International Seaways, Inc. (INSW) FY 2023 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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INTRODUCTION

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This MD&A, which should be read in conjunction with our accompanying consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data,” provides a discussion and analysis of our business, current developments, financial condition, cash flows and results of operations. It is organized as follows:

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A detailed discussion of the 2022 to 2021 year-over-year changes is not included herein and can be found in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 filed on February 28, 2023.

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GENERAL

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We are a provider of ocean transportation services for crude oil and refined petroleum products. We operate our vessels in the International Flag market. Our business includes two reportable segments: Crude Tankers and Product Carriers. For the years ended December 31, 2023 and 2022 we derived 51% and 62%, respectively, of our TCE revenues from our Product Carriers segment. Revenues from our Crude Tankers segment constituted the balance of our TCE revenues during these periods.

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As of December 31, 2023, the Company’s operating fleet consisted of 73 wholly-owned or lease financed and time chartered-in vessels aggregating 8.8 million deadweight tons (“dwt”). In addition to our operating fleet of 73 vessels, four LR1 newbuilds are scheduled for delivery to the Company between the second half of 2025 and first quarter of 2026, bringing the total operating and newbuild fleet to 77 vessels. Our fleet includes VLCC, Suezmax and Aframax crude tankers and LR2, LR1 and MR product carriers.

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The Company’s revenues are highly sensitive to patterns of supply and demand for vessels of the size and design configurations owned and operated by the Company and the trades in which those vessels operate. Rates for the transportation of crude oil and refined petroleum products from which the Company earns a substantial majority of its revenues are determined by market forces such as the supply and demand for oil, the distance that cargoes must be transported, and the number of vessels expected to be available at the time such cargoes need to be transported. The demand for oil shipments is significantly affected by the state of the global economy, levels of U.S. domestic and international production and OPEC exports. The number of vessels is affected by newbuilding deliveries and by the removal of existing vessels from service, principally through storage, recycling or conversions. The Company’s revenues are also affected by its vessel employment strategy, which seeks to achieve the optimal mix of spot (voyage charter) and long-term (time or bareboat charter) charters. Because shipping revenues and voyage expenses are significantly affected by the mix

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between voyage charters and time charters, the Company measures the performance of its fleet of vessels based on TCE revenues. Management makes economic decisions based on anticipated TCE rates and evaluates financial performance based on TCE rates achieved. In order to take advantage of market conditions and optimize economic performance, management employs all of the Company’s LR1 product carriers, which currently participate in the Panamax International pool, in the transportation of crude oil cargoes.

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Our revenues are derived predominantly from spot market voyage charters and our vessels are predominantly employed in the spot market via market-leading commercial pools. We derived approximately 91% and 96% of our total TCE revenues in the spot market for the years ended December 31, 2023 and 2022, respectively. The future minimum revenues, before reduction for brokerage commissions, expected to be received on non-cancelable time charters for three VLCCs, two Suezmaxes, one Aframax, and six MRs as of December 31, 2023 are as follows:

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Russian-Ukraine Conflict

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The ongoing military conflict in Ukraine has had a significant direct and indirect impact on the trade of crude oil and refined petroleum products. This conflict has resulted in the United States, United Kingdom, and the European Union, among other countries, implementing sanctions and executive orders against citizens, entities, and activities connected to Russia. Some of these sanctions and executive orders target the Russian oil sector, including a prohibition on the import of oil from Russia to the United States or the

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United Kingdom, and the European Union's ban on Russian crude oil and petroleum products which took effect in December 2022 and February 2023, respectively.

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Russia’s invasion of Ukraine also led to a disruption in supply chains for crude oil and refined petroleum products, changing volumes and trade routes, thus increasing ton-mile demand for the seaborne transportation of both crude oil and refined petroleum products, which resulted in a prolonged spike in freight rates. Self-sanctioning by Western oil majors and many ship owners resulted in disrupted product flows, primarily diesel, from Russia to Europe, while high arbitrage spreads incentivized Middle Eastern and U.S. diesel flows to Europe, increasing ton-mile demand for vessels.

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The U.S., EU nations and other countries could impose wider sanctions and take other actions. Further sanctions imposed or actions taken by the U.S., EU nations or other countries, and retaliatory measures by Russia in response, could lead to increased volatility in global oil demand, which could have a material impact on our business, results of operations and financial condition. In addition, it is possible that third parties with which we do business may be impacted by events in Russia and Ukraine, which could adversely affect us. See Item 1A, Risk Factors – Terrorist attacks and international hostilities and instability can affect the tanker industry, which could adversely affect INSW’s business.

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Red Sea Attacks

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The ongoing military conflict between Israel and Hamas has had a direct and indirect impact on the trade of crude oil and refined petroleum products. Heightened security risks because of attacks on merchant vessels transiting through the Red Sea to or from the Suez Canal has led to an increase in ton-mile demand for vessels as more vessel owners are opting to re-route their vessels around the Cape of Good Hope. See Item 1A, Risk Factors – Terrorist attacks and international hostilities and instability can affect the tanker industry, which could adversely affect INSW’s business.

