INTEREST EXPENSE

Interest expense was $39,476 in 2016 compared with $42,970 in 2015.
The decrease in interest expense in the current year reflects the impact of the Company’s repurchases and prepayments of
$152,754 in aggregate principal amount of the INSW Term Loan in 2016. Interest expense is expected to decrease further in 2017
as a result of the principal prepayments and open market repurchases made during 2016. Refer to Note 9, “Debt” to the
Company’s consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data”
for additional information.Interest expense, including amortization of issuance and deferred
financing costs, commitment, administrative and other fees, was $42,970 in 2015 and was comprised primarily of $42,688 relating
to the INSW Facilities.Interest expense in 2014 was $56,258, including $17,085 associated
with the INSW Facilities. The balance of interest expense recognized during 2014 represented contractual post-petition interest
from the Petition Date through the effective date of the Equity Plan on allowed claims associated with our pre-reorganized INSW
loan agreements of $32,015 and certain rejected executory contracts. Accordingly, interest expense for the year ended December
31, 2014 is not comparable to either 2016 or 2015.


INCOME TAX EXPENSE

EBITDA and Adjusted EBITDAEBITDA 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:
·EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual
commitments;
·EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and
·EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest
or principal payments, on our debt.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.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

Liquidity
Working capital at December 31, 2016 was approximately $126,000
compared with $348,000 at December 31, 2015. Current assets are highly liquid, consisting principally of cash, interest-bearing
deposits and receivables. The Company’s total cash (including restricted cash) decreased by $225,846 during the year ended
December 31, 2016. As further described below, this decrease reflects the use of $155,232 for repurchases, prepayments and regular
principal amortization of outstanding debt and $202,000 for dividends paid to OSG, offset by cash flows provided by operating activities.As of December 31, 2016, we had total liquidity on a consolidated
basis of $142,001 comprised of $92,001 of unrestricted cash and $50,000 of undrawn revolver capacity. 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.As of December 31, 2016, we had total debt outstanding (net of original
issue discount and deferred financing costs) of $439,651 and a total debt to total capitalization of 26.6%, which compares with
30.1% at December 31, 2015. Our debt profile reflects recent actions (discussed further below) to deleverage our balance sheet
as well as minimal scheduled amortization requirements before 2018.Restricted cash as of December 31, 2015 was legally restricted under
the INSW Facilities. The INSW Facilities stipulate that if annual aggregate cash proceeds of INSW asset sales exceed $5,000, the
net cash proceeds from each such sale are required to be reinvested in vessels within twelve months of such sale or be used to
prepay the principal balance outstanding of the INSW Facilities. In June 2016, INSW utilized restricted cash to prepay $8,832 of
outstanding principal under the INSW Term Loan.Sources, Uses and Management of CapitalNet cash provided by operating activities for the year ended December
31, 2016 was $116,768. In addition to operating cash flows, our other sources of funds are proceeds from issuances of equity securities,
additional borrowings as permitted under the INSW Facilities and proceeds from the opportunistic sales of our vessels. We or our
subsidiaries may in the future complete transactions consistent with achieving the objectives of our business plan discussed in
Item 1, “Business – Strategy.”Our current uses of funds are to fund working capital requirements,
maintain the quality of our vessels, comply with international shipping standards and environmental laws and regulations and repay
or repurchase our outstanding loan facilities. The INSW Facilities require that a portion of Excess Cash Flow (as defined in the
loan agreement) be used to prepay the outstanding principal balance of each such loan. To the extent permitted under the terms
of the INSW Facilities we may also use cash generated by operations to finance capital expenditures to modernize and grow our fleet.From our Emergence Date in August 2014 through December 2016, we
have generated and used cash through the following investing and financing activities:
·INSW FacilitiesUpon our emergence from Bankruptcy, we closed on the INSW
Facilities and drew down the full amount available under the INSW Term Loan of $628,375 and received proceeds net of issuance and
deferred financing costs of $605,561. We combined such funds with cash and cash equivalents on hand to make payments relating to
the Chapter 11 Cases.The INSW Term Loan amortizes in equal quarterly installments
in aggregate annual amounts equal to 1% of the original principal amount of the loans, adjusted for mandatory pre-payments. The
INSW Facilities require that a portion of Excess Cash Flow (as defined in the term loan agreement) be used to prepay the outstanding
principal balance of such loan, commencing with the six-month period beginning July 1, 2015 (as described below), and annual periods
thereafter. We have remaining unused credit availability under the INSW Revolver Facility of $50,000.The INSW Facilities have a covenant to maintain the aggregate
Fair Market Value of the Collateral Vessels at greater than or equal to $500,000 at the end of each fiscal quarter. The Company
had substantial headroom under this covenant at December 31, 2016.The INSW Term Loan matures on August 5, 2019 and the INSW
Revolver Facility matures on February 5, 2019. The maturity dates for the INSW Facilities are subject to acceleration upon the
occurrence of certain events, including a change in control event or other events of default as defined in the respective loan
agreements.

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LIQUIDITY AND SOURCES OF CAPITAL

·Amendments to INSW FacilitiesThe first amendment to the INSW Facilities entered into
on June 3, 2015, among other things, provided for the following, subject to certain conditions described therein: (i) permitted
INSW to pay a cash dividend to OSG no later than June 30, 2015; (ii) permitted INSW to retain net cash proceeds up to $78,000 from
the sales of certain assets that occurred prior to June 3, 2015; and (iii) altered the periods during which Excess Cash Flow (as
defined in the loan agreement for the INSW Facilities) must be used to prepay the outstanding principal balance of the INSW Facilities,
from an annual period beginning January 1, 2015 to a six-month period beginning July 1, 2015 and annual periods thereafter.Pursuant to the June 3, 2015 amendment to the INSW Facilities,
INSW paid a cash dividend of $200,000 to OSG on June 26, 2015. Such amendment reduced the base Available Amount (as defined in
the loan agreement for the INSW Facilities) from $25,000 to $0. Therefore, as of December 31, 2015, no cash dividends, loans or
advances to OSG were permitted under the INSW Term Loan. The Available Amount under the INSW Term Loan increased to $132,200 in
the first quarter of 2016, after the required reports were filed with the banks.On July 18, 2016, the Company entered into a second amendment
(the “Second INSW Credit Agreement Amendment”) to the INSW Facilities. The Second INSW Credit Agreement Amendment,
among other things, amended the conditions under which the INSW Facilities permitted OSG to spin off INSW. In particular, the Second
INSW Credit Agreement Amendment permitted the distribution of OSG’s equity interests in INSW to OSG’s shareholders
in conjunction with the transfer of substantially all of INSW’s assets (subject to certain exceptions) to a new wholly-owned
subsidiary of INSW, subject to the satisfaction of other conditions set forth in the INSW Facilities and the Second INSW Credit
Agreement Amendment.On September 20, 2016, the Company entered into a third
amendment (the “Third INSW Credit Agreement Amendment”) to the INSW Facilities. The Third INSW Credit Agreement Amendment,
among other things, (i) permitted INSW to dividend up to an aggregate amount of $100,000 to OSG prior to October 14, 2016; (ii)
reduced the maximum amount of Incremental Term Loans and Incremental Revolving Loans (as defined in the INSW Facilities) the Borrowers
may obtain under the INSW Facilities to $200,000 and alters certain conditions for providing such loans; (iii) increased the amount
of certain investments the Company and its subsidiaries may make under the INSW Facilities; and (iv) required the Company to prepay
outstanding Initial Term Loans (as defined in the INSW Facilities) in an aggregate principal amount equal to $75,000 substantially
simultaneously with the effective date of the Third INSW Credit Agreement Amendment. The dividend distribution of $100,000 to OSG
and the $75,000 prepayment of the outstanding principal balance of the INSW Term Loan were completed as of September 30, 2016.On November 30, 2016, the Company entered into a fourth
amendment (the “Fourth INSW Credit Agreement Amendment”) to the INSW Facilities primarily to reflect the spin-off of
the Company from OSG. The Fourth INSW Credit Agreement Amendment, among other things, (i) removed OSG as guarantor of and party
under the facility; (ii) replaced restrictions on the movement of funds to OSG with limitations on the use of the Available Amount
to pay dividends to shareholders; (iii) restricted payments of dividends from INSW’s subsidiaries to INSW and (iv) added
or modified certain definitions.In addition to the dividend distribution described above, during
the year ended December 31, 2016, we used cash to opportunistically repurchase and retire $68,922 of the outstanding principal
under the INSW Term Loan, at an aggregate discounted price of $65,167 (a financing activity). We also made mandatory principal
prepayments of the INSW Term Loan of $83,832 (which includes $8,832 relating to restricted cash described above). The net loss
of $1,342 realized on these transactions for the year ended December 31, 2016 is included in other (expense)/income in the consolidated
statement of operations. The net loss reflects a $5,097 write-off of unamortized original issue discount and deferred financing
costs associated with the principal reductions, which were treated as partial extinguishments. Third party legal and consulting
fees (aggregating $225) incurred by the Company in relation to the open market repurchases and INSW Term Loan amendments are included
in general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2016.The Available Amount for cash dividends permitted under the INSW
Term Loan was $30,200 as of December 31, 2016, after INSW’s dividend distributions to OSG of $102,000 during the year ended
December 31, 2016. Management expects that the Available Amount will increase to approximately $70,236 by the end of the first
quarter of 2017, after the required reports are filed with the banks.Outlook We believe the actions we have taken have strengthened our balance
sheet as well as increased our flexibility to actively pursue fleet renewal or potential strategic opportunities that may arise
within the diverse sectors in which we operate and at the same time positioned us to generate sufficient cash to support our operations
over the next twelve months ending December 31, 2017. Also, as we monitor the maturity profile of Company’s outstanding debt,
we will evaluate opportunities to extend or refinance the INSW Facilities in the next 12 to 15 months.

