Tsakos Energy Navigation Limited (TEN) Q1 2016 Earnings Report, Transcript and Summary

Thank you for standing by ladies and gentlemen, and welcome to Tsakos Energy Navigation Conference Call on the First Quarter 2016 Financial Results. We have with us Mr. Takis Arapoglou, Chairman of the Board; Mr. Nikolas Tsakos, President and CEO; Mr. Paul Durham; Chief Financial Officer; and Mr. George Saroglou, Chief Operating Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advice you that the conference is being recorded today. I now pass the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relation Advisor of Tsakos Energy Navigation. Please go ahead, sir.

Thank you very much, and good morning to all of our participants. This is Nicolas Bornozis of Capital Link, investor relations advisor to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the first quarter of 2016. In case you do not have a copy of today's earnings release, please call us at 212-661-7566 or e-mail us at ten@capitallink.com and we will e-mail a copy to you right away. Please note that prior to today's conference call there was also a live audio and slide webcast, which can be accessed on the Company's website on the front page at www.tenn.gr. The conference call will follow the presentation slides, so please we urge you to access our presentation on the webcast. Please note that the slides of the webcast presentation will be available as an archive on the company's website after the conference call. Also please note that the slides of the webcast presentation are user controlled, and that means that by clicking on the proper button you can move to the next or to the previous slide on your own. At this time I would like to read the Safe Harbor statement. This conference call and slide presentation contain certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties which may affect TEN's business prospects and results of operations. Such risks are more fully disclosed in TEN's filings with the Securities and Exchange Commission. Ladies and gentlemen, at this point I'd like to turn the call over to Mr. Takis Arapoglou, the Chairman of the Board of Tsakos Energy Navigation. Mr. Arapoglou, please go ahead, sir.

Thank you, Nicholas. Good morning, everyone. Another quarter of healthy revenues and profitability as we continue to shift our ship employment policy towards longer-term charters to lock in high longer returns and offset market cyclicality, we are creating a strong and sustainable revenue flow. This will be further boosted by the additional accretive revenue from our record newbuilding program in the forthcoming months expected to contribute $100 million in EBITDA. I'd also like here to highlight and congratulate management and our anchor shareholder for their effective and continued focus on expenses. Operating expenses for the quarter declined, despite the addition of one extra vessel during the quarter, mainly due to outstanding technical management. Against very challenging surroundings in the shipping landscape right now, TEN is clearly a rare outstanding success. So once again, congratulations to the team. And we all look forward to more good news going forward. Over to you now, Nikolas Tsakos.

Thank you Chairman, and good morning to everybody. We have the great pleasure to have here not only our Chairman, but our Owner and Chairman and our Deputy Chairman, Mr. Joliffe and Mr. Arapoglou. So it's very nice to host all of you today on our results, on our first-quarter results. Again, we are looking at the market that is comfortable. It is positive and for the companies who are playing in the upper tier of the premier league, to put it in football terms, I think it is business is ample business is there to be taking also for long-term. This has been a quarter where the market has been very supportive. We have seen some cyclicality on the rates in the market. Our results actually were effected more because we decided to be preemptive and take out some of our largest ships, our suezmaxes, to complete their drydocking and special surveys in order to fulfill some regularity obligations that we have to do before the end of the second quarter in the first quarter. Our results has been positive, but as Paul will say, they would have been much more positive if we had not taken some off-hire. And of course, I think because of our very high utilization, which ranges between 99% and 100% usually, 95.5% still is much higher than the market than the market usual - than the market norm. However for us, this 95.5% makes, Paul, a difference that you will talk us about. But looking forward, the second quarter has started positively. We have the first of our -- the Chairman mentioned, the first of our 15 deliveries. We had the pleasure to see this beautiful vessel being the resale, being taken delivery at Hyundai. And she has been chartered at a very accretive spot rate right now with significant chances to have a relative long-term charter going forward when the time is right. But before I take more of your time I'll ask George Saroglou to give us a quick story of what happened up to now, and then Paul will continue with the financials, and I will be back with the team to answer any questions. And again, thank you for your support, and we are looking for another exciting period of growth going forward. And this is our biggest period of growth with 15 ships [ph] we are going to contribute or adding to our already quite high EBITDA, another $100 million in the next five or six quarters. So we're very excited. George?