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OPERATIONS AND OIL TANKER MARKETS

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The International Energy Agency (“IEA”) estimates global oil consumption for the fourth quarter of 2023 at 102.0 million barrels per day (“b/d”), up 1.8% from the same quarter in 2022. The estimate for global oil consumption for 2024 is 103.0 million b/d, an increase of 1.3% over the 2023 estimate of 101.7 million b/d. OECD demand in 2024 is estimated to decrease by 0.2% to 45.6 million b/d, while non-OECD demand is estimated to increase by 2.5% to 57.4 million b/d.

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Global oil production in the fourth quarter of 2023 was 102.2 million b/d, the same level as the fourth quarter of 2022. OPEC crude oil production averaged 26.7 million b/d in the fourth quarter of 2023, a decrease of 0.3 million b/d from the third quarter of 2023, and a decrease of 2.4 million b/d from the fourth quarter of 2022. Non-OPEC production increased by 2.3 million b/d to 70.0 million b/d in the fourth quarter of 2023 compared with the fourth quarter of 2022. Oil production in the U.S. in the fourth quarter of 2023 increased by 2.5% to 13.3 million b/d compared to the third quarter of 2023 and by 7.0% from the fourth quarter of 2022.

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U.S. refinery throughput decreased by 1.3 million b/d to 15.8 million b/d in the fourth quarter of 2023 compared with the third quarter of 2023. U.S. crude oil imports in the fourth quarter of 2023 decreased by 0.1 million b/d to 6.1 million b/d compared with the fourth quarter of 2022, with imports from OPEC countries remaining flat and imports from non-OPEC countries decreasing by 0.1 million b/d.

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China’s crude oil imports in 2023 set a new record of 11.3 million b/d; the previous record year was 2020 with 10.8 million b/d. Crude imports in December averaged 11.4 million b/d, up from November’s imports of 10.3 million b/d.

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Total commercial inventories ended the fourth quarter of 2023 essentially flat compared with the fourth quarter of 2022; however stocks during the fourth quarter of 2023 declined by approximately 64.0 million barrels from the end of the prior quarter while stocks during the fourth quarter of 2022 increased by approximately 21.0 million barrels.

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During the fourth quarter of 2023, the tanker fleet of vessels over 10,000 dwt increased, net of vessels recycled, by 1.2 million dwt as the crude fleet increased by 0.8million dwt, with VLCCs and Aframaxes growing by 0.6 million dwt and 0.4 million dwt, respectively, and Suezmaxes decreasing by 0.2 million dwt. The product carrier fleet increased by 0.4 million dwt, with MRs growing 0.4 million dwt. Year-over-year, the size of the tanker fleet increased by 13.1 million dwt with the VLCCs, Suezmaxes, Aframaxes, and MRs

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increasing by 6.1 million dwt, 0.9 million dwt, 4.0 million dwt, and 2.2 million dwt, respectively. The LR1/Panamax fleet remained unchanged.

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The tanker orderbook remains at historic lows across all tanker sectors and the average age of the global fleet is approximately 13 years. During the fourth quarter of 2023, the tanker orderbook increased by 3.4 million dwt overall compared with the third quarter of 2023. The crude tanker orderbook increased by 2.6 million dwt. The VLCC orderbook remained flat, while the Suezmax and Aframax orderbooks increased by 1.4 million dwt and 1.2 million dwt respectively. The product carrier orderbook increased by 0.8 million dwt, with increases in the LR1 and MR sectors of 0.6 million dwt and 0.2 million dwt respectively. Year-over-year, the total tanker orderbook increased by 17.8 million dwt, with VLCC decreasing by 1.1 million dwt and increases in Suezmaxes, Aframaxes, Panamaxes and LR1s of 7.2 million dwt, 5.7 million dwt, 2.2 million dwt and 3.7 million dwt, respectively.

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Crude tanker rates recovered during the fourth quarter of 2023 from the relatively lower rates in the third quarter of 2023, remaining significantly over 10-year average rates and cash breakeven levels, reflecting the continuing impact of the disruptions in trade flows on tanker demand. Clean product tanker rates remained strong during the quarter. The strength in rates across the board continued into the first quarter of 2024.

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RESULTS FROM VESSEL OPERATIONS

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During 2023, income from vessel operations increased by $172.8 million to $615.4 million from $442.7 million in 2022. Such increase resulted principally from a year-over-year increase in TCE revenues and larger gains on the sale of vessels recognized in the current year, partially offset by increased depreciation and amortization, vessel expenses, and charter hire expenses in the current year.

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The increase in TCE revenues in 2023 of $201.8 million, or 24%, to $1,055.5 million from $853.7 million in 2022 primarily reflects (i) a net aggregate $191.9 million rates-based increase resulting from higher average daily rates earned across all of INSW’s fleet sectors, with the exception of the MRs, and (ii) a $10.5 million increase attributable to the Company’s Lightering business.

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The following tables provide a quarterly trend analysis of spot TCE rates earned between the fourth quarter of 2022 and 2023 by our Crude Tankers and Product Carriers fleet. See the “Operations and Oil Tanker Markets” discussion above for a description of the market factors that impacted the quarterly trend of spot rates during 2023.

