International Seaways Inc
NYSE:INSW
Earnings Call Analysis
Q3-2023 Analysis
International Seaways Inc
International Seaways reported a robust net income of nearly $100 million for the third quarter, amounting to roughly $2 per diluted share. Over the last twelve months, cumulative earnings surpassed $640 million. Adjusted EBITDA for the same quarter stood at $151 million, totaling over $800 million for the year. The financial health of the company is reflected further in the substantial shareholder returns—with $1.25 per share declared in combined dividends, supplemental dividends, and $14 million in stock buybacks, totaling over $320 million returned to shareholders within a year.
The company's liquidity remains a strong suit with more than $580 million available at the quarter's end, including $215 million in cash and significant undrawn revolving credit facilities. A strategic debt management plan saw $104 million repaid on their $750 million facility and $50 million drawn on a new facility, maintaining a low net loan-to-value ratio of 19% and a cash breakeven of under $15,000. This disciplined approach to liquidity and debt, combined with an undrawn revolving capacity of over $400 million and 30 unencumbered ships, puts the company in a favorable position to navigate market changes.
Market demand for oil shows encouraging signs, with a 2 million barrels per day increase projected for 2023 over 2022 and a further increase of 1.5 million barrels per day in 2024. A corresponding growth in oil supply is expected, which should positively influence the sentiment and lift average time charter equivalents, benefiting the tanker space. Although geopolitical events present challenges, the potential easing of sanctions on Venezuelan crude oil and a tanker fleet that is aging present opportunities for positive momentum in the industry.
The company noted that current commercial inventory levels are below the 15-year high, which appears to be negatively affecting the current tanker environment. However, they remain cautiously optimistic due to geopolitical factors that may swing in favor of tanker demand, aiding market recovery over time.
The company displayed resilience with a net income of $98 million for the second quarter, and despite higher vessel-related expenses and G&A costs, they recorded a solid $11 million in lightering business revenue and $5 million in EBITDA for the third quarter. The company's liquidity improved to over $581 million following disciplined capital allocation, including significant debt prepayments and combined dividends amounting to $61 million for Q3. They have already repaid $770 million of debt in the current quarter, emphasizing their robust financial management and commitment to maintaining a balanced capital allocation strategy.
International Seaways has successfully returned $316 million in cash to shareholders on earnings of $658 million, a nearly 17% yield, demonstrating a strong focus on shareholder value. This substantial return, coupled with $215 million in debt prepayment, adds to their impressive balance sheet, which boasts 75 vessels in the crude and product tanker markets, assets recorded at $2 billion, but with market values exceeding $3 billion. The company's continuous efforts in returning shareholder value, with a total shareholder return nearing 300%, denote a compelling investment proposition.
For the next years, the company provided guidance for expenses, offering estimates for 2024. While specific numbers were not disclosed in the remarks, detailed guidance and expected schedules were made available for modeling purposes, signaling transparency and preparedness in their financial planning.
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Hello, everyone, and welcome to the International Seaways Third Quarter 2020 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to our host, James Small, General Counsel and Chief Administrative Officer. Please go ahead.