Thank you. Thank you, Nikolas. We reported today another profitable quarter following strong performance in the tanker market that remains robust following three weak years, 2010 to 2013. The operating performance year-to-date and the organic growth that is coming as a result of the company's newbuilding program that gets delivered, we believe will produce another profitable year in 2016. For those of you who are connected to the internet and our website, there is an online slide presentation, the format we will follow during the call. Let's turn to slide number 3, with the key operating highlights. In early February we took delivery of a 2012-build suezmax tanker, sister vessel to a 2009 build suezmax we took delivery late last year. Both vessels upon delivery started operating in the spot market, taking advantage of a strong freight market environment. In May we also took delivery of our newbuilding VLCC Ulysses, which immediately entered into a short-term time charter, before waiting for this to be committed to a longer period charter. This year marks the busiest growth year since 2007 for the company with nine newbuilding vessels expected to enter the fleet. With the exception of the LNG vessel Maria Energy, all other newbuilding vessels have committed long-term charters at accretive rates. During the first quarter of 2016, TEN operated an average 49.6 vessels. On a pro forma basis we have a fleet of 65 vessels, excluding the option for a fourth shuttle tanker. Thanks to the modality of the fleet and the balanced employment strategy, we continue to operate the fleet at a very high utilization rate, 95.3% for the quarter, which is almost full utilization considering that this number incorporates three scheduled drydockings. As you know, all vessels in the fleet have to periodically undergo scheduled repairs. We would also like to highlight that in order to capture the healthy rates that are currently available for time charter business, as a result of a sustained strong spot market, TEN has gradually fixed more vessels in time charters with or without profit-sharing, or renewed terminating charters at higher rates. Five panamax tankers had their charters extended for two more years between minimum $18,500 and maximum rate $28,500 per day with a starting rate for the first six months of $22,000 per day. The increase in the five vessels' combined annual revenue compensates for the low income the Neo Energy that is expected to have during 2016 compensating - competing in a challenging LNG market after completing a very successful four-year time charter. The Neo Energy trading in the spot market is now fixed on up to two months at a rate that produces positive EBITDA. With the company's newbuilding vessels that we gradually enter the fleet during the year, we expect the annual contracted coverage of the fleet to go to 70%. The low oil price environment continues to impact the crude sector in TEN in a very positive way. World oil demand continues to be strong. For 2016 the International Energy Agency expects oil demand growth to be 1.2 million barrels per day. However, demand during the first quarter of 2016 has been stronger at 1.4 million barrels per day, thanks to stronger than forecasted demand from India and China. Despite the spike in the price of oil since February at $50, the price of oil is still 50% below the average brent [ph] price for 2014. The low oil price continues to stimulate demand and encourages strategic and commercial stockpiling. On the supply side, OPEC produces at record levels reaching 33.2 million barrels per day neighbor. After the lifting of sanctions, Iran has returned to the pre-sanction production levels of about 3.5 million barrels per day. Iraqi production is also at record levels at 4.3 million barrels per day. Production outside OPEC continues to decline. US crude oil production has fallen as a result of the lower price of oil. And the slowdown in production has so far a positive impact on US crude oil imports. Supply of oil is expected to remain at elevated levels going forward. And this is positive for tanker demand and tanker earnings. Fleet growth is managed. The order book for the next two-plus years currently stands at 15.6%. However 12% of the fleet is currently over 15 years and natural fleet replacement should gradually reduce the effect of the new tonnage in the market. Main shipyards in the Far East are in financial distress, which could lead to structuring and capacity cuts. In addition, lack of access to capital has resulted in very few orders so far in 2016. If these trends continue, global fleet growth will be low after the current quarter book delivers in 2016 and 2017. Overall we expect 2016 to be another strong year for crude tankers, thanks to the growing global oil demand, high supply of oil, relatively low oil price, and moderate fleet growth. Slide number 4 has the main financial highlights of our press release, which Paul will present in more detail. I would like to highlight the strong profitability for both for the quarter and more particularly, net income of $5.4 million, EBITDA of $60 million and a very strong cash reserves of $276 million. The next slide is the fleet, and we see here pro forma fleet of 65 vessels, which currently includes 51 vessels in operation and a newbuilding program, which out of the 15 vessels, 12 are already in very long and accretive time charter business and are fixed on superior employment with minimal five year duration, excluding any optional period. When the effect of the full newbuilding program into the fleet will add the company's EBITDA approximately another $100 million. Predominantly the heating engagement as we've seen further transportation, the sizeable number of vessels engaged in transporting products was five vessels of specialized vessels covering the LNG and the offshore shuttle tanker sector. The fleet is very modern, with the average age of the operating fleet at 8.5 years, vessels almost 10 years for the world tanker fleet. We are a very low cost base operator, as you see from the next slide, as most of the fleet has been built and acquired before the rise of newbuilding prices. The freight market has been strong and is expected to remain strong during the year, as the relative low oil price environment stimulates demand for stockpiling, especially from oil important countries and additional energy spending from consumer in both developed and developing economies. We continue to see how - we continue the balance employment strategy of the corporate fleet through a mix of spot charters, COAs and pulling arrangements and period charters with fixed rates and minimal rates that have profit-sharing arrangements. This is the next slide, the employment slide. 31 vessels in the operating fleet are in secured employment, including 9 vessels in profit-sharing arrangements covering 60% of the 2016 operating base. The average charter for a vessel today is 2.4 years, 29 vessels, including the 9 on profit sharing, are on flexible employment whose earnings are affected by the spot market. As you can see, for every $1000 increase in the spot rates, the annual effect for TEN is an increase of $0.08 in EPS. In the secured employment charters we have the long-term time charter of a newbuilding vessel that will enter the fleet later in the year in 2017, from where TEN expects a minimum revenue backlog of $1.5 billion and an additional annualized EBITDA of $100 million. On the oil demand, just to highlight a few things again. 2016 oil demand is expected to grow at least by 1.2 million barrels per day, which is closer to the long-term trend, although have been pleasantly surprised by the demand numbers in the fourth quarter which has come higher at 1.4 million barrels per day. The global economy, despite headwinds in some regions, continues to grow. And the lower oil prices are supporting strong demand, especially in high consuming countries like the United States and developing economies like China and India. This supply driven drop in the price of oil benefits the tanker markets because we have rising volumes, longer distances and manageable fleet growth for crude tankers. And all these factors expect to play favorably for us in 2016 and beyond. The next slide is basically the history of our cash distributions. We have increased the dividend distribution in 2016 from $0.06 to $0.08 per quarter, which is a 33% increase. And we paid in total $0.24 a share in 2015, while this year we will pay $0.32 per share. The first dividend for 2016 was paid on April 7. The next dividend which we announced today is scheduled for August 10. We have two more dividend payments in October and December, dates that will be announced during the course of the year. The company likes to reward shareholders with sustainable and growing dividends. In total since 2002 TEN has paid $10.28 in cash dividends, or approximately $430 million, and this compares with a listing price in our IPO of $7.50. So the average yield if one goes back to 2002 is 5.25%. In addition to the dividend distribution, the company has a $20 million buyback program in place that so far has repurchased 2.2 million common shares at an all-in cost of $5.84. The next slide has the most recent NAV calculation and the analysts that cover TEN. The division of the management of the company is to continue growing TEN responsibly, and at the same time have the reality being reflected in the company's share price. At the same time, believing in the company's value and the business in which we operate, management continues to increase their holdings in the company, as the relating filings indicate. That concludes the operational part of our presentation. Paul will walk you through the financial highlights of the first Q. Paul?