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See Note 5, “Business and Segment Reporting,” to the Company’s consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data,” for additional information on the Company’s segments, including equity in income of affiliated companies and reconciliations of (i) time charter equivalent revenues to shipping revenues and (ii) adjusted income/(loss) from vessel operations for the segments to income/(loss) before income taxes, as reported in the consolidated statements of operations.

Crude Tankers

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The following table provides a breakdown of TCE rates achieved for the years ended December 31, 2023 and 2022 between spot and fixed earnings and the related revenue days. The information is based, in part, on information provided by the commercial pools in which the segment’s vessels participate and excludes commercial pool fees/commissions averaging approximately $973 and $787 per

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day in 2023 and 2022, respectively, as well as activity in the Crude Tankers Lightering business and revenue and revenue days for which recoveries were recorded by the Company under its loss of hire insurance policies.

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During 2023, TCE revenues for the Crude Tankers segment increased by $190.4 million, or 59%, to $512.2 million from $321.9 million in 2022. Such increase principally resulted from (i) an aggregate rates-based increase in the Suezmax, VLCC and Aframax fleets of $146.1 million due to significantly higher average daily blended rates in these sectors, (ii) a $21.5 million days-based increase in the VLCC fleet, which primarily reflected the delivery of three dual-fuel LNG VLCC newbuilds between March 2023 and May 2023, (iii) an aggregate $14.6 million days-based increase in the Suezmax and Aframax fleets, which reflected 462 fewer primarily drydock related off-hire days in 2023 and (iv) a $10.5 million increase in the Crude Tankers Lightering business. These increases were partially offset by (v) a $2.2 million days-based decrease in the Panamax fleet due to the Company’s recycling of its two remaining Panamaxes in April 2022.

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Vessel expenses increased by $16.9 million to $115.7 million in 2023 from $98.8 million in 2022. Such increase was principally driven by the VLCC newbuild deliveries described above, along with increased costs of spares, stores and lubricating oils. Charter hire expenses decreased by $3.5 million to $11.9 million in 2023 from $15.4 million in 2022. Approximately $5.8 million of the decrease reflects the impact of the exercise of purchase options under bareboat charters for two of the Company’s Aframaxes in 2023, partially offset by a $2.3 million increase in charter hire expense in the Crude Tankers Lightering business. Depreciation and amortization increased by $14.3 million to $76.9 million in 2023 from $62.6 million in 2022 principally as a result of (i) $7.6 million relating to the commencement of depreciation on the Company’s three dual-fuel LNG VLCC newbuilds, (ii) the impact of drydockings and ballast water treatment system and scrubber installations during 2022 and 2023, and (iii) $2.7 million of incremental depreciation relating to the two previously bareboat chartered-in Aframaxes purchased by the Company as noted above.

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Excluding depreciation and amortization and general and administrative expenses, operating income for the Crude Tankers Lightering business was $23.3 million for 2023 compared to $16.7 million for 2022. Although lightering activity levels decreased year-over-year, with 438 service support only lighterings and two full-service lighterings being performed during 2023 compared to the 472 service support only lighterings and one full-service lightering that were performed during 2022, operating income increased year-over-year due to the higher average rates earned per lightering operation in 2023 compared with the average rates earned in 2022.

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Product Carriers

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The following table provides a breakdown of TCE rates achieved for the years ended December 31, 2023 and 2022 between spot and fixed earnings and the related revenue days. The information is based, in part, on information provided by the commercial pools in which the segment’s vessels participate and excludes commercial pool fees/commissions averaging approximately $797 and $665 per day in 2023 and 2022, respectively, as well as revenue and revenue days for which recoveries were recorded by the Company under its loss of hire insurance policies.

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During 2023, TCE revenues for the Product Carriers segment increased by $11.4 million, or 2%, to $543.3 million from $531.9 million in 2022. The increase in TCE revenues was primarily as a result of (i) a $64.2 million aggregate rates-based increase in the LR1 and LR2 sectors due to substantial year-over-year increases in average daily blended rates earned in the current year. Offsetting such increase to a large extent were (ii) a $29.4 million aggregate days-based decrease in the MR and Handysize sectors, principally

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due to the sales of five MRs between May 2022 and December 2023, and the final four remaining Handysize vessels in the Company’s fleet during the second quarter of 2022, (iii) an $18.4 million rates-based decline in the MR sector due to lower daily rates earned in the current year, and (iv) a $5.2 million days-based decrease in the LR1 fleet sector which reflects a 121-day net decrease in time chartered-in days and 73 more off-hire days in the current year, partially offset by the purchase of a 2011-built LR1 in February 2022.

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Vessel expenses during 2023 increased by $2.0 million to $143.8 million from $141.8 million in 2022. The increase reflects an increase in costs for spares and stores, partially offset by the MR and Handysize sales referenced above. Charter hire expenses increased by $10.8 million to $27.5 million in 2023 from $16.8 million in 2022 primarily as a result of (i) increased daily rates for two time chartered-in LR1s upon the Company’s extension of such time charters in October 2022 and May 2023, respectively, and (ii) the Company time chartering-in an additional LR1 in July 2023 at a current market rate to replace LR1s that were redelivered to their owners upon expiry of their time charters. The impact of the increase in rates was partially offset by the year-over-year decrease in time chartered-in days referenced above. Depreciation and amortization increased by $4.5 million to $52.2 million in the current year from $47.7 million in the prior year. Such increase resulted from increased drydock amortization, and the purchase of the LR1 described above, partially offset by the MR and Handysize sales described above.