Thank you, Candice. Good morning, everyone, and welcome to International Seaways Earnings Call for the third quarter of 2023. Before we start, I'd like to begin by advising everyone with us on the call today 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 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 ongoing conflicts around the globe, the company's strategy, 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 the fourth quarter of 2023 during 2024 or in any other period, projected scheduled drydock and off-hire days; purchases and sales of vessels, construction of new build vessels and other investments; the company's consideration of strategic alternatives; anticipated in recent financing transactions and any plans to issue dividends, the company's relationships 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, perception of historical trends, current conditions, expected and future developments, and other factors that management believes are appropriate to consider in a certain test.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 include those described in our annual report on Form 10-K for 2022, our quarterly reports on Form 10-Q for the first 3 quarters of 2023 and in other filings that we have made or the future may make with the U.S. Securities and Exchange Commission. Now let me 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 for the third quarter of 2023. Following Slide 4 of the presentation, which you can find on the Investor Relations section of our website. International Seaways net income for the third quarter was almost $100 million, roughly $2 per diluted share, bringing our cumulative earnings over the last 12 months to over $640 million. Adjusted EBITDA was $151 million for the quarter and over $800 million in the last 12 months. Based on our strong results in the third quarter and the spot fixtures well above our break even level thus far in the fourth quarter, we declared a combined dividend of $1.25 per share. Following this dividend payment in December, actual last 12-month returns to shareholders will include a cumulative $6.29 per share in combined dividends as well as $14 million in buybacks, equating to over $320 million, a 16-plus percent yield on our average market cap during this period.We continue to enhance our balance sheet with our balanced capital allocation approach. Total liquidity at the end of the quarter was over $580 million, comprised of $215 million in cash and an undrawn revolver capacity of over $365 million. We added $160 million of revolver capacity after executing this new credit facility during the quarter. This facility features a 20-year amortization profile, a margin of 190 basis points over SOFR and a 5.5-year term, all of which are critical key outcomes for Seaways. We drew about $50 million on the revolver during the quarter, which has been repaid. The final results on our major senior credit facility allowed us to repay $100 million. We now have a total undrawn revolving capacity of over $400 million and 30 unencumbered ships.Our fortress balance sheet highlights the success of our balanced capital allocation strategy over time. We have acquired assets. These assets are on the book for $2 billion, where the value of the fleet today is nearly $3.3 billion. Our net loan to value is 19%. Our cash break even for the next 12 months is under $15,000 per day. This is an exceptionally low level and a key differentiator for International Seaways. This includes about $3,700 per day of our fixed contracted revenue [ that in ] aggregate amounts to over $344 million through the charter expiry. It excludes any profit sharing element on applicable time charters. This low break even level paves the way for enhanced free cash flow during 2024. We have exercised 2 optional LR1 newbuilding contracts. We now have 4 LR1 newbuildings with delivery scheduled beginning in the second half of 2025 through to the first quarter of 2026. These 4 ships are designed to be scrubber fitted, and they are certified as dual fuel ready. The aggregate price is $231 million for the 4 vessels. Upon delivery, these ships would trade in a niche Panamax International joint venture, which has earned over $64,000 per day on average in the last 12 months. Turning to Slide 5. We've updated our standard set of bullets on tanker demand drivers with the settled green up arrow next to the bullet represented as positive for tankers and the black dash representing neutral impact and a red down arrow means the factor is not positive for tanker demand. Pulling some highlights. Oil demand increased in 2023, on average about 2 million barrels per day over 2022 and is projected to increase another 1.5 million barrels per day in 2024. Scheduled growth in oil supply is about 1.5 million barrels per day over the next 2 years, each of the 2 years, mostly coming from the West in the United States, Guyana and Brazil. A relevant question for the tanker space is when will OPEC decides to turn some of the pumps back on and increase production. We believe this will bring positive sentiment and lift average time charter equivalents. On the flip side, during the duration with OPEC keeping production at bay, we are drawing inventories in the fourth quarter based upon present demand levels, which we believe benefits a longer-term horizon on tankers. As the chart on the lower right shows, current level of commercial inventory are well below the 15-year high. Previously, key events caused big builds and draws such as COVID in 2020 and 2021. It