Thank you, George. TEN had a good quarter in line with our expectations, and which could have more closely matched the prior year's excellent first quarter, except for a number of factors that either were unavoidable or were deliberate to secure future benefits. As a result net income of $25.4 million in quarter one was down $12 million against quarter one 2015, due mainly to a fall in net revenue. Firstly, the lucrative time charter of our LNG carrier ended halfway through the quarter, reducing our net revenue in quarter one by nearly $4 million compared to previous quarters. This may affect most of 2016, although we are now picking up short-term charters, as mentioned. Secondly, scheduled drydockings of three suezmaxes were advanced to undergo necessary and beneficial regulatory operating, which lost us 120 days' earnings equivalent to over $3 million. Drydocking days lost in the prior quarter one were minimal. A further $1 million reduction from quarter one 2015 was due to the sale of two ships in 2015, offset by strong revenue from the two new suezmaxes, although one only started operations in mid-quarter. There was some softening of the spot market which affected certain of our vessels, some of our afromaxes and handy-size product carriers, compared to last year's quarter one. And of course our elderly VLTC did not repeat the very rewarding storage charter of last year. All this contributed to a reduction of $3 million to $4 million revenue compared to quarter one 2015. Operating expenses, in particular crew costs, fell by $1 million mainly due to a stronger US dollar versus euro and tighter control by the technical managers, as mentioned by the Chairman. Daily OpEx per vessel fell to below $7900; that is, to levels we were achieving half a decade ago. Finance costs were down $500,000 to $7.9 million, mainly because of a non-recurring expense in last year's quarter one. A small increase in loan interest was offset by a more benign impact to bunker hedges than we had expected. EBITDA totaled $60 million, down from the prior quarter one, but all vessels actually earned positive EBITDA in quarter one, even those vessels undergoing drydocking in the quarter. In quarter one, $76 million debt was repaid, including $47 million as prepayment on a maturing loan. $101 million new debt was drawn, of which $31 million refinanced the expired loans, $25 million was pre-delivery financing relating to newbuildings, and $45 million was for part financing the acquisition of the suezmax Decathlon. As of the end of quarter one we had $1.42 billion debt outstanding and net debt-to-capital was under 45%. Our all-in Q1 cost of debt still remained at a modest 2.5%. With current cash of $270 million and an expected healthy year in earnings, plus potential proceeds from vessel sales, and with oil prices expected to continue benefiting voyage costs and encouraging demand, we are confident of meeting all our operational, newbuilding, dividend, share buyback and debt service obligations through 2017. This confidence will grow with delivery of our new vessels from June to year end with accretive charters attached, a contribution which will do much to balance any LNG carrier loss time. And this concludes my comments. And now I'll hand the call back to Nikolas.