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General and Administrative Expenses

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During 2023, general and administrative expenses increased by $1.1 million to $47.5 million from $46.4 million in 2022. The primary driver for the increase was increased compensation and benefits costs of $2.9 million, of which $1.8 million relates to non-cash stock compensation. Partially offsetting such increase was a $2.2 million decrease in costs relating to shareholder activism-related matters in the current year.

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Equity in Income of Affiliated Companies

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The Company sold its interest in the FSO joint ventures on June 7, 2022. During 2022, equity in income of affiliated companies was $0.7 million, which reflected the Company’s recognition of a loss on the sale of $9.5 million.

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Other Income/(Expense)

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Other income was $10.7 million for the year ended December 31, 2023 compared with $2.3 million for the year ended December 31, 2022. The current period other income includes $13.9 million of interest income resulting from a significant increase in the average balance of invested cash and the interest rates earned on such investments during 2023 compared to interest income of only $3.7 million earned during 2022. Such interest income in 2023 was partially offset by a $1.3 million loss on extinguishment of debt and a $2.7 million write-off of unamortized deferred financing costs. Similar unamortized deferred financing costs write-offs during 2022 amounted to $1.3 million. See Note 10, “Debt,” to the accompanying consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data,” for further information. The 2023 and 2022 periods also reflect net actuarial gains and currency gains or losses associated with the Company’s retirement benefit obligation in the United Kingdom.

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Interest Expense

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The components of interest expense are as follows:

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Interest expense increased in 2023 compared to 2022 as a result of (i) higher average floating interest rates during 2023, (ii) the impact of two lease financings entered into during the second quarter of 2022, and (iii) the post-delivery interest expense related to BoComm Lease Financing. See Note 10, “Debt,” to the accompanying consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data,” for further information on the Company’s debt facilities.

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Income Tax Provision

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We qualified for an exemption pursuant to Section 883, or the “Section 883 exemption,” of the U.S. Internal Revenue Code of 1986, as amended, or the “Code,” for the tax year ended December 31, 2023. We will qualify for the Section 883 exemption for 2024 and forward if, among other things, (i) our common shares are treated as primarily and regularly traded on an established securities market in the United States or another qualified country (“publicly traded test”), or (ii) we satisfy one of two other ownership tests. Under applicable U.S. Treasury Regulations, the publicly traded test will not be satisfied in any taxable year in which persons who directly, indirectly or constructively own five percent or more of our common shares (sometimes referred to as “5% shareholders”) own 50% or more of the vote and value of our common shares for more than half the days in such year, unless an exception applies. We can provide no assurance that ownership of our common shares by 5% shareholders will allow us to qualify for the Section 883 exemption in future taxable years. If we do not qualify for the Section 883 exemption, our gross shipping income derived from U.S. sources, i.e., 50% of our gross shipping income attributable to transportation beginning or ending in the United States (but not both beginning and ending in the United States), generally would be subject to a U.S. federal income tax of four percent without allowance for deductions.

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The Company reviews its freight tax obligations on a regular basis and may update its assessment of its tax positions based on available information at that time. Such information may include additional legal advice as to the applicability of freight taxes in relevant jurisdictions. Freight tax regulations are subject to change and interpretation; therefore, the amounts recorded by the Company may change accordingly. During 2023 and 2022, the Company increased its reserve for uncertain tax liabilities for various jurisdictions by $3.6 million and $0.2 million, respectively.

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See Note 12, “Taxes,” to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data,” for further details on the income tax provision line.

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EBITDA and Adjusted EBITDA

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EBITDA represents net income/(loss) before interest expense, income taxes and depreciation and amortization expense. Adjusted EBITDA consists of EBITDA adjusted for the impact of certain items that we do not consider indicative of our ongoing operating performance. EBITDA and Adjusted EBITDA are presented to provide investors with meaningful additional information that management uses to monitor ongoing operating results and evaluate trends over comparative periods. EBITDA and Adjusted EBITDA do not represent, and should not be considered a substitute for, net income or cash flows from operations determined in accordance with GAAP. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results reported under GAAP. Some of the limitations are:

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While EBITDA and Adjusted EBITDA are frequently used by companies as a measure of operating results and performance, neither of those items as prepared by the Company is necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation.

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The following table reconciles net income/(loss), as reflected in the consolidated statements of operations set forth in Item 8, “Financial Statements and Supplementary Data,” to EBITDA and Adjusted EBITDA:

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LIQUIDITY AND SOURCES OF CAPITAL

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Our business is capital intensive. Our ability to successfully implement our strategy is dependent on the continued availability of capital on attractive terms. In addition, our ability to successfully operate our business to meet near-term and long-term debt repayment obligations is dependent on maintaining sufficient liquidity.

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Liquidity

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As of December 31, 2023, we had total liquidity on a consolidated basis of $601.2 million comprised of $126.8 million of cash, $60.0 million of short-term investments and $414.4 million of undrawn revolver capacity.

