Diamond S Shipping Inc. (INSW) Earnings Call Transcript & Summary

Good morning, and welcome to the International Seaways Business Update Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to James Small, Chief Administrative Officer and General Counsel. Please go ahead.

Thank you. Good morning, everyone, and welcome to our conference call to discuss the announced merger between International Seaways and Diamond S Shipping. Before we begin, I would like to advise everyone that during this call, the participants may make forward-looking statements regarding the merger, either or both companies and the industry in which they operate. Those statements may address, without limitation, the following topics: the timing and likelihood of the completion of the proposed transaction or any anticipated synergies or other benefits therefrom; the accounting or tax treatments of the proposed transaction; customer reactions to the proposed transaction; any plans to issue dividends; the party's prospects, including statements regarding vessel acquisitions, trends in the tanker market and possibilities of strategic alliances and investments; expectations regarding revenues and expenses; and economic, political and regulatory developments around the world. Any such forward-looking statements are based on International Seaways' and Diamond S' current plans, estimates and projections and take into account various assumptions based on a number of factors, including management's experience and perception of historical trends, current conditions, expected and future developments and other factors believed to be appropriate to consider in the circumstances. Forward-looking statements are subject to risks, uncertainties and assumptions, many of which are beyond the control of International Seaways and Diamond S that could cause results to differ materially from those implied or expressed by those statements. Factors, risks and uncertainties that could cause differences from expectations include those described in each company's 2020 annual report on Form 10-K and in other filings that they 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 the President and Chief Executive Officer of International Seaways, Ms. Lois Zabrocky. Lois?

Thank you very much, James. Good morning, everyone. Thank you so much for joining us today. If you turn to Slide 4. We're so excited to discuss our merger with Diamond S, enabling us to consolidate the tanker sector and create an industry bellwether. I'm pleased to welcome Jeff Pribor, International Seaways' CFO; and Craig Stevenson, Jr., President and CEO of Diamond S, who are joining me on today's call. Through this transformational strategic combination, we're bringing together 2 leading companies, both with long-term customer relationships and deep cultures based on achieving the most stringent safety and operational standards. Importantly, we are also joining 2 U.S.-based tanker companies with strong and complementary positions in the crude and product tanker sectors. The combined company will have 100 vessels, including our 2 FSOs; our annual TCE revenue, greater than $800 million; and enterprise value close to $2 billion; and an equity market capitalization of approximately $1 billion. This highly accretive transaction doubles our NAV and is expected to generate over $23 million in annual cost synergies and over $9 million of revenue synergies. Turn to Slide 5. I'm going to review the key terms of our transaction today. Under the terms of the definitive merger agreement, which was unanimously approved by both companies' Boards of Directors, International Seaways will merge with Diamond S. Diamond S shareholders will receive 0.55375 shares in INSW in consideration for each share held for a total value of $416 million in stock consideration. Once completed, in INSW and Diamond S shareholders will own approximately 55.75% and 44.25% of the combined company, respectively. Concurrent with this transaction and immediately prior to closing, International Seaways shareholders will receive a special cash dividend of $31.5 million, representing $1.10 per share. Additionally, Diamond S affiliate