Thank you, Paul. And thank you for the good news, and hopefully it will get even better as we go into the year and our deliveries will come to build more and more profitability and more EBITDA. So we are very excited. As I said, 2016 is the most pivotal year of growth in the company for many, many years. And we are looking to continue, of course, and grow our dividend policy, which is something that we are one of the very few companies in the cyclical market that since inception we have maintained a dividend, and hopefully it will go from strength-to-strength. The market environment we are facing, it's a comfortable market environment. We considered there is more uncertainty and less focus than we had a year ago, whereas the VLCC rates have stayed very strong, very similar to a year ago. I think we are seeing a 20% to 25% decrease in the other segments of the market, perhaps excluding the smaller sizes that have always been a traditional less fluctuation in this market. We are seeing the LNG segment hitting bottom some time in the first quarter. We have signs there that although this market is starting to get some steam, we are seeing the trains and the projects starting to arrive. We are seeing the US exports becoming more a reality in this respect. We're seeing more gas coming and furthermore to come out of Australia. So I think this is a market that we will have to absorb, I would say 40 to 50 vessels that are out there. But when this happens, and I think it will happen within 2016, then the market will be very strong. And that's where we want to position our timing and grow the company in that respect. So we are looking at an exciting year. We have $100 million of EBITDA already additionally from our existing vessels. And with this in mind, we would like to open the floor to any questions. Nick, are you there? Jamie?

Yes. Hello, sir.

I think we would like to open the floor for any questions. That’s perfect Thank you very much. [Operator Instructions] And from Deutsche Bank, you have a question from the line of Jason Crescenzo. And I hope I've pronounced our name correctly, sir.

Yes, you pronounced it correctly. Hi, guys. Thanks for taking the question. It was recently reported you fixed the VLC Ulysses on an attractive time charter. While I understand you may not be able to comment on the specifics, could you just give a high level overview or outlook of how you see the VLCC time charter market evolving?

Yes, thank you. Look, as I said, this is a market that has kept the very strong, the VLCC market very strong on the spot. I think as we speak since we started this call, I even saw that the market, which is waking up in your part of the world after your Memorial Day weekend, is becoming even stronger. So we closed at what is scaled 56, the far east [ph] routes. So we have seen some subjects at around 62.5, which starts touching the 50,000, 55,000 time charter equivalent. So I think there is liquidity, there is strength in this market. If you first make you maiden voyage is very accretive voyage, way above anything you can get today on time charter. At time charter you can get for a long period of time something starting with a 4. We have a lot of offers for first class end users, as we always use, and I think most probably we will be looking to do something like that.

Very good. Thank you for that. And just one last one, regarding the timing or parameters of potential asset sales, could you just give a little more color on that?