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Working capital at December 31, 2023 and 2022 was $269.5 million and $385.2 million, respectively. Current assets are highly liquid, consisting principally of cash, interest-bearing deposits, short-term investments consisting of time deposits with original maturities of between 91 and 180 days, and receivables. Current liabilities include current installments of long-term debt and finance lease liabilities of $127.4 million and $204.7 million at December 31, 2023 and 2022, respectively.

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The Company’s total cash decreased by $116.9 million during the year ended December 31, 2023. This decrease principally reflects:

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Such cash outflows were offset to a large extent by:

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Our cash and cash equivalents balances generally exceed Federal Deposit Insurance Corporation insured limits. We place our cash and cash equivalents in what we believe to be credit-worthy financial institutions. In addition, certain of our money market accounts invest in U.S. Treasury securities or other obligations issued or guaranteed by the U.S. government or its agencies, floating rate and variable demand notes of U.S. and foreign corporations, commercial paper rated in the highest category by Moody’s Investor Services and Standard & Poor’s, certificates of deposit and time deposits, asset-backed securities, and repurchase agreements.

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As of December 31, 2023, we had total debt outstanding (net of original issue discount and deferred financing costs) of $722.7 million and a net debt to total capitalization of 23.8%, which compares with 33.3% at December 31, 2022.

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Sources, Uses and Management of Capital

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During 2022, as the tanker cycle recovered from the historical lows of 2021, we increased our overall liquidity with vessel sales, a refinancing that increased the capacity of our revolving credit and cash from operations.  With strong market conditions continuing in 2023, we have used incremental liquidity generated from operations to invest in the fleet, reduce debt levels and make returns to shareholders.

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In addition to future operating cash flows, our other future sources of funds are proceeds from issuances of equity securities, additional borrowings as permitted under our loan agreements and proceeds from the opportunistic sales of our vessels. Our current uses of funds are to fund working capital requirements, maintain the quality of our vessels, purchase vessels, pay newbuilding construction costs, comply with international shipping standards and environmental laws and regulations, repay or repurchase our outstanding loan facilities, pay a regular quarterly cash dividend, and from time-to-time, repurchase shares of our common stock and pay supplemental cash dividends.

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The following is a summary of the significant capital allocation initiatives we executed during 2023 and the sources of capital we have at our disposal for future use as well as our current commitments for future uses of capital:

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During 2023, the Company’s Board of Directors declared and paid regular quarterly and supplemental cash dividends totaling $308.2 million or $6.29 per share as follows:

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Also on February 28, 2024, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.12 per share of common stock and a supplemental dividend of $1.20 per share of common stock. Both dividends will be paid on March 28, 2024 to stockholders of record as of March 14, 2024.

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During 2023, the Company repurchased and retired 366,483 shares of its common stock in open-market purchases, at an average price of $38.03 per share, for a total cost of $13.9 million. In August 2023, the Company’s Board of Directors authorized an increase in the share repurchase program to $50.0 million from $26.1 million. In November 2023, the Company’s Board of Directors authorized the extension of the expiry date of the stock repurchase program from December 31, 2023 to December 31, 2025.

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In December 2022 the Company tendered notice of its intention to exercise its options to purchase two 2009-built Aframaxes that it had been bareboat chartering-in. The aggregate purchase price for the two vessels was $43.0 million, representing an approximately 45% discount to the market price of the vessels. The first of the two vessels was purchased in March 2023, and the second in early April 2023.

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On March 10, 2023 the Company entered into an amendment to the $750 Million Credit Facility agreement. Pursuant to the amendment, the Company (a) prepaid $97 million of outstanding principal under the $750 Million Facility Term Loan; (b) obtained a release of collateral vessel mortgages over 22 MR product carriers; and (c) received from the lenders additional revolving credit commitments in an aggregate amount of $40 million, which additional commitments constitute an increase to, and are subject to the same terms and conditions as, the previously-existing revolving credit commitments. Following the effectiveness of the amendment, the aggregate principal commitments available under the $750 Million Facility Revolving Loan was $257.4 million (none of which was outstanding) and the scheduled future quarterly principal amortization under the $750 Million Facility Term Loan decreased from $30.2 million to $27.7 million.

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Following the amendment to the $750 Million Credit Facility agreement, the Company made mandatory principal prepayments totaling $181.3 million between March 2023 and December 2023 on the $750 Million Facility Term Loan in conjunction with the sale of three 2008-built MRs, and the release of five Suezmaxes and one Aframax vessel from the collateral package. These transactions resulted in a further reduction in the scheduled future quarterly principal amortization under the $750 Million Facility Term Loan to $19.0 million beginning in the first quarter of 2024.

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In May 2023, the Company tendered notice of its intention to exercise its options to purchase one 2013-built Aframax and one 2014-built LR2, which were bareboat chartered-in under the COSCO Lease Financing arrangement as at June 30, 2023. The $46.4 million aggregate purchase price for the two vessels consisted of the $45.2 million remaining debt balance of the COSCO Lease Financing and $1.2 million of purchase option premiums. The transaction closed on July 3, 2023.