took us time to draw these inventories down. We look at the 5-year average all the way from 2010 since it predates events and have included the average of 2019 and 2022 separately as these 2 periods match better with oil demand. The bottom line is that inventories are historically low, especially when combining commercial and strategic reserves. Before moving on from this slide, there are a number of outstanding geopolitical events that are sadly affecting our current tanker environment. Over the last few months, the price cap imposed on the Russian oil have been effectively priced out due to rising crude oil costs from OPEC plus production cuts. We have seen an impact on the tanker market as many shifts to the great fleet migrate into the commercial fleet. An upside over time is that we see the loosening of sanctions on 800,000 barrels per day of Venezuelan crude oil. Moving to Slide 6. The supply side continues to be compelling. This component is very strong for tanker fundamentals. On the lower left-hand chart, we break down the order book by each vessel class relative to the total fleet. More specifically, potential candidates in the next few years that will be at the very leaset removed from intensive commercial trading, which we categorize as becoming somewhat marginalized around 20 years of age or older. In aligning the dark bars on the graph, vessels on order do not meet the need to replace the existing fleets.On the lower right-hand chart, the limited replacement of the fleet over the next few years is expected to increase the average fleet age to levels that we have not seen for years. 15% of the tanker fleet today is over 18 years. And by 2027, we anticipate that figure to double to 30%. And the average age of the fleet, if this were the case, would be about 15 years old. We believe that in order to meet growing demand in the next few years that ships over 15 years old will need to stay in service beyond the next few years as we transition to a multi-fuel future. The candidate pool for recycling will then be very high. Overall, we expect a great run for tankers over the next few years. Regional imbalances of oil should continue to increase the need for tankers as the growth in oil production is coming from the West and largely the growth in oil demand is driven by emerging markets in the East. At Seaways, we will continue to capture the strength of the tanker market today and tomorrow. With our balanced capital allocation approach, we continue to utilize all possible levers that builds upon our track record of returning to shareholders, maintaining a healthy balance sheet and growing the company. I'm now going to turn it over to our CFO, Jeff Pribor, to provide our financial review. Jeff?
Thanks, Lois, and good morning, everyone. Looking at Slide 8, on the upper left, net income for the second quarter was $98 million or $1.99 per diluted share. On the upper right, you can see adjusted EBITDA for the third quarter of 2023 was $151 million. In the appendix, we provided a reconciliation from reported to adjusted earnings. While our expense guidance for the third quarter mostly fell within the range of expectations, I'd just like to point out a few items of note within our income statement. Vessel expenses were a bit higher than expected with the largest variance due to some repairs and maintenance on 1 VLCC and some increased spend for crew training on the new dual fuel VLCC. G&A expenses were also higher due to increased costs for legal and regulatory matters.On the revenue side, our lightering business had another strong quarter, earning about $11 million in revenue with $2 million in vessel expenses, $3 million in charter hire and $1 million of G&A, the lightering business contributed about $5 million of EBITDA in the third quarter and has contributed $15 million in EBITDA year-to-date. Turning to our cash bridge on Slide 9. We began the quarter with total liquidity of $493 million, composed of $236 million in cash and $257 million in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we first had $151 million in adjusted EBITDA for the second quarter, less $54 million in debt service, composed of scheduled debt repayments and cash interest expense, less our drydock and capital expenditures of about $15 million in the quarter and a working capital benefit of about $22 million. This comprises our definition of free cash flow of about $104 million for the third quarter.The remaining bars moving to the right on the cash bridge show our capital allocation for the quarter. Incremental deleveraging reflects a net prepayment of $54 million in connection with executing our new revolving credit facility or RCF as I'll call it for short. $104 million was prepaid on our $750 Million Facility to transfer collateral vessels and $50 million which were drawn on [indiscernible] the RCF. With $160 million in overall capacity, we also added $110 million in undrawn RCF capacity as shown in the dotted line cash bridge. Also in the quarter, we paid $61 million in combined regular and supplemental dividends of $1.42 per share in September. These components then bystanding liquidity of over $581 million, as you see on the far right with $214 million in cash and short-term investments and $367 million in undrawn revolving capacity. Moving now to Slide 10. We have a strong financial position and as detailed by the balance sheet you see on the left-hand side of the slide. Here are some key items. Cash remained strong at $214 million. Vessels on the books at cost are