management services agreement with Capital Ship Management will be transitioned out over time without any interruption for customers. And the majority of the vessels will be redelivered by the third and fourth quarters of 2021. I'm pleased to announce that Craig Stevenson, Jr., Diamond S' President and CEO, has agreed to assume the position of special adviser at the combined company, where he will work in concert with myself and management to effect a smooth integration. Our Board will be composed of 10 directors, 7 of whom will be appointed by INSW and 3 by Diamond S. The Diamond S banking group has provided their consent to amend their facilities to accommodate the transaction. In addition, shareholders representing approximately 14% and 29% of the issued and outstanding shares of International Seaways and Diamond S, respectively, have committed to vote in favor of the merger. The transaction is expected to close during the third quarter of 2021, subject to INSW and Diamond S shareholder approval and customary closing conditions. Moving to Slide 6. We detail the highlights of the transaction. By combining these 2 leading U.S.-listed diversified tanker owners, we expect to deliver a number of compelling strategic and financial benefits to the stakeholders of both companies. Looking at the first series of bullets. The combination of International Seaways and Diamond S creates a top-tier industry leader with a diverse fleet of 100 ships and a deadweight of over 11 million. We will become the third largest U.S.-listed tanker company by deadweight and the second largest by vessel count. Seaways has a long and successful history in the crude and product tanker sectors, and today's transaction furthers our industry leadership. Following our acquisition of Diamond S, 71% of our deadweight will be focused on crude and 29% on product. And we will have a presence across sectors. We are solidifying our power alley in the large crude segment, focused on Vs and Suezmaxes. And we are creating a power alley in the product, principally by combining the large MR fleet of Diamond S with our LR1/Panamax fleet. We are ideally positioned to take advantage of favorable long-term fundamentals. With our broad operating footprint and a strong financial profile, we are also poised to continue to execute a balanced and accretive capital allocation following the completion of the transaction. This will include taking advantage of attractive opportunities to grow and renew our fleet as we recently did with our Shell LNG-fueled VLCC project, while we continue to return capital to shareholders. Turning to the second series of bullets. We expect the combined company to benefit from significant synergies and operating efficiency, driving annual cost savings of over $23 million. We also expect to achieve over $9 million of revenue synergies. We will continue our focus on upholding our best-in-class environment, social and governance focus. We're proud to have been ranked as the #1 tanker company by Webber Research ESG rankings 3 years in a row and are committed to being at the forefront of sustainability in the maritime sector. We believe this will create compelling opportunities for both shareholders and customers. Looking at the last series of bullets. We are confident this transaction creates significant value for shareholders of both companies. Seaways will double our NAV in a cashless transaction that we expect to be immediately accretive to our earnings per share and cash flow. As mentioned earlier, we will also become a near $1 billion company by our market capitalization, and we believe this market cap expansion and enhanced trading liquidity should provide an opportunity for a rerating of our equity valuation as we firmly establish ourselves as a market leader. We will also maintain significant financial strength with net leverage of 42%, representing one of the lowest leverage ratios in the industry and a strong cash position. This balance sheet will provide us with significant financial flexibility to successfully operate through the tanker market cycles. Now I want to invite Craig to add his perspective on the transaction. Craig?