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LIQUIDITY AND SOURCES OF CAPITAL

Carrying Value of VesselsAll except one of the Company’s owned vessels are pledged
as collateral under the INSW Facilities. The following table presents information with respect to the carrying amount of the Company’s
vessels by type and indicates whether their market values, which are estimated by taking an average of two third-party vessel appraisals,
are below their carrying values as of December 31, 2016. 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 International Flag 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.Footnotes to the following table exclude those vessels with an estimated
market value in excess of their carrying value.

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LIQUIDITY AND SOURCES OF CAPITAL

(1)As of December 31, 2016, the International Flag Crude Tankers segment includes vessels with an aggregate carrying value of
$722,883, which the Company believes exceeds their aggregate market value of approximately $556,625 by $166,258.
(2)As of December 31, 2016, the International Flag Product Carriers segment includes vessels with an aggregate carrying value
of $306,450, which the Company believes exceeds their aggregate market value of approximately $228,125 by $78,325.Off-Balance Sheet Arrangements As of December 31, 2016, the affiliated companies in which INSW
held an equity interest had total bank debt outstanding of $714,170 of which $638,827 was nonrecourse to the Company.As of December 31, 2016, the maximum potential amount of future
principal payments (undiscounted) that INSW could be required to make relating to equity method investees secured bank debt was
$38,789 and the carrying amount of the liability related to this guarantee was $0.INSW has an interest in two joint ventures each of which converted
a ULCC into a Floating Storage and Offloading Service vessel (together, the “FSO Joint Venture”). Prior to the spin-off,
the FSO Joint Venture was party to a number of contracts to which OSG served as guarantor: (a) the FSO Joint Venture is the borrower
pursuant to a loan agreement, as amended and restated, with OSG and Euronav, each as guarantors, certain other parties thereto
and ING Bank N.V. as agent and security trustee (the ’‘Loan Agreement’’); (b) the FSO Joint Venture is
an obligor pursuant to a guarantee facility agreement, by and among, the FSO Joint Venture, those banks and financial institutions
listed therein, Nordea Bank Finland PLC, as issuing bank, Nordea Bank Norge ASA as agent and ING Bank N.V. as Security Trustee
(the ’‘Guarantee Facility’’); and (c) the FSO Joint Venture is party to two service contracts with Maersk
Oil Qatar AS (the ’‘MOQ Service Contracts’’).


LIQUIDITY AND SOURCES OF CAPITAL

In connection with the Distribution on November 30, 2016, INSW now
guarantees the obligations of the FSO Joint Venture pursuant to the Loan Agreement and the Guarantee Facility (together, the ’‘ING
and Nordea Guarantees’’) and guarantees the obligations of the FSO Joint Venture pursuant to the MOQ Service Contracts
(the ’‘MOQ Guarantee’’, together with the ING and Nordea Guarantees, the ’‘INSW FSO Guarantees’’).
OSG will continue to guarantee the obligations of the FSO Joint Venture pursuant to the Loan Agreement and the Guarantee Facility
(together, the ’‘OSG FSO Guarantees’’).INSW entered into guarantee arrangements in connection with the
spin-off on November 30, 2016, in favor of Qatar Liquefied Gas Company Limited (2) (’‘LNG Charterer’’)
and relating to certain LNG Tanker Time Charter Party Agreements with the LNG Charterer and each of Overseas LNG H1 Corporation,
Overseas LNG H2 Corporation, Overseas LNG S1 Corporation and Overseas LNG S2 Corporation (such agreements, the ’‘LNG
Charter Party Agreements’’, and such guarantee, the ’‘LNG Performance Guarantee’’). OSG will
continue to provide a guarantee in favor of the LNG Charterer relating to the LNG Charter Party Agreements (such guarantee, the
’‘OSG LNG Performance Guarantee’’ and collectively, with the OSG FSO Guarantees the ’‘Continuing
OSG Guarantees’’).In connection with the Continuing OSG Guarantees, INSW will pay
a $125 fee per year to OSG, which is subject to escalation after 2017 and will be terminated if OSG ceases to provide the OSG LNG
Performance Guarantee. INSW will indemnify OSG for liabilities arising from the Continuing OSG Guarantees pursuant to the terms
of the Separation and Distribution Agreement.See Note 13, “Related Parties,” to the Company’s
consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data” for additional
information.In addition and 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 OSG
Ship Management (UK) Ltd., a subsidiary of INSW, to make payments to the Scheme. See Note 17, “Pension Plans,” to the
Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data,”
for additional information.Aggregate Contractual ObligationsA summary of the Company’s long-term contractual obligations
as of December 31, 2016 follows:

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LIQUIDITY AND SOURCES OF CAPITAL

(1)Amounts shown include contractual interest obligations of floating rate debt estimated based on the aggregate LIBOR floor rate
of 1% and applicable margins for the INSW Term Loan of 4.75%. Management estimates that no prepayment will be required for the
INSW Term Loan as a result of estimated Excess Cash Flow for the year ended December 31, 2016. Amounts shown for the INSW Term
Loan for years subsequent to 2017 exclude any estimated repayment as a result of Excess Cash Flow.
(2)As
of December 31, 2016, the Company had charter-in commitments for 7 vessels on leases that are accounted for as operating leases.
Certain of these leases provide the Company with various renewal and purchase options. The future minimum commitments for time
charters-in have been reduced to reflect estimated days that the vessels will not be available for employment due to drydock.


RISK MANAGEMENT

At December 31, 2016 and 2015, INSW was party to an Interest Rate
Cap agreement with a start date of February 5, 2015 with a major financial institution covering a notional amount of $400,000 to
limit the floating interest rate exposure associated with the INSW Term Loan. The Interest Rate Cap agreement contains no leverage
features. The INSW Interest Rate Cap, which expired on February 5, 2017, had a cap rate of 2.5%.Currency and exchange rate risk 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 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 loss.Fuel price volatility risk Historically, the Company managed its exposure to future increases
in fuel prices in the normal course of its business by entering into standalone bunker swaps. The Company’s deployment of
most of its conventional tanker fleet in commercial pools and time charters currently limits the Company’s direct exposure
to fluctuations in fuel prices as a component of voyage expenses.

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INTEREST RATE SENSITIVITY

*Including current portion.As of December 31, 2016, the Company had a secured term loan (INSW
Term Loan) and a revolving credit facility (INSW Revolver Facility) under which borrowings bear interest at a rate based on LIBOR,
plus the applicable margin, as stated in the respective loan agreements. There were no amounts outstanding under the INSW Revolver
Facility as of December 31, 2016.


CRITICAL ACCOUNTING POLICIES

Revenue RecognitionThe Company generates a majority of its revenue from voyage charters,
including vessels in pools that predominantly perform voyage charters. Within the shipping industry, there are two methods used
to account for voyage charter revenue: (1) ratably over the estimated length of each voyage and (2) completed voyage. The recognition
of voyage revenues ratably over the estimated length of each voyage is the most prevalent method of accounting for voyage revenues
in the shipping industry and the method used by the Company. Under each method, voyages may be calculated on either a load-to-load
or discharge-to-discharge basis. In applying its revenue recognition method, management believes that the discharge-to-discharge
basis of calculating voyages more accurately estimates voyage results than the load-to-load basis. Since, at the time of discharge,
management generally knows the next load port and expected discharge port, the discharge-to-discharge calculation of voyage revenues
can be estimated with a greater degree of accuracy. The Company does not begin recognizing voyage revenue until a charter has been
agreed to by both the Company and the customer, even if the vessel has discharged its cargo and is sailing to the anticipated load
port on its next voyage, because it is at this time an obligation to perform is established, the charter rate is determinable for
the specified load and discharge ports and collectability is reasonably assured.Revenues from time charters and bareboat charters are accounted
for as operating leases and are thus recognized ratably over the rental periods of such charters, as service is performed. The
Company does not recognize time charter revenues during periods that vessels are off hire.For the Company’s vessels operating in Commercial Pools, revenues
and voyage expenses are pooled and allocated to each pool’s participants on a time charter equivalent basis in accordance
with an agreed-upon formula. The formulas in the pool agreements for allocating gross shipping revenues net of voyage expenses
are based on points allocated to participants’ vessels based on cargo carrying capacity and other technical characteristics,
such as speed and fuel consumption. The selection of charterers, negotiation of rates and collection of related receivables and
the payment of voyage expenses are the responsibility of the pools. The pools may enter into contracts that earn either voyage
charter revenue or time charter revenue. Each of the pools follows the same revenue recognition principles, as applied by the Company,
in determining shipping revenues and voyage expenses, including recognizing revenue only after a charter has been agreed to by
both the pool and the customer, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its
next voyage.For the pools in which the Company participates, management monitors,
among other things, the relative proportion of the Company’s vessels operating in each of the pools to the total number of
vessels in each of the respective pools, and assesses whether or not the Company’s participation interest in each of the
pools is sufficiently significant so as to determine that the Company has effective control of the pool. Company management determined
that as of June 30, 2013, it had effective control of one of the pools in which the Company participated. Such pool was not a legal
entity but operated under a contractual agreement. Therefore, effective July 1, 2013 through June 30, 2014, when the Company’s
participation in this pool ended, the Company’s allocated TCE revenues for such pool were reported on a gross basis as voyage
charter revenues and voyage expenses in the consolidated statement of operations. The impact of this method of presenting earnings
for this pool for the year ended December 31, 2014 was an increase in both voyage charter revenues and voyage expenses of $40,454.Vessel Lives and Salvage ValuesThe 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
(except for FSO service vessels for which estimated useful lives of 30 years are used and LNG Carriers for which estimated useful
lives of 35 years are used) 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.If the estimated economic lives assigned to the
Company’s vessels prove to be too long 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. Company management estimates the scrap value of all of its vessels to be $300 per lightweight ton. The
Company’s assumptions used in the determination of estimated salvage value take into account current scrap prices, the
historic pattern of annual average scrap rates over the five years ended December 31, 2016, which ranged from $235 to $495
per lightweight ton, estimated changes in future market demand for scrap steel and estimated future demand for vessels. Scrap
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 scrapping activity in 2017 and beyond include the combined impact of scheduled
newbuild deliveries and charter rate expectations for vessels potentially facing age restrictions imposed by oil majors.
These factors will influence owners’ decisions to accelerate the disposal of older vessels, especially those with
upcoming special surveys including first generation double hull vessels.