I think we have always announced that we are always looking to keep the fleet young. We have quite a nice number, a nice mix of vessels there, and our first-generation vessels which are all built in the best yards around outside, there always – there is always an appetite for them. Right now there is an uncertainty, mainly due to the lack of bank financing for secondhand tonnage. There are negotiations going on, but there's nothing I think firm that we could announce as we speak today.

I've got you. And just if I could follow up. Just some guidance concerning the potential age of assets you would be looking to sell and or, I know you said there wasn't anything in timing, but anything in the pipeline coming up soon?

Yes, I think we hope to be able to before the end of the third quarter to announce the sales of our [indiscernible] of 10 years or older.

Very good. That's it for me. Thanks a lot for the time, guys.

Thank you.

Thank you very much indeed. Now from Stifel you have a question from the line of Ben Nolan. And your line is now open, sir.

Hi, yes. This is actually Steven Tittsworth on for Ben Nolan. I had a couple of questions. First is centering around the Korean shipyard news. Recently there's been a lot of talk about STX going through some financial difficulties, very troubled. In your view, do you believe there could be a material contraction in shipyard capacity over the next coming years?

I think we are seeing a very serious contraction of newbuilding capacity. And I think it was time. We show this starting in China, if for us old enough to remember 10 years ago what was happening. As you know we have Posidonia coming here in Greece next week. And I hope as many of you will come and visit us. We have the company's opening party here, open house party on the 7 and 8. And we would like to see as many of you, and come kick the tires here, trend centers, meet some of our captains and the people who run actually the ships. 10 years ago at a similar event we were, I would say, harassed by Chinese shipyards of all sizes and sorts of all types of ship, of people. I think this is something that does not exist anymore. Right now we are seeing that this has now been moved to the more traditional shipyard, the big shipyards of Japan and Korea. I think we are going to see shrinkage in this. It comes because of the damage that has been caused by the offshore industry, number one. And of course the over-capacity that has flooded the market in dry cargo containers. So I think although we feel very close to the shipyards, I think for the long-term survival and profitability of our business, the less of newbuilding capacity, the better it is.

Perfect, perfect. Then my last question centers around your share repurchase program. I know you purchased 2.2 million so far. It looks like you have about $7 million left over, just based on what you spent. Have you thought about upsizing that share repurchase program or continuing at the current pace or perhaps maybe even focusing more on paying down debt instead?

Yes, I think this is a very fair question. Yes, I think we will be increasing. The Board has taken the decision to increase it. However, we have to understand that we buy and operate ships. We are a ship owner. It's not our business to buy and cancel shares. We aren't an investment banker. So I think our main business, if we want to reward our shareholders we are going to do it through dividends and through or reducing our debt. This is our first, and if we have remaining cash, of course an investment in ourselves is a very, very good investment right now.

Okay, perfect. That does it for me. Thank you for your time.

Thank you.

Okay. Thank you very much indeed, sir. Now your next question from JPMorgan comes from the line of Noah Parquette. And your line is open, sir.

Thanks for taking my questions. I wanted to ask, you just finished up the financing for your newbuild program. There was a lot of talk about a lack of financing out there. Can you talk a little bit about how those discussions went? What your takeaway is in terms of availability of finance to maybe other owners?

I think that there is adequate finance for companies that have a long-term strategy, that have a majority of a fleet that is strategically - a strategic fleet with our relationships. As you know, we are expecting - we're starting taking over nine afromaxes with very long time charters to start one of the largest oil producers in the world. So I think for deals like this for us and the remaining of our peer group, I would say a dozen companies out there, there is adequate finance and there are banks chasing or given competitive terms for this business. But then if you go to the other side of the equation, I think for new start-ups, for people who are looking to buy a secondhand ship, I think there's really nothing more than 50% finance, in case you can even get that. So I think that it is - and of course, there's no finance for speculative newbuilding.

It's Niko. If I can add to this, needless to say that banks all over the world are finding it more difficult to lend in view of the economic situation, in view of the heavier capital requirements that they have. It's not just shipping that they're hesitant. It's a phenomenon that most of the world banks are going through right now, that are more picky and have more limited capital to lend.

Okay. And are you still seeing import, export banks fill in the void there, or has that come down too?