Thanks, Lois. Thanks, Jeff. It's a pleasure to be here. Clearly a transformative transaction. The 2 companies have very, very similar cultures. Diamond S is basically a little bit more focused on the product side of the business than on the crude side. The 2 companies coming together is sort of just about anything anyone would ever want in the tanker space and a very, very large company. And clearly, size is important. Trading liquidity is important. For those of you who know me and the other positions I've held in the industry, consolidation is something that needs to be front and center, and we've been working for some time now to continue to consolidate. Liquidity is probably as important of a value as anything for any stakeholder. And so I just wanted to tell all of the shareholders that we -- at Diamond S, we work very, very hard for all of the shareholders and are optimistic about the future. The timing of this transaction seems to be very attractive. Lois, I'd like to turn it back to you. Thank you.

Thank you very much, Craig. If we turn to Slide 7, we take a look at the strategic vision for the new International Seaways. We have solidified our position as a diversified tanker sector bellwether company, establishing our power alleys in large crude and product markets. With enhanced scale and capability, combined with a best-in-class ESG track record, we are ideally suited to meet the evolving needs of leading energy companies and benefit from favorable long-term fundamentals for both the crude and product tanker sectors. Complementing our sizable operating platform, we will maintain significant balance sheet strength, preserving our financial flexibility, enabling us to capitalize on attractive opportunities for shareholders. Since becoming an independent public company over 4 years ago, we've remained true to executing an accretive and balanced capital allocation strategy in order to maximize value for our shareholders. This has included returning capital as we repurchased nearly 5% of our outstanding shares last year. We also paid $0.24 per share in dividends in 2020. And as noted, we will be paying a special dividend of $31.5 million or $1.10 per share to current Seaway shareholders immediately prior to the closing of this transaction. Our $0.06 per share quarterly dividend remains in place. A key to our approach is our track record of taking advantage of attractive opportunities to grow and renew our fleet at favorable times in the tanker cycle. Consistent with our intense focus on preserving our financial strength and remaining discipline, Seaways will continue to be opportunistic to deliver accretive returns to equity. Our agreement to build 3 dual-fuel Vs on 7-year time charter agreements with Shell under favorable terms is the most recent example of our proven approach and collaboration with customers. It follows the acquisition of 9 modern Vs and Suezmaxes at attractive points in the cycle in '17 -- 2017 and 2018. With the strategic combination we are announcing today, we have enhanced our ability to unlock shareholder value. Based on this increased upside to the crude and product tanker markets and a larger market cap, we believe we have the potential to have our equity rerated and close the NAV gap. Moving to Slide 8. We talk in detail on our track record of investing over $600 million at the cyclical low points in the tanker market. This is consistent with our disciplined approach to capital allocation. As you can see on the chart, the 9 ships, including 6 Vs acquired in 2018 for $434 million and the 2 Suezmaxes and 1 VLCC acquired in 2017, have materially appreciated in value since their acquisition on an age-adjusted basis. These 9 ships contributed $111 million in operating income during 2020. In addition, our Shell project new building contracts have appreciated in value since the agreement was announced, further illustrating our ability to adeptly identify attractive fleet renewal opportunities. Moving to Slide 9. You really can see the scale and the reach of the combined platform. The crude and product tanker fleet will provide a leading presence in the VLCC, Suezmax and LR1 and MR markets. We will also have significant commercial reach and a global trading footprint driven by our long relationships with world-class energy customers and our involvement in industry-leading pools such as Tankers International, one of the largest pool operators of VLCCs in the world. INSW was a founding member of Tankers International pool over 20 years ago, and we have helped to expand the global presence, and we established a New York City office in 2020 within our own headquarters. The pools that we are a part of include Penfield, a commercial manager operating a Suezmax, Afra and Panamax pool; Concord Maritime, who operates a pool specializing in Aframaxes and LR2s; and Panamax International, a joint venture between Seaways, Ultranav and Flopec of Ecuador. That pool focuses on Panamax trading in North and South America and creates outsized returns in a niche market. I'm now going to turn the call over to Jeff, and he's going to provide additional financial details on today's transaction. Jeff?

Thank you, Lois. Turning now to Slide 10. I'd like to talk about our balance sheet. The combined company will have significant financial strength, highlighted by a cash position of $340 million, total liquidity of $433 million and a net leverage ratio of 42%. As Lois mentioned, we will continue to maintain one of the lowest leverage ratios in the tanker sector. In terms of our debt, it is expected to be approximately $1.2 billion combined at closing. The 2 companies' debt facilities shown at the top left of the slide reflect our highly competitive cost of capital and include an attractive quarterly amortization schedule with the vast majority of debt maturity dates no earlier than 2024. I'd also like to point out at this time that we continue to have very strong relationships with the leading group of diverse global banks. We very much appreciate the ongoing support of this group, which now includes 12 major shipping banks. Moving now to Slide 11. As Lois mentioned, the combined revenue in 2020, TCE revenue, would have been to be over $800 million, more than double of what our own TCE revenue. Adjusted EBITDA for the combined company would also nearly double to $424 million on a combined basis. Turning to Slide 12. We provide additional detail on the significant synergies we expect to realize. International Seaways and Diamond S complementary platforms create an opportunity for reduced overhead, the elimination of duplicative public company costs as well as the streamlining of ship management arrangements, among other expenses. We expect to fully achieve cost synergies in excess of $23 million within 2022 and believe the scale of our combined platform and streamlined commercial operations will also lead to revenue synergies of over $9 million annually. If you look on the right -- the chart on the right-hand side of the slide. We break out some of the specifics of these costs, including compensation, office and administrative costs, management fees and public company costs. That concludes my remarks, so I'd like to now turn the call back to Lois for market commentary and closing comments.