approximately $2 billion relative to the current market values of over $3 billion. And with about $855 million of gross debt at September 30, you can see that we brought net loan to value below 20% to just about 19%, also illustrated in the bottom right-hand chart of the page. In the upper right-hand table, our proforma debt balances as of November 1 reflect our recent debt repayments of $71 million, comprised of $21 million of the $750 million facility and $50 million pay down on the RCF, which also increased our revolver capacity to $417. The new RCF, which we executed during the third quarter was oversubscribed even as we increased the size of the overall facility. Now because 85% of our debt portfolio is hedged or fixed. Our weighted average all-in interest rate using current bank borrowing rates of about 6%, which is effectively a margin of just 50 basis points above today's benchmark sulfur rigs. As we mentioned in our press release this morning, we expect to continue on this trajectory of a balanced capital allocation approach. We've already repaid $70 million of debt in this quarter. We've also announced our combined dividend of $1.25 per share, consisting with a regular dividend of $0.12 per share and a $1.13 supplement dividend, which represents approximately 60% of net income in Q3. These payments will be made in the fourth quarter as we continue to build our track record of executing our capital allocation strategy. As we already mentioned earlier, including this combined dividend, our total dividend yield calendar for 2023 would be approximately 16% based on average market cap year-to-date. The last slide that I'll cover, Slide 11, reflects our forward-looking guidance and booked to-date time charter equivalent, or TCE, aligned with our cash break even loans. Starting with TCE pictures for the fourth quarter of 2023, which I'll remind you, as I always do, that the actual TCE on our next earnings call may be different than what you're seeing here. But we have a blended average of about $34,000 a day so far this quarter with the details provided on the upper left. On the right side of the slide, you can see our cash break evens, which we've displayed for the next 12 months, reflective of the delivery of the last vessel and our current newbuilding program of the dual-fuel VLCCs and related payments on [indiscernible] as well as the new fixed revenues before any profit share on our increased long-term time charters. Overall, we've reduced our break evens by $3,700 per day. Let me just say that again, lowered them by $3,000 a day from the third quarter of last year. When you compare this break even to our fixtures to date -- compare this break even to our fixtures achieved to-date of the quarter, it certainly looks like International Seaways should generate substantial cash flows during the fourth quarter again. On the bottom left-hand chart for the modelers out there, we provided some updated guidance for expenses in the fourth quarter and our estimates for 2024. We also included in the appendix our quarterly expected off-hire and CapEx schedule for 2023 and '24. I don't intend to read each item line by line, but encourage you to use these for modelling for instance. That concludes my remarks. So I'd now like to turn the call back to Lois for her closing comments. Lois?
All right. Thanks so much, Jeff. On Slide 13, we provide you with Seaways' investment highlights, which I'll summarize briefly. International Seaways has built a consistent track record of returning to shareholders, maintaining a healthy balance sheet, all the while growing our company. Our total shareholder return over this time is approaching 300%, surpassing many peers. Over the last 12 months, through regular quarterly dividends, supplemental dividends and opportunistic share repurchases, we've returned $316 million in cash returns on earnings of $658 million, representing a nearly 17% yield. We've improved our balance sheet over the time, with 75 vessels in the crude and product tanker markets. We had $2 billion in assets on the books that are worth over $3 billion in the market today. We've prepaid $215 million in debt and unencumbered 30 ships. Our cash break even level is at $15,000 per day. We're strategically positioned for a sustained robust tanker market with a growing need for seaborne transportation created by regional imbalances. At Seaways, our highest focus is always upon key, reliable transportation in an industry that will only become more transparent with evolving environmental regulations. We remain focused on being a leader in ESG. I want to thank everyone for joining us. And with that, operator, we'd like to open up the lines for questions.
Thank you, Lois.[Operator Instructions]Our first question comes from the line of Ben Nolan of Stifel.
Great. So a really good quarter. I have just a couple of questions. First, just as I'm thinking about the fourth quarter, once again, things like the LR1s look really good. However, the VLCC rates look to-date a little bit lower than what I was thinking, and I appreciate that several of them have time charter contracts on them. But can you maybe just talk through sort of how the dynamics for the Vs in the fourth quarter thus far?
Well, I guess I'd say, Ben, that rates have definitely picked up, and the team at Tankers International is looking quite strong numbers for the remaining open days in the fourth quarter. So overall, we're pretty happy with what it looks like there on the Vs.
Okay. So just timing kind of a thing, I guess.