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During the third and fourth quarters of 2023, the Company entered into agreements to construct four dual-fuel ready LNG 73,600 dwt LR1 Product Carriers at K Shipbuilding Co., Ltd’s shipyard, subject to certain conditions customary to similar transactions. The four vessels are scheduled for delivery between the second half of 2025 and the first quarter of 2026. The total construction cost for the vessels will be approximately $231 million, which will be paid for through a combination of long-term financing and available liquidity. On November 24, 2023, the Company entered into an option agreement for the construction of two additional dual-fuel ready LNG 73,600 dwt LR1 Product Carriers at the same shipyard for delivery during the third quarter of 2026 at an additional cost of approximately $116 million. Under the terms of the agreement, as amended, the Company’s option will expire on March 31, 2024.

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On September 27, 2023, the Company entered into a $160 million revolving credit agreement (the “$160 Million Revolving Credit Facility”) with Nordea Bank Abp, New York Branch (“Nordea”), ING Bank N.V., London Branch (“ING”), Crédit Agricole Corporate & Investment Bank, and DNB Markets Inc. (or their respective affiliates), as mandated lead arrangers and bookrunners; and Danish Ship Finance A/S and Skandinaviska Enskilda Banken AB (PUBL) (or their respective affiliates), as lead arrangers. Nordea is acting as administrative agent, collateral agent, coordinator and security trustee under the Revolving Credit Agreement, and ING is acting as sustainability coordinator.

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The $160 Million Revolving Credit Facility comprises a 5.5-year revolving credit facility in an aggregate amount of $160 million which matures on March 27, 2029 and reduces on a 20-year age-adjusted profile. The $160 Million Revolving Credit Facility is secured by a first lien on five of the Company’s vessels (the “Collateral Vessels”), along with their earnings, insurances and certain other assets, as well as by liens on certain additional assets of the Borrower. Interest on the $160 Million Revolving Credit Facility is calculated based upon Term SOFR plus the Applicable Margin (each as defined in the credit agreement). The Applicable Margin is 1.90%, and is subject to a sustainability-linked pricing mechanism, pursuant to which the Applicable Margin may be decreased or increased by 0.075%, as described in greater detail in Note 10, “Debt,” to the accompanying consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data.”

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On December 20, 2023, the Company adopted an “at the market” offering program in connection with general corporate housekeeping and entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Evercore Group L.L.C. and Jefferies LLC, as sales agents (the “Sales Agents”), to issue and sell through or to the Sales Agents, from time to time, shares of its common stock, in “at the market” offerings having an aggregate gross sales price of up to $100 million. As of the date hereof, the Company has neither sold nor undertaken to sell any shares pursuant to the Distribution Agreement. The Company has no obligation to sell any shares and may at any time suspend offers under the Distribution Agreement or terminate the Distribution Agreement. See Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities,” for further details on the offering program.

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As of December 31, 2023, the Company has vessel construction commitments for four dual-fuel ready LR1s and the purchase and installation of three ballast water treatment systems and two mewis ducts, and the final outstanding installment payments due for six ballast water treatment systems that had been installed as of December 31, 2023. The Company’s debt service commitments and aggregate purchase commitments for vessel construction and betterments as of December 31, 2023, are presented in the Aggregate Contractual Obligations Table below.

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During the first quarter of 2024, we continued to execute on our fleet optimization program by entering into agreements for the en bloc purchase of four 2015-built and two 2014-built MR Product Carriers for an aggregate purchase price of $232 million. Eighty-five percent of the purchase price consideration will be paid for with cash from available liquidity and the balance of 15% with the issuance of INSW common stock. Delivery of the vessels is expected to be completed by the end of the second quarter of 2024.

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Outlook

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Our strong balance sheet, as evidenced by a substantial level of liquidity, 30 unencumbered vessels, and diversified financing sources with debt maturities spread out between 2026 and 2031, positions us to support our operations over the next twelve months as we continue to advance our vessel employment strategy, which seeks to achieve an optimal mix of spot (voyage charter) and long-term (time charter) charters. Our balance sheet strength and diverse fleet position us to continue pursuing our disciplined capital allocation strategy of fleet renewal, incremental debt reduction and returns to shareholders and pursue potential strategic opportunities that may arise within the diverse sectors in which we operate.

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Aggregate Contractual Obligations

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A summary of the Company’s long-term contractual obligations as of December 31, 2023 follows:

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In addition to the above long-term contractual commitments, we have certain obligations for our shore-based employees as of December 31, 2023, related to a defined benefit pension plan in the U.K. as follows:

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Carrying Value of Vessels

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At December 31, 2023, 42 of the Company’s 72 owned and bareboat chartered-in vessels were pledged as collateral under certain of the Company’s debt and lease financing facilities. The following table presents information with respect to the carrying amount of the Company’s vessels by type. Instances in which the fair market values of the Company’s vessels, which are estimated by a third-party vessel appraiser, are below their carrying values as of December 31, 2023, are indicated in the footnote(s) to the table. The carrying value of each of the Company’s vessels does not necessarily represent its fair market value or the amount that could be obtained if the vessel were sold. The Company’s estimates of market values for its vessels assume that the vessels are all in good and seaworthy condition without need for repair and, if inspected, would be certified as being in class without notations. In addition, because vessel values are highly volatile, these estimates may not be indicative of either the current or future prices that the Company could achieve if it were to sell any of the vessels. The Company would not record a loss for any of the vessels for which the fair market value is below its carrying value unless and until the Company either determines to sell the vessel for a loss or determines that the vessel is impaired as discussed below in “Critical Accounting Policies — Vessel Impairment.” The Company believes that the future undiscounted cash flows expected to be earned over the estimated remaining useful lives for those vessels that have experienced declines in market values below their carrying values would exceed such vessels’ carrying values.