Thanks so much, Jeff. We're very positive on the long-term outlook for crude and product tankers. We anticipate in the second half of 2021 a recovery of oil demand as the world opens up and vaccinations are pervasive throughout the emerging markets. This is one of the major reasons we're so excited for our merger with Diamond S at this time. Turning to Slide 13. We provide an update on oil supply and demand. Based on the March forecast, the IEA estimates oil demand to increase by 5.5 million barrels per day, recovering about 60% of the volumes that were lost in 2020. Consistent with this uptick, the IEA expects a 5.4 million barrel per day increase in demand for 2021 and growth in 2022 amounting to an additional 3.5 million barrels per day. While demand is recovering and rising, global oil stocks are 62.8 million barrels per day below the May 2020 peak according to the IEA. We continue to believe that stock drawdowns are needed to set the stage for a fulsome tanker market recovery. The decision by OPEC+ not to lift production quotas puts pressure on inventory levels. Partly as a result, floating crude storage has already decreased to pre-pandemic levels. On Slide 14, given that we will be significantly increasing our presence in the MR sector, we believe an update on oil supply and demand specifically related to the positive implications for product tankers' global refinery throughput is trending upwards with an increase of 440,000 barrels per day in January. Although February saw a decline of almost 2 million barrels per day due to an extended period of cold weather in the United States, particularly in Texas, for the second quarter, the IEA expects refinery throughput to be up 8 million barrels per day on a year-on-year basis and up 4.3 million barrels a day for the full year of 2021. Aside from jet fuel, demand for refined products this year is expected to exceed 2019 demand. Similar to the developments we're seeing in the crude market, the refined product floating storage is also down to near pre-pandemic levels. It's also worth noting that less anticipated refinery maintenance this year as compared to the high levels we've seen in recent past is supportive of increased demand for product tankers. On Slide 15, we take a look at ship supply. We have mentioned this previously, and it continues to be the case. The overall tanker order book remains at historic lows. 31 VLCCs were ordered in 2019, 41 ordered in 2020 with 10 orders canceled recently. We believe uncertainty related to the markets, to decarbonization regulations and as well as higher steel input costs and increasing new building prices is tempering ordering. On the bottom half of the slide, we take a look at the potential for recycling. There are a number of candidates based on the aging global fleet. As you can see in the chart on the right-hand side, 1/4 of the existing VLCC fleet is now at least 15 years old and 8% is 20 years old or older. This represents the entire VLCC order book. Another 13 Vs will reach 20 years old in 2021. Once these vessels reach the age of 15, they're more expensive to operate. And as these ships reach the ballast water treatment deadlines, then owners must invest in capital upgrades. Based on these dynamics, the potential for recycling has been building. Only 4 Vs were recycled in both of 2019 and 2020. Recycling is less -- is likely to increase, particularly given the current low spot rate environment and increasing recycle prices. Before opening up the call for questions, on Slide 16, we go over our closing comments. Today's highly accretive strategic combination will enable Seaways to double our net asset value in a cashless transaction that will be accretive to earnings and cash flow per share immediately. The combined company will be an industry bellwether with significant scale, financial strength and commercial expertise. With over 100 -- with 100 ships and power alleys in large crude and product sectors, we are ideally positioned to capitalize on the attractive industry fundamentals we anticipate in the second half of the year and into 2022. Our larger operating footprint and strategic alignment unlocks substantial cost and commercial synergies to be realized through 2022. We have maintained significant balance sheet strength and financial flexibility. We're committed to further executing our balanced and accretive capital allocation strategy. This includes returning capital to shareholders. As we efficiently integrate the merger, our unwavering focus will be on drawing on our highly experienced management team and Board to continue to meet the evolving needs of leading energy companies and to create lasting value for customers and shareholders. And as always, our highest focus will continue to be on the safety of our ships and our seafarers. Thank you very much. Operator, we will now open the call for questions.

[Operator Instructions] The first question is from Omar Nokta from Clarksons Platou Securities.

Lois, Jeff, Craig, congratulations. Clearly an exciting opportunity here and gives both companies a critical mass across most of the tanker asset classes and really without changing the leverage profile, as you guys highlight, and not overextending yourselves. A couple of questions for you. The -- clearly, these next few months, you're going to be doing some preparations. And then afterwards, there's going to be some integration. And that's going to cover, I think, a lot of 2021. And as you head into next year, into '22, I think you touched on this in the presentation, but what are you guys thinking of in terms of strategic priorities as a combined company?