Ben, the other thing is to look at our guidance. Look at the percentage, it's actually a pretty low percentage of the fourth quarter. Every company is going to be a little different based on accounting and the particular voyages their experience, but there's a lot of core left based on what we reported at this point.
Sure. Yes. I appreciate that. And then I was going to ask, the MRs, in particular, did really well, which is maybe a little surprising to me given that the average is solidly in the teens at this point. I know you kind of continue to thin out that fleet a little bit ones and twos here. But it sounds like most of those assets are unencumbered - the older ones are unencumbered at this point. It seems like you're still doing really well with them. And I know there's always a preference to have a little bit newer assets. But I mean, given the strength of the market here, how do you think about where you think the average useful life within International Seaways of those assets are? I mean, do you think it's possible to sweat them out to 20 years or even longer? Or is that just not part of the DNA for you guys?
Actually, we totally do think that, that's part of our strategic plan there. And if you really look at the product part of our fleet and you think about what demand has been and how it has increased on the product at a higher ton-mile demand level than it has on the crude. And I think the crude will catch up, the products are just really earning. So we feel like the MRs are just a complete strength for us. And we certainly see that they are trading very competitively in the market. We've maintained them very well, and they have really strong potential.
Okay. And then last for me, and I know it's just something that you don't like to and probably can't talk to, but with respect to the strategic investor kind of issues that have been going on over the last, I don't know, 1.5 years or so... Just curious if there's any incremental dialogue or if things are relatively quiet on that front?
I guess what I would say is that we've been running and we'll continue to run the International Seaways for all of our shareholders, all of our stakeholders. We've been posting extremely strong performance and very systematically engaging with our shareholders, and we feel really good about bringing about returns that we've been able to deliver to all of our shareholders.
Right. Well, there's no question about that.
Our next question comes from the line of Sherif Elmaghrabi of BTIG.
So during the third quarter, you fixed the 2008-built MR then you sold another MR last month and I think Ben's question touched on this... But looking at the fleet, there's still a handful of similar vessels or more than a handful. So I'm curious what kind of time charter opportunities you're seeing for these 13 to 15-year-old MRs? And given where asset prices are, how do you balance that with the chance to recycle that capital elsewhere?
Well, I'll flip it to Derek, our Chief Commercial Officer in a second. And I'll just say that, again, I mean, we're really feeling the strength in the MR fleet that we are lucky enough to have at International Seaways and we've been executing time charters. We very carefully prune when we think it's opportunistic, and we have a very strong base to operate from. And then Derek, do you want to chime in with any additional comments there?
Sure. Thanks, Lois. Sherif, thanks for the question. I think you've kind of teed it up for us on the answer. We're going to continue our prudent asset allocation, especially in the MR sector. So because the rates have been so good on the MR side, we see increasing opportunities for charters. What we're looking for is multiyear charters for some of the shifts around the 2008-2009 vintage. And like you said for us, we've prudently sort of pruned the fleet in terms of selling them slowly. But to your question and to Ben's question, we want to keep the exposure in that MR side because the rates have been so good for us and for our shareholders.
All right. And then turning to the LNG newbuild, the LR1. Will those be able to run on LNG as soon as they hit the water? Or is there some additional CapEx required to get them running on LNG? And then more broadly, just in terms of bunkering, how extensive do you expect sports fueling -- LNG fueling capability to be by 2026, considering LR1s, for example, can call a more diverse set of ports than the VLCC?
So I guess I would start with... We have at Seaways already on the water, 3 fully dual fuel LNG vessels, VLCCs that are using LNG on a common basis and it is definitely for sure that they have a lower need for multiple bunkering ports and that is going very well for us. The 3 LR1s are certified for, classified for, dual fuel suitability to turn them to being fully capable for LNG, and we [ count to see ] that in our future. Bill, our Chief Technical Officer, Bill, why don't you jump in a little bit and just share a little bit more on that.
Sure, Lois. Thanks. Yes, those 4 LR1s will not be able to run an LNG from day 1 but will require our CapEx down the road. As we see the fuel markets, the regulatory standards, the customer expectations all evolve over the next 5-plus years or so.