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CRITICAL ACCOUNTING POLICIES

Although management believes that the assumptions used to determine
the scrap rate for its International Flag vessels are reasonable and appropriate, such assumptions are highly subjective, in part,
because of the cyclicality of the nature of future demand for scrap steel.Vessel ImpairmentThe 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.In developing estimates of future cash flows, the Company must
make assumptions about future performance, with significant assumptions being related to charter rates, ship operating expenses,
utilization, drydocking 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) internally forecasted rates that are consistent with forecasts provided
to the Company’s senior management and Board of Directors, and (ii) the trailing 12-year historical average rates, based
on monthly average rates published by a third party maritime research service. The internally forecasted rates are based on management’s
evaluation of current economic data and trends in the shipping and oil and gas industries. Management used the published 12-year
historical average rates in its assumptions because it is management’s belief that the 12-year period captures an even 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 internally forecasted rates and 12-year historical average rates calculated
as of the reporting date to be reasonable.Estimated outflows for operating expenses and drydocking requirements
are based on historical and budgeted costs and are adjusted for assumed inflation. Finally, utilization is based on historical
levels achieved and estimates of a residual value are consistent with the pattern of scrap rates used in management’s evaluation
of salvage value.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 considered 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, of 9%.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 scrappings, 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.2016 Impairment Evaluations — The Company
has been monitoring the industry wide decline in vessel valuations during 2016 and specifically from June 30, 2016 to September
30, 2016, and September 30, 2016 to December 31, 2016, as well as the decline in forecasted near term charter rates, and concluded
that the declines in vessel valuations and in forecasted near term charter rates constituted impairment trigger events for 28 vessels
as of September 30, 2016 and 24 vessels as of December 31, 2016. In developing estimates of undiscounted future cash flows for
performing Step 1 of the impairment tests, the Company utilized the methodology described above. In estimating the fair value of
the vessels for the purposes of Step 2 of the September 30, 2016 impairment tests, the Company developed fair value estimates that
utilized a market approach which considered an average of two vessel appraisals. Based on the tests performed, impairment charges
totaling $49,640 were recorded on two LR1s, an Aframax and a Panamax to write-down their carrying values to their estimated fair
values at September 30, 2016. In estimating the fair values of the vessels for the purposes of Step 2 of the December 31, 2016
impairment tests, the Company considered 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 used a methodology
consistent with the methodology described above. Based on the tests performed, impairment charges aggregating $29,602 were recorded
on one Panamax and seven MRs to write-down their carrying values to their estimated fair values at December 31, 2016.

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CRITICAL ACCOUNTING POLICIES

2015 Impairment Evaluation — Management
gave consideration as to whether any events and changes in circumstances existed as of December 31, 2015 that could be viewed as
indicators that the carrying amounts of the vessels in the Company’s International Flag fleet were not recoverable as of
December 31, 2015 and determined there were no such events or changes in circumstances.2014 Impairment Evaluation — Management
gave consideration to the following events and changes in circumstances in determining whether there were any indicators that the
carrying amounts of the vessels in the Company’s International Flag fleet were not recoverable as of December 31, 2014:
(i)A significant year-over-year decline in third party valuation appraisals for four MRs securing the INSW Term Loan;
(ii)the impact, if any, of management’s intent to dispose of or continue to trade certain vessels during 2015; and
(iii)the impact, if any, of outsourcing technical and commercial management of the Company’ International Flag conventional
tanker fleet.Management determined that the latter two factors had no impact
on the carrying value of the Company’s International Flag fleet as of December 31, 2014. However, the decline in the third
party valuation appraisals on four modern MRs, which were built between 2009 and 2011, was deemed to be an impairment indicator
requiring the need to test the recoverability of the carrying value of these vessels. Based on tests performed, it was determined
that the vessels would generate undiscounted cash flows in excess of their December 31, 2014 carrying values over the remainder
of their useful lives.Impairment of Equity Method InvestmentsWhen events and circumstances warrant, investments accounted
for under the equity method of accounting are evaluated for impairment. If a determination is made that an other-than-temporary
impairment exists, the investment should be written down to its fair value in accordance with ASC 820, Fair Value Measurements
and Disclosures, which establishes a new cost basis. In December 2016, evidence of an other-than-temporary decline in the fair
value of the Company’s investments in its FSO joint ventures below their carrying values was identified by the Company. Specifically,
management concluded that the lower charter rate expected over the duration of the recently awarded five-year service contracts
commencing in the third quarter of 2017 was negative evidence indicating that the excess of the carrying value of the Company’s
investment in these joint ventures over their fair value was other-than-temporary as of December 31, 2016.As the Company determined that other-than-temporary impairments
existed in relation to its investments in the FSO joint ventures, impairment charges aggregating $30,475 were recorded to write
down the investments to their estimated fair values as of December 31, 2016. Such charges are included in equity in income of affiliated
companies in the accompanying consolidated statements of operations. In estimating the fair value of the Company’s investments
in the FSO joint ventures as of December 31, 2016, the Company utilized an income approach, by preparing discounted cash flow models
since there is a lack of comparable market transactions for the specially built assets held by the joint ventures. In preparing
the discounted cash flows models, the Company used a methodology largely consistent with the methodology and assumptions detailed
in the “Vessel Impairment” section above, with the exception being that as the assets owned by the joint ventures serve
under specific service contracts, the estimated charter rates for periods after the expiry of the existing contracts are based
upon management’s internally forecasted rates. The cash flows were discounted using the current estimated weighted average
cost of capital for each joint venture, which approximated 9.5% and took into consideration country risk, entity size and uncertainty
with respect to the cash flows for periods beyond the current charter expiries.DrydockingWithin the shipping industry, there are two methods that are
used to account for dry dockings: (1) capitalize drydocking costs as incurred (deferral method) and amortize such costs over the
period to the next scheduled drydocking, and (2) expense drydocking costs as incurred. Since drydocking cycles typically extend
over two and a half years or five years, management uses the deferral method because management believes it provides a better matching
of revenues and expenses than the expense-as-incurred method.

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| International Seaways, Inc. |  |


CRITICAL ACCOUNTING POLICIES

Pension BenefitsThe Company has obligations outstanding under the OSG Ship Management
(UK) Ltd. Retirement Benefits Plan (the “Scheme”), a defined benefit pension plan maintained by a subsidiary in the
U.K., who is the principal employer of the Scheme. The plan has been closed to new entrants and accrual since December 2007. The
Company has recorded pension benefit costs based on complex valuations developed by its actuarial consultants. These valuations
are based on key estimates and assumptions, including those related to the discount rates, the rates expected to be earned on investments
of plan assets and the life expectancy/mortality of plan participants. The Company is required to consider market conditions in
selecting a discount rate that is representative of the rates of return currently available on high-quality fixed income investments.
A higher discount rate would result in a lower benefit obligation and a lower rate would result in a higher benefit obligation.
The expected rate of return on plan assets is management’s best estimate of expected returns on plan assets. A decrease in
the expected rate of return will increase net periodic benefit costs and an increase in the expected rate of return will decrease
benefit costs. The mortality assumption is management’s best estimate of the expected duration of future benefit payments
at the measurement date. The estimate is based on the specific demographics and other relevant facts and circumstances of the Scheme
and considers all relevant information available at the measurement date. Longer life expectancies would result in higher benefit
obligations and a decrease in life expectancies would result in lower benefit obligations.In determining the benefit obligations at the end of year measurement
date, the Company continues to use an equivalent single weighted-average discount rate, at December 31, 2016 (2.60%) and 2015 (3.80%),
respectively. Management believes these rates to be appropriate for ongoing plans with a long duration such as Scheme. The Company
also assumed a long term rate of return on the Scheme assets of 3.85% and 5.62% at December 31, 2016 and 2015, respectively, based
on the asset mix as of such dates and management’s estimate of the long term rate of return that could be achieved over the
remaining duration of the Scheme.Newly Issued Accounting StandardsSee 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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| International Seaways, Inc. |  |