Well, clearly, Omar, our top strategic priority will be the successful integration. And one of the things that -- with that MR 50 fleet strong, Diamond S has a very strong base of MR experience, and that will complement our crude experience. So really, as you say, throughout 2021, the successful integration will be top of mind. And we believe that we're going into recovering part of the cycle. And we think that, that in particular is -- the timing of what we are creating here is particularly advantageous. Jeff, do you want to complement that?

No, no. I think you hit it perfectly well. Omar, I think that this positions us very well for what's going to be a good second half of this year, probably led by products, the products and crude, and we really like the way we're going to look going into 2022. So I think our priority will be to integrate and harvest.

Makes sense. Clearly, with Diamond S now, it gives you just a meaningful footprint in the Suezmaxes, in the MRs, really to complement the VL and Panamax exposure you currently have. The Diamond S fleet is -- it skews a little older. And I just wanted to ask, how are you guys thinking about that age difference? And clearly, it seems the benefits of just all of a sudden having a meaningful footprint in both those sectors is huge. But how do you think about managing the older vessel here in the coming few years?

Well, Omar, as you know, I mean, at Seaways, we have refleeted ourselves solely through secondhand purchases until last month when we signed our 7-year time charters to build dual-fuel VLCCs for Shell. And fitting these 2 fleets together, the Suezmaxes have an average age of 8 years. So what that does is really just solidifies our focus on the big ships. So we spent over $600 million on big ships, which to us means VLCCs and Suezmaxes. So this just really makes that a concrete platform that is fully realized. And then you turn to the MRs, and they do have an average age of 12 years. However, International Seaways, when we spun out from OSG, we had an average age of 12 years, which we have steadily worked down to 9. When we combine with Diamond S, we will still have an average age of 9.5 years. And one of the things that we've established a track record of over the last 4 years is just really working the markets and constantly assessing each ship and harvesting, as Jeff says, when those opportunities arise for us as recently in the third quarter when we sold $60 million worth of ships in the marketplace. So for us, it will be a combination of these ships have a long life ahead of them, and we think the product fundamentals will be there. The timing of this transaction means that these ships will go on our books at a low point in the cycle. And we think that there will be a high return on capital for shareholders.

Yes. I'd just underscore that, Omar, these MRs in particular at this age, they're over 10, but they have -- look at the next few years. They've got good, strong earnings potential left in them. And then as Lois said, they come on at a perfect time of the cycle to really get a really good return on assets for all of our shareholders.

Yes. That makes sense. And clearly, it's definitely well timed, it appears. And one final question. At Diamond S, Craig had put 28 or so of the MRs in the Northern pool -- or Norient. I'm not sure if this is earlier -- or it's a topic of discussion going forward. But how do you guys think about as the Capital Maritime vessels return back into the fleet? Do you expect to take those MRs and put them into Norient? Or do you plan to do something else?

So Omar, International Seaways participates in CPTA, our Clean Products pool in collaboration with Ultragas of Chile. And that's a platform that has around a dozen MRs, and they have posted quite strong competitive results in the last year. So we see that the move that Diamond S made to Norient has been very successful. We have our CPTA pool. And then we will, in collaboration with Craig, look at what is the optimal place to put these ships. And we're going to have over the next, say, 3 months in order to do that analysis. Craig, do you want to add anything to that?

Lois, I mean, I think you and Jeff have pretty well covered the bases. I mean obviously, we spend a lot of time in [indiscernible] and I think for our product carrier fleet, it was a perfect fit for us. And so they are incredible professionals, have some of the greatest performance of [indiscernible] without scrubbers. They have great performance. And so happy to work with Lois and her team to come to the best solution.

Thank you, Craig. Yes. So I think, Omar, as we look at it and going in the future, we will have selective sales. We will maintain scale, and we will optimize the time charter equivalents, sweat those assets every day.

The next question is from Magnus Fyhr from H.C. Wainwright.

Congratulations to a great transaction. I had kind of a follow-up question on Omar related to the commercial management. I mean I think the larger market cap, the scale and the strong balance sheet should definitely help close the valuation gap to the larger cap peer group now. But as I -- my question kind of relates to the commercial management. Both companies, I guess, for the Norient pool are outsourcing that function into pools. I guess the only thing left is the Suezmaxes on the Diamond S management. Any thoughts there of maybe bringing that commercial management of them in-house or continue with that? And what are the merits of having the ships in the pool versus maybe getting more market intelligence on these Suezmaxes and have them in-house?