Our next question comes from the line of Christopher Robertson of Deutsche Bank.
Lois and Jeff, just turning to the current demand landscape. We, of course, see the continued ton-mile demand expansion related to the dislocation of the Russian trade. But wondering if you could touch on anything else, maybe less known in the market that's impacting effective supply, including any congestion issues, bottlenecking... I guess in other words, are there any short-lived or temporary factors impacting rates currently that could unwind in the next few months?
Well, it's interesting. Short-term factors, I don't know how short-term, but we're definitely seeing an impact with the reduced draft at the Panama Canal, and that's a true bottleneck out there in the market. I do think that will persist for a few months here and it does impact the tanker trade because you're getting a lot of congestion there, and that does drive a little bit of a longer ton-mile situation. I would say that's something of a temporary factor. I mean, definitely in Q4 from everything that we see inventories are drying and this is a really strong demand signal, which we appreciate on the tanker side.
Yes, definitely. That makes sense. Turning to a little bit more esoteric question here on the balance sheet, Jeff, could you talk to us about the $75 million of short-term investments that sit there in terms of what those are, the duration, kind of how liquid are those investments and when they might be converted to cash?
It's just our cash management. What we've been doing is instead of just overnight money market funds, which are doing quite well, we laddered out some of the investments into time deposits with, typically, our facility banks, our relationship banks. And per gap, if you go out a little bit, it just doesn't get to be listed as cash. It comes out of the short-term investment, but it's [indiscernible] so our longest in 6 months. So it looks and [Audio Gap]cash, but it's listed as a short-term investment. So how should we see it as cash.
Definitely. Yes. Just wondering if, I guess, is that the continued strategy to kind of ladder those over time while the interest rates are attractive?
Well, sure. I mean I think you've heard what we've described as a balance of cash and revolver. We think that that's a good mix for security and [ planned ] optionality. But it's nice getting above 5% on market funds. And then when you extend out [indiscernible] lately moving at another 50 basis points or thereabouts. So we actually have a lot of our cash as earning more than a substantial part of the debt that we have is either fixed or swapped. So that's kind of a nice situation to be in. So we're sort of happy with the extra interest income we're making these days, and the treasury department is working hard on that, and we'll keep sweating those assets like we do the ships.
Yes, that makes sense. Last question for me, just turning back to the 4 LR1s. Can you talk a bit about the cadence related to the installment payments for those 4 vessels?
Yes, I'll take that just to start, Jeff. And what I would say is that the installment payments are attractively weighted to the backside of the vessel construction cycle and move towards the delivery. I don't know if you want to say anything more than that, Jeff?
Maybe we'll fine to make sure to have an [ FD-safe ] way to explain that, but it's very typical back-end loaded, where it's not too much upfront. I'd say we probably only have... The first 2 will recquire deposits maybe in the coming quarter. So for near-term modeling, I think I'd go with that. And then the rest will be back-end loaded and we'll expand on that as much as we can when we get to more information out of that. But pretty typical newbuild schedule, but on the back-end loaded variety.
[Operator Instructions]I would now like to open the line for Omar Nokta of Jefferies.
Lois and Jeff, I had a couple of questions, but then maybe just perhaps just a quick follow-up to the last one from Chris about the LR1s. I did notice, at least the way it reads on the balance sheet that perhaps there wasn't a deposit made on those 2 initial LR1s that were ordered last quarter. Is that right? Or were those sort of accounted for differently?
No, you're correct, Omar, a very clever pickup there. We have received the refund guarantees and those are fully embraced. And of course, that is the time at which you make your down payment so that would be made in the fourth quarter.
Okay. Got it. And then just sort of maybe talking about the capital returns, you've obviously generated a good amount of cash flow consistently now for the past several quarters. You've been paying out supplemental dividends. And Jeff, in your comments, you talked about how the ratio is basically 60% of quarterly earnings. That looks to be a bit higher than the, say, 40% to maybe 50% in the past few quarters. I know, obviously, it's a Board decision, but just in general, as we kind of think about future payouts, obviously subject to strong numbers coming from International Seaways, but in general, is 60% like a new threshold we should think about when we consider what the potential supplemental dividends will be like in strong upcoming quarters?
