.
I have a couple of questions. The first relates to -- it's a little bit more of a macro type question. You guys talked a whole lot about the order book and fleet age and everything. There has been a little bit of ordering lately though. But what I think one of the interesting things is that as it relates to the crude tankers has been mostly Suezmaxes and it's been like two years since the VLCC has been ordered. I'm curious what the dynamic is? Why are -- what about the market makes people a little bit more optimistic about a Suezmaxes versus a Vs that would be expressed in an order?
I guess, I would say that, I almost thought you were going to go to the ships that have been ordered, our MRs and LR2s, and of course, you just seen incredible strength in both of those sectors with the Russian war. So that doesn't incredibly shock me. I mean, the Suezmaxes are -- they're a little more flexible and you can build them in a few more yards. But we still haven't seen very much on big crude. I mean even on the Suezmaxes, it has been pretty reduced, I would say. So overall, we are still below around like a 4% replacement or a full order book. And in theory, you should be losing 4% to 5% of your fleet each year in normal times, which we’re not in and so we think that still looks pretty structurally low.
I mean, clearly, the numbers have never been really this low other than maybe a month ago or so. But -- okay, that's helpful. Along those lines and maybe just talking about newbuildings. I mean, obviously, a few years ago you guys did the VLCCs with LNG. I'm curious if there has been any level of reverse inquiry whether or not you guys would be interested in doing it, I think it's a different conversation. But are you starting to see your customers getting a little bit more [Indiscernible] and saying, hey, what can you guys do. We know that we are going to need a ship in a few years, so let's have a conversation. I mean, is that happening at all?
Yes. I mean, I would certainly say that, I think oil majors are -- they are very forward-looking, they are very structured. So we worked to engage them and have discussions. I think it's still not 100% clear on exactly what type of dual fuel, depending upon your vessel size, you should be using. The dual fuel LNG is super for these, that may not work for all different sectors. So there is a lot yet to be learned and innovated in this space.
One thing, Ben, we remarked on before, but I think it's appropriate to say it again as we come to the completion of delivery of this three vessel program is, there is a lot of intellectual property in the company and what we have gained as an asset from having spent the time building these vessels and seeing it through the completion and to see trials and now putting them out with our customer. So I think that if there is going to be a reverse inquiry, we expect the phone to be ringing here.
And then just the last one for me, I know you guys did the repurchase of some of the vessels that you had leased in. Are there any more of those in the fleet that you have purchase options on?
Yes. We will be looking at our debt facilities and our sale leaseback facilities, which are all accounted for is that for opportunities to reduce debt incrementally as we’ve talked about today. There maybe some of the low hanging fruits that -- or lower hanging fruits that makes sense to or even though we have a high fixed portion, fixed or hedge portion of our debt could stick off some of the more slightly higher cost stuff. So yes, you can look for that…
We now have Omar Nokta with Jefferies.
I wanted to just follow up with a couple things. Just first off, obviously, the Panamax LR1 fleet continues to be a nice piece of business for you, it's niche overall. But it's becoming a real contributor to your revenue as we could see this past quarter and the one before it, you earned 70,000 a day. In 1Q, you've guided to 79 so far in the second quarter. How should we be thinking about that segment as we move forward here, whether the rest of this quarter or into the second half, how has that market been developing? And can we expect this type of elevated rate to continue for some time?
Omar, I would say that, right now across -- and of course those LR1s are trading crude and dirty PPP in the America. Presently all the crude markets have backed off somewhat. However, we still anticipate that Panamax International will continue to host very strong rates. And of course, that's our joint venture with Ultra and Flopec. And we expect that it will near the broader market and continue to post that extra benefit beyond the spot.
And is there -- I guess I'm not sure if, I'm pretty sure you've even asked this in the past, but I can't recall. Is there a sort of index or a route that we can sort of have a sense of being able to track how that business is doing, or is it really just the very kind of customer-to-customer relationship and it's almost I don't want to say a black box, but we just don't have a really good sense of being able to see how that's performing.
What I would say is maybe we'll follow up with Tom offline, because we do have indices that, our market indices that are benchmarked. So if we could do that I think that might be beneficial.
Yes, sorry to get into the -- but it's just obviously remarkable how…
No, there are some reflective routes. There are routes that we use as benchmarks and et cetera, that reflect that trade.
And then -- look forward to that. And then just as a follow up to the discussion about the dual fuel VLCCs that you've taken delivery out, you've got the first two, the third one’s coming up shortly. Wanted to ask because clearly, there's just a lot of -- what's the future type of propulsion and whatnot, but maybe just with respect to these VLCCs? And wanted to get a sense of how so far as you've taken delivery of them, how they've been deployed in terms of -- is the LNG portion of the fuel source being utilized, are the ships being maybe used for lifting US cargos and thereby having access to US LNG at a cheaper price? Any color you can give on how these are currently being operationally utilized?
So I mean, the trading in typical VLCC trades, right? So on the Vs, those routes, I mean, you need Singapore, US golf is great, Fujairah, right? So those are sort of your bunker spots. They are using the LNG system not fully for propulsion, they're operating these on a mix presently. And of course we want that LNG system to be used so that we make sure everything is effective as we start to trade them and operational and smooth for us, right? So we're going to learn more as we get all three of them into steady service.