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Footnotes to the following table exclude those vessels with an estimated market value in excess of their carrying value.

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Off-Balance Sheet Arrangements

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Pursuant to an agreement between INSW and the trustees of the OSG Ship Management (UK) Ltd. Retirement Benefits Plan (the “Scheme”), INSW guarantees the obligations of INSW Ship Management UK Ltd., a subsidiary of INSW, to make payments to the Scheme. See Note 17, “Pension and other postretirement benefit plans,” to the accompanying consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data,” for additional information.

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RISK MANAGEMENT

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Interest rate risk

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The Company is exposed to market risk from changes in interest rates, which could impact its results of operations and financial condition. The Company manages this exposure to market risk through its regular operating and financing activities and, when

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deemed appropriate, through the use of derivative financial instruments. To manage its interest rate risk exposure associated with changes in variable interest rate payments due on its credit facilities in a cost-effective manner, the Company, from time-to-time, enters into interest rate swap, collar or cap agreements, in which it agrees to exchange various combinations of fixed and variable interest rates based on agreed upon notional amounts or to receive payments if floating interest rates rise above a specified cap rate. The Company uses such derivative financial instruments as risk management tools and not for speculative or trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage exposure to nonperformance on such instruments by the counterparties.

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See “Interest Rate Sensitivity” section below and Note 9, “Fair Value of Financial Instruments, Derivative and Fair Value Disclosures,” to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data,” for additional information on the Company various interest rate derivatives.

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Currency and exchange rate risk

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The shipping industry’s functional currency is the U.S. dollar. All of the Company’s revenues and most of its operating costs are in U.S. dollars. The Company incurs certain operating expenses, such as some vessel and general and administrative expenses, in currencies other than the U.S. Dollar, and the foreign exchange risk associated with these operating expenses is immaterial. If foreign exchange risk becomes material in the future, the Company may seek to reduce its exposure to fluctuations in foreign exchange rates through the use of short-term currency forward contracts and through the purchase of bulk quantities of currencies at rates that management considers favorable. For contracts which qualify as cash flow hedges for accounting purposes, hedge effectiveness would be assessed based on changes in foreign exchange spot rates with the change in fair value of the effective portions being recorded in accumulated other comprehensive income/(loss).

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Fuel price volatility risk

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The Company has installed scrubbers on ten VLCCs and two of its Suezmaxes. During 2023, the average price differential between very low sulfur fuel and high sulfur fuel in Singapore and Fujairah, the most common bunkering locations for VLCCs, was approximately $158 per ton. Assuming a VLCC bunker consumption rate of 50 metric tons per day, this translated to approximately $7,900 per day per vessel in lower bunker consumption costs on our VLCCs during 2023. In addition to installing scrubbers on certain of the larger vessels in the Company’s fleet, significant consideration continues to be given to other ways of managing the risk of volatility in the price spread between high-sulfur fuel and low-sulfur fuel as well as the risk of limited supply of compliant fuel or HFO along the routes that the Company’s vessels typically travel.

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Interest Rate Sensitivity

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The following table presents information about the Company’s financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents the principal cash flows and related weighted average interest rates by expected maturity dates of the Company’s debt obligations.

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Principal (Notional) Amount (dollars in millions) by Expected Maturity and Average Interest (Swap) Rate

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As of December 31, 2023, the Company had variable rate secured term loans or lease financings, and revolving credit facilities under which borrowings bear interest at a rate based on SOFR, plus the applicable margin, as stated in the respective financing arrangements. The Company has entered into interest rate swaps agreements with major financial institutions covering for accounting

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purposes 100% of the $750 Million Facility Term Loan outstanding principal balance of $113.6 million as of December 31, 2023, and $224.3 million of the notional principal amount outstanding under the Ocean Yield Lease Financing that effectively converts the Company’s interest rate exposure from a three-month SOFR floating rate to a fixed rate of 2.84% through the maturity date of February 22, 2027.

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CRITICAL ACCOUNTING ESTIMATES AND POLICIES

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The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates in the application of its accounting policies based on the best assumptions, judgments, and opinions of management. Following is a discussion of the accounting policies that involve a higher degree of judgment and the methods of their application. For a description of all of the Company’s material accounting policies, see Note 3, “Summary of Significant Accounting Policies,” to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data.”

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Vessel Lives and Salvage Values

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The carrying value of each of the Company’s vessels represents its original cost at the time it was delivered or purchased less depreciation calculated using an estimated useful life of 25 years from the date such vessel was originally delivered from the shipyard. A vessel’s carrying value is reduced to its new cost basis (i.e., its current fair value) if a vessel impairment charge is recorded.