OPERATIONS AND OIL TANKER MARKETS

Chinese crude oil imports reached a record
10.4 million b/d in November 2018, followed by 10.3 million b/d in December. For the year, imports averaged 9.2 million b/d, an
increase of 10.1% from the 2017 average.During the fourth quarter of 2018, the tanker
fleet of vessels over 10,000 deadweight tons (“dwt”) increased by 1.8 million dwt as the crude fleet increased by 1.5
million dwt, with VLCCs growing by 2.2 million dwt while the Suezmax and Aframax fleets saw declines of 0.2 and 0.6 million dwt,
respectively. The product carrier fleet expanded by 0.4 million dwt with LR1s declining by 0.2 million dwt and MRs increasing by
0.6 million dwt. Year over year, the size of the tanker fleet increased by 6.2 million dwt with the largest increases in the VLCC,
Suezmax and MR sectors, while Aframaxes and Panamaxes saw modest growth in the fleet size as scrapping during the period tempered
newbuilding deliveries.During the fourth quarter of 2018, the crude
tanker orderbook decreased by 1.4 million dwt overall led by declines in the VLCC orderbook of 2.5 million dwt, with Aframaxes
showing a decline of 0.3 million dwt, while the Suezmax orderbook increased by 1.4 million dwt. The product carrier orderbook decreased
by 0.6 million dwt, with the Panamax orderbook increasing by 0.1 million dwt and the MR orderbook decreasing by 0.7 million dwt.From the end of the fourth quarter of 2017
through the end of the fourth quarter of 2018, the total tanker orderbook declined by 7.3 million dwt, with declines in all sectors:
VLCC 0.8 million dwt, Suezmax 1.4 million dwt, Aframax 3.2 million dwt, Panamax 0.1 million dwt and MR 1.8 million dwt.VLCC freight rates were significantly better
during the fourth quarter of 2018 compared with the third quarter of 2018, reaching two-year highs. Other crude sectors showed
similar strength. Continued strength in oil demand, reduced crude inventories, and a spike in OPEC production in the third quarter
all led to the strength in the market. MR rates began the quarter on a weak note then gradually strengthened through the rest of
the quarter and into the first quarter of 2019. The first quarter of 2019 similarly began with strength, however the OPEC cuts
during the fourth quarter have put downward pressure on rates.

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| International Seaways, Inc. |  |


RESULTS FROM VESSEL OPERATIONS

Crude Tankers


RESULTS FROM VESSEL OPERATIONS

(a)Adjusted income from vessel operations by segment is before general and administrative expenses,
third-party debt modification fees, separation and transition costs, and loss on disposal of vessels and other property, including
impairments.
(b)The average is calculated to reflect the addition and disposal of vessels during the year.
(c)Revenue days represent ship-operating days less days that vessels were not available for employment
due to repairs, drydock or lay-up. Revenue days are weighted to reflect the Company’s interest in chartered-in vessels.
(d)Ship-operating days represent calendar days.
(e)Vessels time and spot chartered-in under operating leases are related to the Company’s Crude
Tankers Lightering business.The following table provides a breakdown of
TCE rates achieved for the years ended December 31, 2018, 2017 and 2016 between spot and fixed earnings and the related revenue
days. The information in these tables 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 $721, $726 and $748 per day in 2018,
2017 and 2016, respectively, as well as revenue and revenue days for which recoveries were recorded by the Company under its loss
of hire insurance policies.


RESULTS FROM VESSEL OPERATIONS

During 2018, TCE revenues for the Crude Tankers
segment decreased by $3,288, or 2%, to $175,524 from $178,812 in 2017. Such decrease resulted from (i) lower average blended rates
in the VLCC, Aframax and Panamax sectors aggregating approximately $32,657, with the decline for the VLCCs being the most significant,
(ii) a decrease in revenue of $11,948 associated with the sale of the Company’s only ULCC, which was idle in 2018 prior to
its sale in June 2018, and (iii) a 424-day reduction in Aframax revenue days, which led to a revenue decline of $5,368 and was
driven by the sales of two 2001-built Aframaxes during 2018. These decreases in TCE revenues were offset substantially by an increase
of $36,792 relating to a 1,682-day increase in VLCC, Suezmax and Panamax revenue days, and a $9,134 increase in revenue in the
Crude Tankers Lightering business during the current year. The increased revenue days primarily reflected the acquisitions of (a)
two 2017-built Suezmaxes, each of which delivered to the Company in July 2017, (b) one 2010-built VLCC which delivered to the Company
in November 2017, (c) a 2015-built and five 2016-built VLCCs which delivered to the Company in June 2018, and (d) 347 fewer drydock
days in the Panamax fleet in 2018 compared with 2017. The disposals of a 2001-built VLCC that was held-for-sale as of the end of
August 2018 through its sale in October 2018, a 2000-built VLCC in April 2018 and a 2002-built Panamax in September 2018 partially
offset the impact of the increased revenue days described above. In addition, the Company sold two 2001-built Aframaxes during
2018. There was a larger disparity in the spot rates earned by the Company’s modern and older VLCCs in the current year versus
2017. VLCCs aged 15 years or less earned an average daily rate of $21,813 per day as compared to the rate for older VLCCs of $12,477
per day in 2018, while in 2017 the VLCCs under 15 years of age earned $26,968 per day as compared to the rate for older VLCCs of
$21,898 per day. The market conditions for VLCCs improved significantly during the fourth quarter of 2018 as compared to the first
three quarters of 2018 and the disparity in rates tightened, as the VLCCs aged 15 years or less earned a rate of $33,276 per day
as compared to a rate of $26,583 for the older VLCCs.Vessel expenses increased by $7,854 to $95,090
in 2018 from $87,236 in 2017. An increase of approximately $12,840 was attributable to the VLCC and Suezmax sectors and was driven
principally by the vessel acquisitions discussed above. Such increase was offset by a decrease of $3,459 in the Panamax fleet primarily
relating to lower drydock deviation costs, the timing of repairs and the delivery of spares, and the sale of a 2002-built Panamax
in September 2018. The sale of the ULCC noted above also resulted in a $1,805 decrease in vessel expenses in 2018. Charter hire
expenses increased by $10,158 to $23,809 in 2018 from $13,651 in 2017 resulting from the impact of the Company executing sale and
leaseback transactions for two 2009-built Aframaxes in March 2018 and an increase in chartered-in vessels in the Crude Tankers
Lightering business to support increased full service lightering activity, either on a spot or short-term time charter basis which
accounted for $5,316 of the increase. The bareboat charters associated with the sold and leased back Aframaxes are for periods
ranging from 70 to 73 months and contain purchase options executable by the Company, commencing in the first quarter of 2021. Depreciation
and amortization decreased by $1,871 to $54,431 in 2018 from $56,302 in 2017, principally resulting from the impact of reductions
in depreciable vessel bases that resulted from impairment charges on 13 vessels recorded in the third and fourth quarters of 2017
and the vessel sales and sale and leaseback transactions described above. These factors were offset to a large extent by the vessel
acquisitions described above.Excluding depreciation and amortization, and
general and administrative expenses, operating income for the Crude Tankers Lightering business was $8,122 for 2018 and $5,062
for 2017, with the performance in the second half of 2018 ending up much stronger than the first half. To support its operations,
the Crude Tankers Lightering business time chartered in an Aframax on a short-term basis in late June 2018. This proved to be timely
since rates on Aframaxes in the Caribbean spiked later in the year. The increase in the current year’s operating income as
compared to the prior year primarily reflects a higher volume of full service and service support only lighterings in the current
year. In 2018, 49 full service and 355 service support only lighterings were performed, as compared to 27 full service and 325
service support only lighterings in 2017. Additionally, during 2018 the Crude Tankers Lightering business utilized one of its chartered-in
Aframaxes on seven spot voyages, there were no such spot voyages performed in 2017. Increased U.S. exports will likely continue
to require transshipment during 2019, regardless of the eventuality of any deep-water terminals.During 2017, TCE revenues for the Crude Tankers
segment decreased by $79,359 or 31%, to $178,812 from $258,171 in 2016. Such decrease principally resulted from the impact of significantly
lower average blended rates in the VLCC, Aframax, Panamax and ULCC sectors aggregating approximately $84,155. Further contributing
to the decrease was a decrease in revenue days in the Panamax and Aframax sectors, which had the effect of decreasing revenue by
approximately $6,428. The decrease in Panamaxes and Aframax revenue days reflects 319 incremental drydock and repair days in 2017.
These declines in TCE revenues were partially offset by $6,268 in total revenues contributed by the two 2017-built Suezmaxes and
the 2010-built VLCC, which were acquired by the Company in July 2017 and November 2017, respectively. Also serving to offset the
decreases in revenue during 2017 were the increased activity levels in the Crude Tankers Lightering business, which resulted in
a $5,037 increase in Lightering revenues to $25,478 in 2017 from $20,441 in 2016.Vessel expenses increased by $2,960 to $87,236
in 2017 from $84,276 in 2016. The increase was primarily attributable to (i) a $2,418 increase related to the Suezmax acquisitions
discussed above, (ii) a reserve of $388 which was recorded during the second quarter of 2017 for a potential assessment by the
trustees of the Marine Navy Ratings Pension Fund (“MNRPF”), as discussed in Note 20, “Contingencies,” to
the Company’s consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data,”
(iii) a $1,367 increase in drydock deviation costs incurred for the Panamax fleet, and (iv) a $900 increase due to increased activity
in the Crude Tankers Lightering business. Such increases were partially offset by a $2,079 favorable variance in net insurance
claim deductible costs in the Panamax fleet in 2017. Charter hire expenses increased by $3,919 to $13,651 in 2017 from $9,732 in
2016 as a result of an increase in chartered-in Aframaxes and workboats employed in the Crude Tankers Lightering business in the
2017. The only vessels in the segment chartered-in by the Company in either 2017 or 2016 were the vessels chartered-in by the Crude
Tankers Lightering business. Depreciation and amortization increased by $3,907 to $56,302 in 2017 from $52,395 in 2016. Such increase
reflects the delivery of the two Suezmaxes and one VLCC noted above and increased drydock amortization.