So as you are aware, at International Seaways, we have been committed to pools for a number of years, and that is something that we do plan to continue. And I would say that because we align ourselves, for example, with Tankers International, where we own half of it, or Panamax International, where it's a joint venture, we stay very close to the pools and to the customers which facilitate. On the Suezmaxes, I do think that it has been a strength, and they are doing them internally at present. And it's just too early to say. What we will do, I can tell you, is that look strategically at how are the time charter equivalents, and we're going to make sure that we're optimizing the fleet. So we are wedded to making the highest time charter equivalent and not necessarily to the pool or having it be in-house but to earning the most money on each ship every day.

It seems like the Penfield pool will be a good alternative place for those Suezmaxes. I guess if you would keep these -- if you would keep the commercial management in-house under the Diamond S management, what -- these cost savings that you laid out, will that change anything? Or would that -- would the cost savings be as great if you keep those Suezmaxes under commercial management?

Yes. So the majority of our savings will come from reduced public company costs, the limitation of duplication of D&O insurance and Board costs and external audit. And there is an element in there of reduction where there is some overlap. However, the -- keeping of that in-house Suezmax function has really not moved that needle, and we would still expect to be able to realize the $23 million within 2022.

Yes. And just let me underscore, with 100 ships, Magnus, with 100 vessels, we need good people. We need the good people that are in both companies, and lots of them. So there's plenty of scope for synergy just like Lois said, from all the public company costs and other things that you don't need to of. But we do need good people to run 100 ships, and there's going to be 2 separate companies until closing. And then after that, there's going to be a lot of time and integration, a lot of study on the right way to do things. And so it's -- we'll have a lot of time to stop looking at this and make the best choices, as Lois was indicating on the questions you asked.

Right. I mean tripling the size of the fleet, I mean, it seems like you would have to maintain maybe some of those -- some of that overhead, just the increased size of the fleet. Congratulations, again.

The next question is from Ben Nolan from Stifel.

This is one I've been waiting for, for a long time. The -- I do have a couple of questions, and they relate a little bit more to the transaction really than maybe the strategy. So as I think through -- well, I think I know, but I'll let you explain it. Can you talk through a little bit sort of the rationale behind that $31.5 million dividend prior to closing? What sort of -- how should we think about that?

Well, I think, Ben, you start with the Seaways balance sheet. And we have been -- we concluded the year with $216 million of cash at International Seaways. So we are in a position where we can do more than one thing at a time. And we have committed to returning cash to shareholders. And now we're simply able to take action to make that actually happen. And that's just a -- Jeff always says we do more than one thing from a capital allocation perspective. And so in concert with this transformational deal, we're able to do that dividend and return cash to our shareholders.

Yes. I guess the real question is, why $1.10? Why now? How does -- how are you thinking about it with respect to the value proposition of the deal? And also in that, you laid out a $416 million equity value for Diamond S based on yesterday's closing price. Is that inclusive or exclusive of the dividend?

So I'll start with the beginning of that, Ben. So as you can imagine, in the fourth quarter, when we were working on such a transformational transaction, it was not an ideal time to -- you cannot buy back shares, right? And at the same time, we're really focusing on making sure that as we go through the cycle, we're in a very strong balance sheet position, which is really what has allowed us to do some of these recent strategic transactions. And we feel like, at this point, we've ordered the Shell VLCCs. We've now signed the merger agreement with Diamond S. And this is a position where now we have clear focus on our horizon, and it's an opportune time to do return cash to shareholders. And then, Jeff, I'll let you take the second part of that, if you're willing.

Well, yes. Because I think for the benefit of the transcript in particular, you may have said $460 million, whereas the lowest as the press release said she meant -- she did echo that the price in terms of yesterday's share price time shares issued, which would be about roughly over 22.5 million shares, like 22.7 million on the exchange ratio, I mentioned, would be $416 million, 4-1-6.

Well, thank you, Jeff. I didn't realize that, that wasn't -- I must not have been clear, but thank you.