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If the estimated useful lives assigned to the Company’s vessels prove to be shorter than previously estimated because of new regulations, an extended period of weak markets, the broad imposition of age restrictions by the Company’s customers, or other future events, it could result in higher depreciation expense and impairment losses in future periods related to a reduction in the useful lives of any affected vessels.

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Company management estimates the steel recycle value of all of its vessels to be $300 per lightweight ton consistent with its commitment to implement and practice environmentally and socially responsible ship recycling. The Company’s assumptions used in the determination of estimated salvage value take into account current steel recycling prices, the historic pattern of annual average steel recycling rates over the five years ended December 31, 2023, which ranged from $270 to $670 per lightweight ton, estimated changes in future market demand for recycled steel and estimated future demand for vessels. Steel recycling prices also fluctuate depending upon type of ship, bunkers on board, spares on board and delivery range. Market conditions that could influence the volume and pricing of vessel recycling activity in 2024 and beyond include (i) the combined impact of scheduled newbuild deliveries and charter rate expectations for vessels potentially facing age restrictions imposed by oil majors, (ii) the impact of ballast water treatment systems regulatory requirements or proposals, (iii) costs and timing of pending special surveys, which are likely to be expensive for vessels over 15 years of age, and (iv) IMO requirements for the use of low-sulfur fuels and other carbon reduction initiatives. These factors will influence owners’ decisions to accelerate the disposal of older vessels, especially those with upcoming special surveys.

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Although management believes that the assumptions used to determine the steel recycling value for its vessels are reasonable and appropriate, such assumptions are highly subjective, in part, because of the cyclicality of the nature of future demand for recycled steel.

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Vessel Impairment

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The carrying values of the Company’s vessels may not represent their fair market value or the amount that could be obtained by selling the vessel at any point in time since the market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings. Historically, both charter rates and vessel values tend to be cyclical. Management evaluates the carrying amounts of vessels held and used by the Company for impairment only when it determines that it will sell a vessel or when events or changes in circumstances occur that cause management to believe that future cash flows for any individual vessel will be less than its carrying value. In such instances, an impairment charge would be recognized if the estimate of the undiscounted future cash flows expected to result from the use of the vessel and its eventual disposition is less than the vessel’s carrying amount. This assessment is made at the individual vessel level as separately identifiable cash flow information for each vessel is available.

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In developing estimates of future cash flows, the Company must make assumptions about future performance, with significant assumptions being related to charter rates, operating expenses, utilization, drydocking and capital expenditure requirements, residual value and the estimated remaining useful lives of the vessels. These assumptions are based on historical trends as well as future expectations. Specifically, in estimating future charter rates, management takes into consideration rates currently in effect for existing time charters and estimated daily time charter equivalent rates for each vessel class for the unfixed days over the estimated remaining lives of each of the vessels. The estimated daily time charter equivalent rates used for unfixed days are based on a combination of (i) rates as forecasted by third-party analysts, and (ii) the trailing 12-year historical average rates, based on monthly average rates published by a third-party maritime research service. Management uses the published 12-year historical average rates in its assumptions because it is management’s belief that the 12-year period captures a distribution of strong and weak charter rate periods, which results in the use of an average mid-cycle rate that is more in line with management’s forecast of a return to mid-cycle charter rate levels in the medium term. Recognizing that the transportation of crude oil and petroleum products is cyclical and subject to significant volatility based on factors beyond the Company’s control, management believes the use of estimates based on the combination of rates forecasted by third-party analysts and 12-year historical average rates calculated as of the reporting date to be reasonable.

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Estimated outflows for operating expenses and capital expenditures and drydocking requirements are based on historical and budgeted costs and are adjusted for assumed inflation. Utilization is based on historical levels achieved and estimates of residual value for recycling are based upon the pattern of steel recycling rates used in management’s evaluation of salvage value for purposes of recording depreciation. Finally, for vessels that are being considered for disposal before the end of their respective useful lives, the Company utilizes weighted probabilities assigned to the possible outcomes for such vessels being sold or recycled before the end of their respective useful lives.

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The determination of fair value is highly judgmental. In estimating the fair value of INSW’s vessels for purposes of Step 2 of the impairment tests, the Company considers the market and income approaches by using a combination of third-party appraisals and discounted cash flow models prepared by the Company. In preparing the discounted cash flow models, the Company uses a methodology consistent with the methodology discussed above in relation to the undiscounted cash flow models prepared by the Company and discounts the cash flows using its current estimate of INSW’s weighted average cost of capital.

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The more significant factors that could impact management’s assumptions regarding time charter equivalent rates include (i) loss or reduction in business from significant customers, (ii) unanticipated changes in demand for transportation of crude oil and petroleum products, (iii) changes in production of or demand for oil and petroleum products, generally or in particular regions, (iv) greater than anticipated levels of tanker newbuilding orders or lower than anticipated levels of tanker recycling, and (v) changes in rules and regulations applicable to the tanker industry, including legislation adopted by international organizations such as IMO and the EU or by individual countries. Although management believes that the assumptions used to evaluate potential impairment are reasonable and appropriate at the time they were made, such assumptions are highly subjective and likely to change, possibly materially, in the future.

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