RESULTS FROM VESSEL OPERATIONS

Excluding depreciation and amortization, and
general and administrative expenses, operating income for the Crude Tankers Lightering business was $5,062 for 2017 and $4,822
for 2016. Although there was an increase in the number of full service lighterings performed in 2017, 27 as compared to 19 in 2016,
the growth in operating income between 2016 and 2017 was relatively flat, primarily due to lower margins earned on jobs performed
in the third quarter of 2017. The lower margins were as a result of increased charter hire expense, as Aframaxes were spot chartered-in
at higher rates because of significant hurricane activity during the third quarter of 2017. In addition, there were more time chartered-in
workboats in the six months ended December 31, 2017 compared to the same period in 2016. However, the higher level of lightering
activity anticipated in the second half of 2017 did not materialize as the number of service-only and full service lighterings
declined in the second half of 2017 compared with the first six months of 2017.Product Carriers


RESULTS FROM VESSEL OPERATIONS

The following table provides a breakdown of
TCE rates achieved for the years ended December 31, 2018, 2017 and 2016 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 certain of the segment’s
vessels participate and excludes commercial pool fees/commissions averaging approximately $444, $404 and $442 per day in 2018,
2017 and 2016, respectively, as well as revenue and revenue days for which recoveries were recorded by the Company under its loss
of hire insurance policies.


RESULTS FROM VESSEL OPERATIONS

During 2018, TCE revenues for the Product
Carriers segment decreased by $28,607, or 30%, to $67,576 from $96,183 in 2017. A 2,265-day decrease in MR revenue days, driven
by the sales of seven MRs between August 2017 and December 2018 and the redelivery of three MRs to their owners between December
2017 and June 2018 at the expiry of their respective bareboat charters, contributed approximately $23,288 of the overall decrease.
Period-over-period decreases in average daily blended rates earned by all Product Carrier fleet sectors also accounted for a decrease
in revenue of approximately $5,012.Vessel expenses decreased by $13,485 to $40,615
in 2018 from $54,100 in 2017, which was principally attributable to a 2,297-day decrease in owned and bareboat chartered-in days,
as detailed above. Charter hire expenses decreased by $6,949 to $21,101 in 2018 from $28,050 in 2017, reflecting the redeliveries
described above along with decreases in the daily charter rates for the Company’s time chartered-in MR fleet, which were
effective in the third quarter of 2017. Depreciation and amortization decreased by $4,556 to $17,862 in 2018 from $22,418 in 2017
resulting primarily from the vessel sales noted above and reductions in depreciable vessel bases that resulted from impairment
charges on two vessels recorded in the third quarter of 2017.


RESULTS FROM VESSEL OPERATIONS

During 2017, TCE revenues for the International
Product Carriers segment decreased by $30,131, or 24%, to $96,183 from $126,314 in 2016. This resulted primarily from declining
average daily blended rates earned in all Product Carrier fleet sectors, which accounted for $27,625 of the overall decrease. A
230-day decrease in revenue days in the segment also contributed approximately $2,506 of the overall decrease. The decline in revenue
days was driven by the Company’s sale of a 2001-built MR, which was delivered to buyers in August 2017, and a 2004-built
MR, which was delivered to buyers in November 2017.Vessel expenses decreased by $4,512 to $54,100
in 2017 from $58,612 in 2016. The two MRs sold during 2017 had an aggregate vessel expense reduction of $1,841 year-over-year.
The remaining decline was principally attributable to a $2,991 favorable variance in net insurance claim deductible costs in the
segment in 2017. Charter hire expenses increased by $371 to $28,050 in 2017 from $27,679 in 2016, reflecting an increase in the
daily charter hire rates for the Company’s bareboat chartered-in MR fleet, which was effective beginning in the fourth quarter
of 2016, partially offset by decreases in the daily charter hire rates for the Company’s time chartered-in MR fleet, which
were effective beginning in the third quarter of 2017. Depreciation and amortization decreased by $4,278 to $22,418 in 2017 from
$26,696 in 2016. Such decrease reflects (i) the impact of reductions in depreciable vessel bases that resulted from impairment
charges on nine vessels recorded in the third and fourth quarters of 2016 and two vessels in the third quarter of 2017, and (ii)
the sale of the two MRs during 2017 discussed above.


SEPARATION AND TRANSITION COSTS

INSW and OSG also entered into a transition
services agreement (the “TSA” or “Transition Services Agreement”) pursuant to which both parties agreed
to provide each other with specified services for a limited time to help ensure an orderly transition following the Distribution.
The Transition Services Agreement specifies the calculation of the costs for these services. Pursuant to the terms of the agreement,
OSG provided certain administrative services, including administrative support services related to benefit plans, human resources
and legal services, for a transitional period after the spin-off. Similarly, INSW agreed to provide certain limited transition
services to OSG, including services relating to accounting activities and information and data provision services. The Transition
Services Agreement terminated on June 30, 2017.During the year ended December 31, 2017 and
2016, INSW earned fees totaling $63 and $27, respectively, for services provided to OSG pursuant to the terms of the Transition
Services Agreement and incurred fees totaling $731and $31, respectively, for services received from OSG, including INSW’s
share of the compensation costs of former OSG corporate employees providing services to one or both companies during the defined
transitional period, which ended on June 30, 2017.


OTHER EXPENSE

Other expense of $1,346 for the year ended
December 31, 2016 was primarily related to a net loss of $1,342 realized on the repurchases and mandatory principal prepayments
of the then outstanding INSW Term Loan, which included a $5,097 write-off of unamortized original issue discount and deferred financing
costs associated with such principal reductions, net of $3,755 discount on repurchase of debt. These transactions were accounted
for as partial extinguishments of debt.


INTEREST EXPENSE

Interest expense was $60,231 in 2018, compared
with $41,247 in 2017. Interest expense incurred on the debt facilities entered into by the Company during the second quarter of
2018 (as discussed in Note 8, “Debt,” to the accompanying consolidated financial statements as set forth in Item 8,
 “Financial Statements and Supplementary Data”) accounted for $12,802 of the increase, and the balance of the increase
before the impact of pension and interest rate caps and swaps was primarily due to the higher average interest rates and average
outstanding principal balances under the 2017 Debt Facilities, which replaced the INSW Facilities in June 2017.Interest expense for the year ended December
31, 2017 was higher than interest expense for the year ended December 31, 2016 primarily due to the higher average interest rates
and outstanding principal balances under the 2017 Debt Facilities, which replaced the INSW Facilities in June 2017. This was partially
offset by lower amortization of deferred finance costs in the 2017 period aggregating $220 attributable to costs incurred to amend
the INSW Facilities in 2016 and costs related to the 2017 Debt Facilities. Refer to Note 8, “Debt,” in the accompanying
consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data” for additional
information.