I think you were, but it may not have come through, I think Ben was asking for a clarification on that. So that is one way to look at it, Ben. And it's right there front and center, a moderate premium on that basis. And then as you well know, the other way to look at it is what is the NAV, which is for you and everybody else that does those kind of calculations per Seaway share multiplied by the same 22.7 million shares issued and compare that to your estimate of Diamond S' NAV per share. And I think you do that and you see that it's really a win-win transaction in terms of being a moderate premium on share price basis and a deal that's right around the NAVs of the 2 companies, which is fair, in our view. So I hope that answers your question.

Yes. And really what I was getting to is the dividend trues that equation up. Is that how to think about it?

Well, I mean, the dividend has been taken into account in the disclosed ownership split and the exchange ratio, Ben. And I think that was part of your question. And I think you're looking at it very holistically, and it's a fair way to think about it.

Okay. So that -- yes. I think I've got what I want there. My next question is for Craig. I'm curious if you guys had run a process in terms of -- or how this may be culminated in terms of getting to where we are.

Well, we've been working on the transaction for an incredibly long period of time. And so you just don't -- you don't put a 3-way deal together sort of overnight. And so we spent a lot of time on it, but it's well -- it's actually over a year. And so there was no process. We just thought the 2 cultures made a lot of sense together. We're a little bit more focused on the product side of the business, and they're a little bit more focused on the crude side of the business. But the 2 companies coming together made a tremendous amount of sense. And so -- and that's where we are today.

Okay. That's helpful. And then lastly for me, it's a small number certainly relative to the cost synergies. You did call out revenue synergies. Can you maybe talk through a little bit how you think about where those revenue synergies are created?

Yes. So absolutely, Ben. I mean we mentioned a couple of the tools where we feel that the Diamond S vessels are performing strongly in Norient. We mentioned our CPTA pool. And as we streamline and move the vessels and really focus on that, we think that, that is a very conservative revenue synergy that can be accomplished in 2022.

And Ben, I would just add from, I don't know, a bean counter's perspective, it's about optimization. I think when you have 100 vessels, we believe that will -- in addition to some of the costs which we outlined, we think on the revenue side, we'll be able to optimally deploy these vessels in a way that's just smart with more market information. And to get what's 1% -- you said it's kind of a small number, 1% of last year's revenue. We think that's a very reasonable aspiration in terms of revenue enhancement.

Right. Okay. Sounds good. Well, so on those '22 synergies, the one part of it, the external management fees, do you expect all of those to be cycled out...

That is correct.

The next question is from Liam Burke from B. Riley FBR.

Jeff, as a bean counter, are you looking at your revised or pro forma balance sheet on the debt side? Is there anything that you see or need to do differently than what you've been doing as International Seaways as a stand-alone has been progressing?

No, but it's a great opportunity to highlight a benefit to this transaction that is kind of on one of the slides, but I'm not sure we've emphasized it enough. The overlap in banks between these 2 companies is tremendous. We both just entered into new facilities about a year ago with a group of banks where it has a heavy overlap. Plus we have our tremendous relationship with our -- what we call the Sinosure banks that helped us acquire those 6 VLCCs that Lois mentioned. But when you look across the 2 companies combined -- and we've indicated that the banks for Diamond S have supported this transaction, provided the consensus needed, put ourselves in a position to just have sort of a harmonized set of bank facilities that are low cost, as you can see. So we're really happy with that. Maturities, both having just entered a bank deal -- a major bank deal last year, we're looking at 2024. So no near-term maturities other than a really healthy profile on amortization, which I like, to answer part of your question. I like having decent amount of amortization so that's keeping pace and keeping that leverage moving down naturally. So I really like our capital structure afterwards. And shout out to all the people, starting with Craig and Kevin at Diamond S who have worked collaboratively to put that in place for this announcement.

Yes. We really want to thank them, yes, Jeff?

Absolutely. It was a team effort with the management teams and the financial and overall side and the banks. We're really, really grateful.

Great. And Lois, you've always been opportunistic on light -- or selling assets when somebody would hit the bid. If you're looking at the age of the fleet, especially on the MR side, is there anything that you see as a priority to lighten up on now? Or are you just going to continue to use that same process of waiting for the market to come to you?