Please go ahead, Jeff.
Thanks, Lois. I would just review our history... To answer your question and review our history: Over the last 4 quarters, we really wanted to balance incrementally deleveraging versus the scheduled amortization on the one hand, to lower our costs and lower our break even, and give out a good dividend yield. And it typically is examined or analyzed or as you have by the way of payout ratio. But as low as -- and I pointed out in our remarks it's added up to $6.29 pro forma for the last dividend for the calendar year. So it's been a good yield. But also towards answering your question, with the debt paydowns that we described from the last quarter's new facility and the payments already in Q4 and kind of where we are with a lot of the really, what I call, high-quality debt that's at rates that are either fixed or swapped at lower than we're earning in interest on our cash. It makes sense that we're sort of able to pay a little more in terms of the payout ratio this quarter. And I think that that's kind of a situation or a healthy situation that will remain. We've got a good amortization, a good healthy amount of amortization still there scheduled in our debt. So it will be naturally reducing quite a bit during the course of 2024. So if the tanker market continues in the good place that it is, I think you should expect dividend payouts to continue like we are doing the math. I hope that's a response.
Yes, that's very good. I was actually surprised we're willing to actually answer the question. No, no, that was very good, very good and constructive. I mean, clearly, the balance sheet has been in a much stronger shape and it seems to continue to go in that direction. Maybe just one kind of final one just regarding the newbuilding, you have the 4 LR1s now. You have the niche trade in South America where those trade and are expected to trade. Do you have options for more? Is there potential more to add to that fleet beyond just the 4 newbuildings? Or is this it you think?
Well, Omar, I think what's really important for us was that we felt that with this really strong base of cargo and the relationships that we've built over the years and that we wanted to have for our foundational units. And then we consistently have had in-charters in different ways within the pool to optimize results, and we'll continue to do that.
Our final question comes from the line of Liam Burke of B. Riley.
Lois, Jeff, for the fourth quarter, your partial fixtures on the Suezmax on a daily rate basis of outdistancing your VLCCs. You mentioned earlier that the VLCCs have moved up off of those partial fixtures. But are you seeing the same move with the Suezmaxes? And are they continuing to outdistance the VLCC rates?
Yes. So what I would say is that you've seen the whole crude space pick up consistent with the last 18 months, the middle part of the space: the Panamaxes, the Aframaxes and the Suezmaxes that are kind of focused on delivering into Europe, shorter-haul crews have really been superstars and that continues. So we've seen the Suezmax pick up and that's still very strong and the whole crude space moved up after really the first cyclicality we saw this summer in a long time.
And Jeff, you highlighted the $3,000 per day per vessel declining up in cash cost per vessel. How much of that is operating savings and how much of that is financial-related in terms of lower principal payments, interest, et cetera?
It's mainly the latter. I think we gave guys that we're working hard to keep expenses in a good place, but the achievements in terms of lower breakevens are primarily from reducing interest cost and debt and also reducing the amortization on debt when you flow the principal. And then if it's due, the amortization goes down as well and the new revolving credit facility shifting more to that from term - it also does that. So it's primarily the balance sheet. But also the time chart as you can tell on the chart when we were talking about break even on vessels. So it's also benefited from the commercial department putting on incrementally more time charters. So it's those 2 factors.
As there are no additional questions waiting at this time, I'd like to turn the conference call back over to Lois Zabrocky for closing remarks.
Thank you, Candice. I just want to thank everyone for joining International Seaways and we're broadcasting here from Bahri, Dubai International Tanker Week, where we're seeing customers, and we really appreciate your interest in International Seaways, and wish everyone to stay well. Thank you very much.
Ladies and gentlemen, this concludes today's International Seaways Third Quarter 2020 Results Call. Have a great rest of your day. You may now disconnect your lines.