EBITDA AND ADJUSTED EBITDA

·EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital
expenditures or contractual commitments;
·EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital
needs; and
·EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements
necessary to service interest or principal payments, on our debt.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.The following table reconciles net loss, as
reflected in the consolidated statements of operations set forth in Item 8, “Financial Statements and Supplementary Data,”
to EBITDA and Adjusted EBITDA:


LIQUIDITY AND SOURCES OF CAPITAL

Restricted cash of $59,331 as of December
31, 2018 represents legally restricted cash relating to the 2017 Term Loan, the Sinosure Credit Facility, the ABN Term Loan Facility,
and the 10.75% Subordinated Notes. Such facilities stipulate that cash accounts be maintained which are limited in their use to
pay expenses related to drydocking the vessels and servicing the debt facilities and, in the case of the 2017 Term loan, that cash
proceeds from the sale of collateral vessels be reinvested in vessels within 12 months of such sale or be used to prepay the principal
amount outstanding of the INSW Facilities.As of December 31, 2018, we had total debt
outstanding (net of original issue discount and deferred financing costs) of $810,667 and a total debt to total capitalization
of 44.5%, which compares with 33.7% at December 31, 2017. Our debt profile reflects actions taken during 2018 as discussed further
below.Sources, Uses and Management of CapitalWe have maintained a strong balance sheet
which has allowed us to take advantage of attractive strategic opportunities during the low end of the tanker cycle. Through disciplined
capital allocation and without issuing equity, we successfully funded over $600,000 worth of vessel acquisitions between July 2017
and June 2018 using cash generated from operations, proceeds from the sale of older vessels and the issuance or assumption of debt
while maintaining what we believe to be a reasonable financial leverage for the current point in the tanker cycle and one of the
lowest loan to value profiles in public company shipping sector.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, comply with international shipping standards and environmental
laws and regulations, repurchase our outstanding shares and repay or repurchase our outstanding loan facilities.The Company has contractual commitments for
the purchase and installation of marine exhaust gas cleaning systems (“Scrubbers”) on 10 of its modern VLCCs. The Company
also has contractual commitments for the purchase and installation of ballast water treatment systems on 15 vessels with options
for the purchase and installation of systems for up to an additional 10 vessels in the Company’s fleet as of December 31,
2018. These systems are intended to be funded with available liquidity, proceeds from the sales of vessels, and proceeds from the
issuance of equity and/or debt as permitted under the Company’s existing debt facilities. As of December 31, 2018, the Company’s
aggregate purchase commitments for these systems are approximately $50,931 (see Aggregate Contractual Obligations Table below)
and could increase by up to an additional $14,000 if all the remaining options for the additional units are exercised. Such options
expire between May 2019 and December 2020.On October 19, 2018, the Company filed a Registration
Statement on Form S-3 (“Shelf Registration”) with the Securities and Exchange Commission (“SEC”). Following
the effective date of the Shelf Registration, the Company may from time to time offer equity or debt securities at an aggregate
offering price not to exceed $100,000. This Shelf Registration replaced the remaining $75,000 balance of a shelf registration on
Form S-3 that was declared effective in May 2018.As described in Item 5, “Market for
Registrant’s Common Equity, Related Stock Matters and Issuer Purchases of Equity Securities,” on January 9, 2019, the
Company entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Evercore Group L.L.C. and
Jefferies LLC, as our sales agents, relating to the common shares of the Company. In accordance with the terms of the Distribution
Agreement, we may offer and sell common shares having an aggregate offering price of up to $25,000 from time to time through the
sales agents.The sales agents are not required to sell
any specific number or dollar amount of our common shares but will use their commercially reasonable efforts, as our agents and
subject to the terms of the Distribution Agreement, to sell the common shares offered, as instructed by us.We intend to use the net proceeds of this
offering, after deducting the sales agents’ commissions and our offering expenses, for general corporate purposes. This may
include, among other things, additions to working capital, repayment or refinancing of existing indebtedness or other corporate
obligations, financing of capital expenditures (including the purchase of marine exhaust gas cleaning systems that reduce sulfur
emissions to comply with upcoming implementation of new IMO standards) and acquisitions and investment in existing and future projects.
As of the date hereof, the Company has neither sold or undertaken to sell any shares pursuant to the Distribution Agreement.


LIQUIDITY AND SOURCES OF CAPITAL

Also, on March 5, 2019, the Company’s
Board of Directors approved a resolution to reauthorizing the Company’s $30,000 stock repurchase program for another 24-month
period ending March 5, 2021.As described in Item 1, “Business — Overview
and Recent Developments,” on April 18, 2018, the Company entered into a stock purchase and sale agreement with Euronav for
the purchase of the holding companies for six VLCCs from Euronav for an aggregate price of $434,000, inclusive of any assumed debt,
in connection with the closing of Euronav’s acquisition of Gener8 Maritime, Inc. (the ‘Transaction”). In connection
with the Transaction and in order to finance portions of the consideration in connection therewith, and for other general corporate
purposes, as applicable, the Company completed the following transactions during the first half of 2018:
(i)Sale of five of its vessels comprising one VLCC tanker, one Aframax tanker, and three MR tankers (one
of which the Company agreed to sell in 2017) for approximately $54,850 in net proceeds;
(ii)Entry into sale-leaseback transactions yielding approximately $39,300 in net proceeds in respect of
two Aframax tankers in the first quarter of 2018;
(iii)Refinancing of its FSO Joint Venture pursuant to which on March 29, 2018, the FSO Joint Venture entered
into a $220,000 Senior Secured Credit Facility. Such agreement is made up of a term loan of $110,000 and a revolving credit facility
of $110,000 available to the FSO Joint Venture. The FSO Joint Venture drew down the facility in full on April 26, 2018 and distributed
$110,000 of the loan proceeds to the Company;
(iv)Sale of $25,000 of its 8.50% notes (the "8.50% Senior Notes") in an SEC-registered offering
on May 31, 2018;
(v)Sale of $30,000 of its 10.75% subordinated step-up notes due 2023 (the "10.75% Subordinated Notes")
in a private placement to certain funds and accounts managed by BlackRock, Inc. ("BlackRock") on June 13, 2018;
(vi)Entry into a credit agreement, secured by the Seaways Raffles, a 2010-built VLCC tanker, and dated
as of June 7, 2018, by and among Seaways Shipping Corporation, a Marshall Islands corporation and wholly-owned subsidiary of the
Company, the Company (as a guarantor), certain other guarantors which are subsidiaries of the Company, lenders named therein and
ABN AMRO Capital USA LLC as lead arranger and facility agent (the "ABN Term Loan Facility"), and the related $28,463
drawdown thereunder on June 12, 2018;
(vii)Entry into a second amendment (the "2017 Debt Facilities Second Amendment") of the Credit
Agreement dated as of June 22, 2017 (as amended by that certain First Amendment to Credit Agreement dated as of July 24, 2017 and
by the 2017 Debt Facilities Second Amendment, the "2017 Term Loan Facility"), by and among the Company, International
Seaways Operating Corporation ("ISOC"), OIN Delaware LLC, the Subsidiary Guarantors from time to time party thereto,
the Lenders from time to time party thereto, Jefferies Finance LLC, as administrative agent for the Lenders and as collateral agent
and mortgage trustee for the Secured Parties, Skandinaviska Enskilda Banken AB (publ), as swingline lender with effect as of the
Closing Date;
(viii)The assumption of outstanding debt under the Sinosure Credit Facility (as defined below) with effect
as of June 14, 2018; and
(ix)Sale of the Seaways Laura Lynn, to Euronav in late June 2018 for approximately $32,300 in net proceeds.The balance payable to Euronav for the other
assets and liabilities of the vessel holding companies acquired was determined to be $20,935 and was paid in full to Euronav in
October 2018.The following is a summary description
of some of the key terms of the various debt facilities that were sources of capital to the Company during 2018. See Note 8, “Debt,”
in the accompanying consolidated financial statements as set forth in Item 8, “Financial Statements and Supplementary Data,”
for additional information.ABN Term Loan FacilityOn June 7, 2018, the Company entered into
the ABN Term Loan Facility. Subsequently on June 12, 2018, the Company borrowed approximately $28,463 secured by the Seaways
Raffles vessel. The ABN Term Loan Facility bears interest at a rate of 3-month LIBOR plus a margin of 3.25% and is repayable in
19 quarterly installments of approximately $869 with a balloon repayment payable on the maturity date in 2023. Additionally, the
ABN Term Loan Facility includes certain financial covenants and is guaranteed by the Company. The Company's guarantee is unsecured.
The Company used the proceeds from the ABN Term Loan Facility to fund a portion of the Transaction.2017 Debt Facilities Second AmendmentOn June 14, 2018, the Company entered into
the 2017 Debt Facilities Second Amendment. The amendment (i) increased the interest rate margin from 4.50% per annum to 5.00% per
annum for loans determined by the Alternate Base Rate (as defined in the 2017 Term Loan Facility) and from 5.50% per annum to 6.00%
per annum for any loan determined by reference to the LIBOR Rate and (ii) allowed a dividend of $110,000 to be made from the Company's
FSO Joint Venture to the Company without incorporating such funds into the cash sweep provisions of the 2017 Term Loan Facility,
(iii) permitted the acquisition of the holding companies of the six VLCCs as Unrestricted Subsidiaries and permitted those entities
and their assets to be subject to the Sinosure Credit Facility and be subject to its liens and permitted the funding of the certain
liquidity and other accounts in connection with that acquisition and (iv) made certain other amendments to covenants under the
2017 Term Loan Facility. As a condition to the effectiveness of the 2017 Debt Facilities Second Amendment, the Company prepaid
$60,000 of the amount outstanding under the facility together with a premium equal to 1% of the $60,000 prepayment and paid a fee
to the lenders of 1% of the 2017 Term Loan Facility debt outstanding after that repayment.