And I'll learn as well watching you guys. And maybe just one simple one, I just kind of thought of it as we were talking. The LNG component of the vessel, does it always have to have LNG in it or is it able to run without that?
We don't have -- the one guy we don't have on is able to run fully on conventional. Yes, it's able to run, but it’s able to run fully on conventional fuel, right? You can run on a blend. We will likely always have some LNG in the bunker tanks that are on deck, probably we need to. And then my head of options sustainability is traveling and if there's anything additional to add, we'll share that with you.
We now have Chris Robertson of Deutsche Bank.
Thanks for taking the time and answering our questions today. Just on, Jeff, looking at the recent pullback, not only with your shares but across the tanker space. Can you talk about how you're thinking about the capital allocation strategy here as it relates to maybe doing some share repurchases over dividends in the coming months?
Yes, I'm glad you asked that. Taking a step back, as you know, we have said we don't have a formula as to how we allocate capital. We look at everything, but I feel that gives us a better ability to be flexible. And I think that's true with respect to whether the returns that we do are dividends or share of purchase. We're proud of the $5 that we've returned over the last 12 months per share, but that includes some share repurchasing last year when that was the right thing to do. We think that the regular and supplemental dividends we declared these last three quarters were the right move. But yes, we're not -- we are cognizant of the drop in prices that the whole peer group has had. And I would say, looking forward, we are generating cash flow in the second quarter, have a good cushion. And at these kind of values, we certainly -- we have an open available $40 million share repurchase programs and we won't be shy to use that to look at accretive share repurchase as part of capital allocation going forward.
You guys spent a little time here talking about the OPEC production targets versus the actuals. I mean, it seems on kind of a tangible impact the volumes haven't really been impacted thus far. But I guess looking ahead now that the Brent price is still trading below $80. I think the IMF has come out and said that Saudi Arabia needs $80 per barrel to balance the balance sheet there for the government. Is there any downside risk do you think at the next meeting that either the cuts would be extended or deepened in some way or trying to get additional compliance to where we will actually see volumes on the water impacted?
It's possible. But the IMF also said on Monday that, Asia, they have raised the GDP to 4.7% or 4.6% from 4.3%, and that will equal 70% of worldwide GDP growth this year. So we love to see that, because that's -- we see that China is a little bit uneven, but golden week here is starting out very strong with year-on-year transportation way higher than last year. So we are seeing pretty strong demand from the East. The Saudis, they are pricing this month, they cut a little bit for Asian destinations, but very mildly. So we are watching it very closely. Of course, it's possible. But we are still -- it still looks like Asia could pull with more strength certainly than the West as we head into the second half.
Last question from me, just looking at the order book to fleet ratios for both segments, you kind of highlighted that the crude segment is faring a bit better at a relatively lower basis. And you mentioned that there has been some ordering on the product side with LR2s and MRs. Do you think at least in the near term kind of given the uncertainty in the market and the current sentiment that ordering might take a pause on the product side, or do you think there is more kind of downside risk to additional orders in the coming quarters?
I think we kind of said it in our remarks, the regulations continue to evolve. Order books continue to move forward, the values are high. The technology is a bit of a question mark. I don't think that we are going to -- I would think we would see a little bit of an abatement. Let's see if that comes to reality.
Thank you. We now have our final question on the line from Liam Burke of B. Riley.
Lois, as the older MRs begin to age, move to the 15 year and above level. Are you satisfy to keep operating them or do you consider selling them or taking them out of the fleet?
You see that we sold one here in the first quarter and that we continue to kind of prune them, but 3105 a day, right? So it's a balance, they're fully employed, they are highly marketable, they are well maintained. So we are judicious in the way that we just kind of continue to do our fleet optimization, that's just ongoing.
And Jeff, you've been very clear about not being formulaic in terms of capital allocation. But do you anticipate a dividend program that has the flexibility of providing the special component every quarter or during the quarter -- next quarters?
Liam, I think that's what we've done is put in a program where we have the regular dividend. It was not all that long ago that we raised it. I mean, we doubled it last year. So from $0.06 a share per quarter to 12, we expect that to continue. And at some point in the future, we look at, as someone else said in this call, as a through the cycle company, and I love that, we'll look at the -- whether we can, at some point, increase that regular dividend. And then you captured it, right? I mean, you're getting what we're -- thank you for saying we're clear. What we're trying to say is when we are in cycle -- points of the cycle, like we are now where there's significant free cash flow in addition to paying down debt, we're going to supplement that regular dividend. And that's why we use the word supplemental dividend, so that we're sharing in an upside with shareholders. And so we don't have a particular formula, as you said. But all things being equal, if that continues in the coming quarters, shareholders should expect that we will continue to do pull the same levers, we'll pay down some debt and we'll share some via dividend or as I said to the last question, possibly share repurchase. We'll continue to share with shareholders.
Thank you. I'd now like to hand it back to Lois for any final remarks.
I want to thank everyone for joining International Seaways today, INSW on the New York Stock Exchange. Thank you very much, and have a great weekend.
Thank you for joining. I can confirm that this conclude today's call. Please have a lovely day, and you may now disconnect your lines.