I mean it goes to why we think this is astute timing in the cycle and really looking at the fleet. Our real focus will be on getting these ships integrated. And we will be using the same process we have all along that's been pretty successful. So every day, you're optimizing your fleet and then you're constantly looking at is it -- which signal do you have, is it a keep or is it a sale, and in the meantime, earn all the cash you can.

The next question is from Amit Mehrotra from Deutsche Bank.

Congrats on the deal. I just had a few kind of quick-hit questions. Jeff, when you say 42% net leverage, I'm assuming that's the mark-to-market to the asset value, not a book number. Is that correct? Does that include the dividend payment? Is that pro forma for the dividend payment?

I believe so. And it is meant to be a market value. The net debt to capitalization would be a different number. It's lower on our side. But we're focused on the numbers we've disclosed. It's year-end balance sheet numbers because that's all the numbers that are public and relatively recent outside estimates of value. So...

Okay. Yes. That makes sense. And then just another quick one for me. Was this basically a NAV-to-NAV deal? I'm just trying to get a -- I could probably back into it with some assumptions, but is the implied value of the International Seaways shares or the Diamond S shares basically at higher value implied in the deal versus what the public equity markets are trading at? Or are the discounts to NAV between both companies kind of at parity where it doesn't really matter? Because we've just seen deals, ship for share deals recently, more in the dry bulk space, where the implied valuation stats have been higher than where the public market is. And I wasn't sure if that was the same hue in terms of this deal.

Go for it, Jeff.

Lois, should I take a crack at it?

Yes.

Amit, I would say there were a number of metrics we use to come to what we firmly believe, and as Craig said, too, as well as Lois, is that's a very good deal for both sets of shareholders. So it's accretion, which was -- synergies help. But you're right, it is -- if you look at the NAVs, and I don't -- we may not have one on us. I don't know if you keep one, but if you look around, I think, a way to look at the deal is 2 ways, right? You can say, as we have, what's the number of shares we're issuing, it's like 22.7 million if you look at fully diluted share count times the number at the exchange ratio. You're getting $416 million, as Lois said. So that's a moderate premium. So that's good for Diamond S shareholders. But if you take the same number of shares times our intrinsic net asset value and compare it to Diamond S' intrinsic net asset value, that's up to every analyst or investor to do, but I think you'd find that it's really close to your point, right? So you have a situation where you're close either way you look at it. And then I think it's like Lois and I were saying earlier, it is like the unicorn, right? It's hard to find. But this is one of those times where you have -- the cultures are good, as Craig said, and the fleet is good, and then the finances come together around the metrics you're asking about. So we really think it works all around.

Yes. Makes sense. I apologize for these quick-hit questions, but I think they're important in terms of -- the last one I had was really related to the pro forma all-in cash breakeven levels. Obviously, they were pretty low given your low debt profile going in. But I assume it doesn't change that much. Maybe it goes up a little bit, if I'm correct, or no? But if you can just give us what the all-in pro forma cash breakeven levels are for the new entity.

I don't have the exact number because we thought it would just be a little too tricky to figure out everything and cover the number that wasn't misleading. But I think what you should do, that is look at our last filing on this, right, and look at Diamond S'. They give cash breakevens as well. And then you say yourself, all right, I'm going to -- and then I'm going to take $23 million a year and divide that by 100 ships. And what does that mean per day basis? And you get an idea that it's taking 2 companies that have -- despite all the -- having great safety records and really doing things right, not skimping, we still have low breakevens, and you're going to realize synergies and certainly bring down the G&A today that both companies would have shown in their public filings. So I think you can kind of get to that.

Okay. That's helpful. I think it's obviously a very compelling deal for you guys. I think it's also really good for the industry in terms of scaling up some of the players. So appreciate the time.

There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Lois Zabrocky for any closing remarks.

Yes. I really -- I want to thank everybody that's gotten us to this point and our ability to announce this transaction today. In particular, Craig, thank you for joining us. Thank you for all of the collaboration that we have enjoyed to date and we will in the future. And really to all of our team, the shareholders can rest assured that we will be completely laser-focused on making sure that the diligence and the integration will be a key focus for all of us at International Seaways and at Diamond S. And I'd like to welcome Diamond S and their superior experience and their culture to coming together with International Seaways. So we really look forward to this transaction and getting over the finish line.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.