LIQUIDITY AND SOURCES OF CAPITAL

Seventy-five percent of Excess Cash Flow (as
defined in the 2017 Debt Facilities credit agreement) must be used to prepay the outstanding principal balance of 2017 Term Loan
Facility. To the extent permitted under the terms of the 2017 Debt Facilities we may also use cash generated by operations to finance
capital expenditures to modernize and grow our fleet. The 2017 Debt Facilities contain certain restrictions relating to new borrowings
and INSW’s ability to receive cash dividends, loans or advances from ISOC and its subsidiaries that are Restricted Subsidiaries.
As of December 31, 2018, the permitted cash dividends that can be distributed to INSW by ISOC under the 2017 Term Loan Facility
was $12,500.Sinosure Credit FacilityAs part of the Transaction, the Company acceded
as a guarantor to that certain China Export & Credit Insurance Corporation ("Sinosure") facility agreement originally
dated November 30, 2015, as supplemented by a supplemental agreement dated December 28, 2015, as amended and restated by an amending
and restating deed dated June 29, 2016, as supplemented by a supplemental agreement dated November 8, 2017, as supplemented by
a consent, supplemental and amendment letter, dated April 2, 2018 (the facility agreement as of such date, the "Original Sinosure
Facility") and as amended and restated by an amending and restating agreement dated June 13, 2018 (the "2018 Amending
and Restating Agreement"), by and among Gener8 Maritime Subsidiary VII, Inc., Seaways Holding Corporation, a wholly owned
subsidiary of the Company, the Company, Citibank, N.A. (London Branch), The Export-Import Bank of China and Bank of China (New
York Branch) (and its successors and assigns) and certain other parties thereto (the "Sinosure Credit Facility"). The
Sinosure Credit Facility is a term loan facility comprised of six loans, each secured by one of the six VLCCs acquired. As of June
14, 2018, it had a principal amount outstanding of approximately $310,968 and bears interest at a rate of LIBOR plus a margin of
2%. Each loan under the Sinosure Credit Facility requires quarterly amortization payments of 12/3% (based
on the original outstanding amount of each Vessel loan) together with a balloon repayment payable on the termination date of each
loan. Each of the loans under the Sinosure Credit Facility will mature 144 months after its initial utilization date. The 2018
Amending and Restating Agreement effects certain amendments to the Original Sinosure Facility as agreed between the parties thereto
and necessitated by the Transaction. The Sinosure Credit Facility is guaranteed by the Company and Seaways Holding Corporation.In conjunction with the Transaction, the Company
acquired a pay-fixed, receive-variable interest rate swap agreement with a major financial institution that effectively fixes the
interest rate on the entire variable interest rate borrowings outstanding under the Sinosure Credit Facility. The Interest Rate
Swap contains no leverage features. In July 2018, the Company amended the interest rate swap agreement to increase the fixed rate
from 2.05% to 2.99%, effective September 21, 2018. The maturity date of March 21, 2022 remained unchanged. In conjunction with
such amendment, the Company received a cash settlement of $7,677 from the counterparty to the transaction.The Sinosure Credit Facility contains certain
collateral maintenance and financial covenants with which the obligors (as defined in the Sinosure Credit Facility) are required
to comply. One such covenant is the Interest Expense Coverage Ratio covenant (the “ICR Covenant”), which for Seaways
Holding Corporation, shall not be less than 2.00 to 1.00 during the period commencing on July 1, 2018 through June 30, 2019 and
will be calculated on a trailing six, nine and twelve-month basis from December 31, 2018, March 31, 2019 and June 30, 2019, respectively.
For the Company, the interest expense coverage ratio shall not be less than 2.25 to 1.00 for the period commencing on July 1, 2019
through June 30, 2020 and no less than 2.50 to 1.00 for the period commencing on July 1, 2020 and thereafter and shall be calculated
on a trailing twelve-month basis. Under the terms of the Sinosure Credit Facility, a potential breach of the ICR Covenant by an
Obligor on a test date (December 31, March 31, June 30 and September 30) (a “Test Date”) falling on or prior December
31, 2019 can be cured or remedied by the deposit of additional cash and cash equivalents into a restricted Minimum Liquidity Account.
The amount of cash and cash equivalents required to be so deposited is calculated by reference to the Consolidated EBITDA of Seaways
Holding Corporation (the “ICR Cure Mechanism”). However, any such remedy and the form of the same for a potential breach
of the ICR Covenant on a Test Date falling on or after January 1, 2020, shall be considered and determined by the Lenders in their
absolute discretion.On March 1, 2019, the Sinosure Credit
Facility lenders consented to extending the ICR Cure Mechanism discussed above based on the Consolidated EBITDA of Seaways
Holding Corporation for an additional period of one year to Test Dates falling on or prior to December 31, 2020. 8.5% Senior NotesOn May 31, 2018, the Company completed a registered
public offering of $25,000 aggregate principal amount of its 8.50% senior unsecured notes due 2023 (the “8.5% Senior Notes”),
which resulted in aggregate net proceeds to the Company of approximately $23,458, after deducting commissions and estimated expenses.


LIQUIDITY AND SOURCES OF CAPITAL

The Company issued the Notes under an indenture
dated as of May 31, 2018 (the “Base Indenture”), between the Company and The Bank of New York Mellon, as trustee (the
 “Trustee”), as supplemented by a supplemental indenture dated as of May 31, 2018 (the “First Supplemental Indenture”
and, together with the Base Indenture, the “Indenture”), between the Company and the Trustee. The Notes will mature
on June 30, 2023 and bear interest at a rate of 8.50% per annum. Interest on the Notes will be payable in arrears on March 30,
June 30, September 30 and December 30 of each year, commencing on September 30, 2018. The terms of the Indenture, among other things,
limit the Company’s ability to merge, consolidate or sell assets.The Company may redeem the Notes at its option,
in whole or in part, at any time on or after June 30, 2020 at a redemption price equal to 100% of their principal amount, plus
accrued and unpaid interest to, but excluding, the redemption date. In addition, if the Company undergoes a Change of Control (as
defined in the Indenture) the Company may be required to repurchase all of the Notes at a purchase price equal to 101% of the principal
amount of the Notes, plus accrued and unpaid interest (including additional interest, if any), to, but excluding, the repurchase
date.The Indenture contains certain restrictive
covenants, including covenants that, subject to certain exceptions and qualifications, restrict our ability to make certain payments
if a default under the Indenture has occurred and is continuing or will result therefrom and require us to limit the amount of
debt we incur, maintain a certain minimum net worth and provide certain reports. The Indenture also provides for certain customary
events of default (subject, in certain cases, to receipt of notice of default and/or customary grace or cure periods).10.75% Subordinated NotesOn June 13, 2018, the Company completed the
Private Placement to certain funds and accounts managed by BlackRock. The 10.75% Subordinated Notes were issued under an indenture
(the "Subordinated Notes Indenture"), between the Company and GLAS Trust Company LLC, as trustee (the "Subordinated
Notes Trustee"). The 10.75% Subordinated Notes are unsecured and rank junior to the 8.5% Senior Notes, the Company's guarantees
of the 2017 Term Loan Facility, the ABN Term Loan Facility and Sinosure Credit Facility and other unsubordinated indebtedness of
the Company. The Private Placement resulted in aggregate proceeds to the Company of approximately $28,000, after deducting fees
paid to the purchasers of those notes and estimated expenses. The Company used the net proceeds from the Private Placement, together
with the net proceeds from the 8.5% Senior Notes, to fund a portion of the Transaction and the offer to prepay a portion of the
obligation of ISOC under the 2017 Term Loan Facility.The 10.75% Subordinated Notes bear interest
from June 13, 2018 at an annual rate of 10.75%; provided that the 10.75% Subordinated Notes shall bear interest at the rate of
13.00% per annum beginning on the earlier of (i) December 15, 2020 and (ii) if the Refinance Date (as defined below) has occurred,
the later of the Refinance Date and June 15, 2020. Interest on the 10.75% Subordinated Notes is payable quarterly in arrears on
the 15th day of March, June, September and December of each year, commencing on September 15, 2018.The stated maturity date of the 10.75% Subordinated
Notes is June 15, 2023; provided that in certain circumstances after the indebtedness outstanding under the 2017 Term Loan Facility
(as amended by the 2017 Debt Facilities Second Amendment) ceases to be outstanding (such date, the "Refinance Date"),
the stated maturity of the 10.75% Subordinated Notes will become June 15, 2022. The 10.75% Subordinated Notes may be redeemed,
in whole or in part, at any time prior to June 15, 2020, at a redemption price equal to 100% of the aggregate principal amount
of the 10.75% Subordinated Notes being redeemed, plus accrued and unpaid interest to, but not including, the date of redemption,
plus a "make-whole" premium.  On or after June 15, 2020, the Subordinated Notes may be redeemed at par, plus
accrued and unpaid interest.The Subordinated Notes Indenture contains
covenants restricting the ability of the Company and its subsidiaries to incur additional indebtedness, sell assets, incur liens,
amend the 2017 Term Loan Facility, enter into sale and leaseback transactions and enter into certain extraordinary transactions.
In addition, the Subordinated Notes Indenture prohibits the Company from paying any dividends unless certain financial and other
conditions are satisfied. The Subordinated Notes Indenture also contains events of default consistent with those under the 2017
Term Loan Facility.The 10.75% Subordinated Notes have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold except
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.On September 17, 2018, the Company repurchased
$2,069 of the 10.75% Subordinated Notes at a price equal to 100% of the principal amount.

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LIQUIDITY AND SOURCES OF CAPITAL

On December 28, 2018, the Company entered
into a supplemental indenture (the “First Supplemental Indenture”) with the Subordinated Notes Trustee to amend the
terms of the 10.75% Subordinated Notes to, among other matters, more closely reflect the asset sale provisions of the 2017 Term
Loan Facility. As a condition to the effectiveness of the First Supplemental Amendment, the Company paid a fee to the holders of
the Notes of 0.50% of the outstanding amounts of the Notes.Outlook We believe our balance sheet gives us flexibility
to continue pursuing fleet renewal or potential strategic opportunities that may arise within the diverse sectors in which we operate
and at the same time positions us to generate sufficient cash to support our operations over the next twelve months. We or our
subsidiaries may in the future complete transactions consistent with achieving the objectives of our business plan.Carrying Value of VesselsAll of the Company’s owned vessels are
pledged as collateral under certain of the Company’s debt facilities including the 2017 Debt Facilities, Sinosure Credit
Facility, and ABN Term Loan Facility. The following table presents information with respect to the carrying amount of the Company’s
pledged vessels by type and indicates whether their fair market values, which are estimated by taking an average of two third-party
vessel appraisals, are below their carrying values as of December 31, 2018. 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.Footnotes to the following table exclude
those vessels with an estimated market value in excess of their carrying value.

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LIQUIDITY AND SOURCES OF CAPITAL

(1)As of December 31, 2018, the Crude Tankers segment includes vessels with an aggregate carrying
value of $429,045, which the Company believes exceeds their aggregate market value of approximately $341,625 by $87,420.
(2)As of December 31, 2018, the Product Carriers segment includes vessels with an aggregate carrying
value of $269,645, which the Company believes exceeds their aggregate market value of approximately $202,300 by $67,345.


LIQUIDITY AND SOURCES OF CAPITAL

Off-Balance Sheet Arrangements As of December 31, 2018, the FSO Joint Venture
and the LNG Joint Venture had total bank debt outstanding of $739,071, of which $646,038 was nonrecourse to the Company.The FSO Joint Venture is a party to a number
of contracts: (a) the FSO Joint Venture is an obligor pursuant to a guarantee facility agreement dated as of July 14, 2017, by
and among, the FSO Joint Venture, ING Belgium NV/SA, as issuing bank, and Euronav and INSW, as guarantors (the ‘‘Guarantee
Facility’’); (b) the FSO Joint Venture is party to two service contracts with NOC (the ‘‘NOC Service Contracts’’);
and (c) the FSO Joint Venture is a borrower under a $220,000 secured credit facility by and among TI Africa and TI Asia, as joint
and several borrowers, ABN AMRO Bank N.V. and ING Belgium SA/NV, as Lenders, Mandated Lead Arrangers and Swap Banks, and ING Bank
N.V., as Agent and as Security Trustee.INSW severally guarantees the obligations
of the FSO Joint Venture pursuant to the Guarantee Facility and severally guarantees the obligations of the FSO Joint Venture to
Maersk Oil Qatar AS (“MOQ”) under the MOQ service contracts, which contracts were novated to NOC in July 2017 (the
 ‘‘MOQ Guarantee’’) for the period beginning on the novation date and severally guarantees the obligations
of the FSO Joint Venture under the NOC Service Contracts. The MOQ Guarantee expired following the receipt of the notification letter
from the Qatari tax authorities in January 2019 that the FSO Joint Venture has paid all Qatari taxes owed by the FSO Joint Venture
under such service contracts through the novation date.The FSO Joint Venture drew down on a $220,000
secured credit facility on April 26, 2018 (See Note 6, “Equity Method Investments” to the Company’s consolidated
financial statements as set forth in Item 8, “Financial Statements and Supplementary Data”) The Company provided a
guarantee for the $110,000 FSO Term Loan portion of the facility, which has an interest rate of LIBOR plus two percent and amortizes
over the remaining terms of the NOC Service Contracts, which expire in July 2022 and September 2022. INSW’s guarantee of
the FSO Term Loan has financial covenants that provide (i) INSW’s Liquid Assets shall not be less than the higher of $50,000
and 5% of Total Indebtedness of INSW, (ii) INSW shall have Cash of at least $30,000 and (iii) INSW is in compliance with the Loan
to Value Test (as such capitalized terms are defined in the Company guarantee or in the case of the Loan to Value Test, as defined
in the credit agreement underlying the Company’s 2017 Debt Facilities (see Note 8, “Debt,” to the accompanying
consolidated financial statements). The FSO Joint Venture has entered into floating-to-fixed interest rate swap agreements with
the aforementioned Swap Banks, which cover the notional amounts outstanding under the FSO Loan Facility and pay fixed rates of
approximately 4.858% and receive a floating rate based on LIBOR. These agreements have an effective date of June 29, 2018, and
maturity dates ranging from July to September 2022. As of December 31, 2018, the maximum aggregate amount of potential secured
bank debt principal payments (undiscounted) and interest rate swap obligations that INSW could be required to make was $93,548
and the carrying value of the Company’s guaranty in the accompanying consolidated balance sheet was $673.INSW maintains a guarantee in favor of Qatar
Liquefied Gas Company Limited (2) (‘‘LNG Charterer’’) relating to certain LNG Tanker Time Charter Party
Agreements with the LNG Charterer and each of Overseas LNG H1 Corporation, Overseas LNG H2 Corporation, Overseas LNG S1 Corporation
and Overseas LNG S2 Corporation (such agreements, the ‘‘LNG Charter Party Agreements,’’ and such guarantee,
the ‘‘LNG Performance Guarantee’’). INSW will pay QGTC an annual fee of $100 until such time that QGTC
ceases to provide a guarantee in favor of the LNG charterer relating to performance under the LNG Charter Party Agreements.OSG continues to provide a guarantee in favor
of the LNG Charterer relating to the LNG Charter Party Agreements (such guarantees, the ‘‘OSG LNG Performance Guarantee’’).
INSW will indemnify OSG for liabilities arising from the OSG LNG Performance Guarantee pursuant to the terms of the Separation
and Distribution Agreement. In connection with the OSG LNG Performance Guarantee, INSW paid a $135 annual fee to OSG for 2018,
which will increase to $145 in 2019 and will be terminated if OSG ceases to provide the OSG LNG Performance Guarantee.See Note 12, “Related Parties,”
to the Company’s consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data”
for additional information.In addition and 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 Company’s consolidated financial statements set forth in Item 8, “Financial
Statements and Supplementary Data,” for additional information.

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Aggregate Contractual ObligationsA summary of the Company’s long-term
contractual obligations as of December 31, 2018 follows:

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LIQUIDITY AND SOURCES OF CAPITAL

(1)Amounts shown include contractual interest obligations of floating rate debt estimated based on the
aggregate effective one-month LIBOR rate as of December 31, 2018 of 2.53% and applicable margin for the 2017 Term Loan Facility
of 6.0%. Management estimates that no prepayment will be required in 2019 for the 2017 Term Loan Facility as a result of estimated
Excess Cash Flow for the year ended December 31, 2018. Amounts shown for 2020 and beyond exclude any estimated repayment as a result
of Excess Cash Flow.
(2)Amounts shown include contractual interest obligations of floating rate debt estimated based on the
aggregate effective three-month LIBOR rate as of December 31, 2018 of 2.78% and applicable margin for the ABN Term Loan facility
of 3.25%.
(3)Amounts shown include contractual interest obligations of floating rate debt estimated based on (i)
the fixed rate stated in the related floating-to-fixed interest rate swap through the swap maturity date of March 21, 2022, or
(ii) the effective three-month LIBOR rate for periods after the swap maturity date, plus the applicable margin for the Sinosure
Credit Facility of 2.00%. The Company is a party to a floating-to-fixed interest rate swap covering the entire variable interest
rate borrowings outstanding under the Sinosure Credit Facility that effectively converts the Company’s interest rate exposure
under the Sinosure Credit Facility from a floating rate based on 3-month LIBOR to a fixed LIBOR rate of 2.99%.
(4)As of December 31, 2018, the Company had charter-in commitments for six vessels on leases that are
accounted for as operating leases. Certain of these leases provide the Company with various renewal and purchase options. The future
minimum commitments for time charters-in have been reduced to reflect estimated days that the vessels will not be available for
employment due to drydock. Upon adoption of ASU 2018-11, Leases (ASC 842), on January 1, 2019, a majority of the amounts
due under these operating lease obligations will be reflected on the Company’s consolidated balance sheet as lease liabilities
with corresponding right of use asset balances. See Note 2, “Summary of Significant Accounting Policies,” in the accompanying
consolidated financial statements set forth in Item 8, “Financial Statements and Supplementary Data,” for additional
information relating to the impact of the Company’s adoption of ASC 842.
(5)Represents the Company’s commitments for the purchase and installation of ballast water treatment
systems on 15 vessels and the purchase and installation of scrubbers on 10 of its VLCC tankers. In addition, the Company is party
to agreements granting INSW the option to purchase additional ballast water treatment systems for installation between 2019 and
2021 on 10 vessels. If exercised, these options could increase the Company’s commitments by up to approximately $14,000.
The Company’s ability to exercise the options expires between May 2019 and December 2020.