I think very selectively, very selectively themselves. They will only do something like that if there is a major owner. As I said, we're way - what makes us comfortable, there's no, of course, no newbuildings have been ordered, neither in the dry cargo and containers, but also in tankers right now. And I think that makes us more comfortable for going forward, that the bubble will have to face the burst of in 2008 and 2009 is not there.

And then I just wanted to ask, can you give an update on your kind of employment strategy for the LNG vessels? The Neo Energy is not earning anything right now, just to confirm, right?

The Neo Energy, well, it's earning but it's not earning anything to write home about.

Okay. So it's basically in the spot market now?

It's in the spot market. I think in this markets, it is very, very important to get, as we say, the propeller moving and to get the steel coil to have a cooled down ship. So this is what most of the ships in the spot market are doing. We have been very likely after almost nine years of very profitable employment to be immune from the spot market which we are facing today. We have beefed up our operations. We have signed a joint venture with one of the largest technical LNG technical managers and Tsakos Shipping and Trading for running the ships in house, and we're very proud and excited about this new development. We're beefing up also the commercial side. And we are actually optimistic that this market will be turning later this year to levels that will be accretive again.

Okay. So when you are looking at the FSRU, is it fair to say that would apply to your older vessel? And then your view on the LNG market itself, expect to improve this year so you would look for regular employment for your newbuild, is that kind of a fair assessment?

There is employment we could schedule today at very accretive rates 18 months down the road. And we could fix the Maria today for delivery 2019, beginning '19, end of '18 at very accretive rates.

Okay.

But of course you have to find something to do in the meantime. So it's, for a company like ours that is well diversified in the energy segment, we have a two out of 65 vessels in that, in that part of the business. I think is a good, it's a luxury problem to have, how to get to do it with the Maria.

Okay. That's very helpful. And then I just wanted to ask about the suezmaxes you drydocked. Are there any other ships that have that type of drydocking that needs to happen in the next couple of quarters or is that all done now?

Hi, this is George. We have a couple of vessels this quarter and then one more around the end of the fourth quarter.

Okay, thanks. That's all I have.

Thank you.

Thank you very much indeed. Now your next question from Wells Fargo comes from the line of Mike Webber. Your line is now open, sir.

Good afternoon, gentlemen. This is Donald stepping in for Mike. How are you?

Hi very well. Thank you.

So there have been a couple of recent transactions on the crude tanker side that suggest newbuild levels may be back to decade lows. And while I understand that the bulk of your cash is focused on your current CapEx and general corporate purposes are you seeing more aggressive inquiry from yards for future newbuild activity? And is this starting to look attractive to you?

Yes, I think we will not, and as my role as the current Chairman of INTERTANKO, I think we will not do any speculative newbuilding orders, because I think by putting more supply in the market it will do us bad long term. However if there are, as we did previously a year or more to go, with the two VLCC re-sales against the share price we will look at the re-sales of course when they become interested. But I think we are not there as a company. There are enough vessels out there right now to service our clients and for us to earn a respectable return that we do not need to go out in the market and order ships, even if the vessels keep on dropping in value, as you said.

Got it. And then my next question is just sort of a follow-up on sort of your previous comments on financing. I guess if we step back and think about 12 months ago, certainly owners were able to go out to banks and get 70%, 80% financing. Is it that constrained? Is it very difficult right now to get any financing above 60%, or is it even moved lower for some of the small, less liquid owners?

I think first of all, smaller owners cannot get financed for a vessel that they will buy on a speculative basis. I think 50% is the 70% of the past right now. So that's – then will start through 50% rather than 70% you will end up to. But of course if you have a good reputation and if you have a project with employment, you might be able to get something better. So as I said, there are a dozen companies out there in our peer group on the end of the segment that compete for that upper scale of finance.

All right. Appreciate the color, guys. And enjoy Posidonia next week.

Thank you. Hope to see you there.

Thank you very much indeed, sir. Now from Morgan Stanley your next question comes from the line of Fotis Giannakoulis. Your line is now open.

Hi this is actually Ben stepping in for Fotis. I just had one question relating to floating storage in the oil macro. So several sources recently have written about increased floating storage and its relation to potentially growing global inventories. And I just wanted some color from you guys on how much of this you still think may be contango driven and what sort of effect it has, both on the broader oil macro climate and tanker rates?

I mean, we've seen the price of oil has dropped since -- from $114 all the way down to $25, $26 from the summer of 2014 until January of this year. And in the last three months has gradually gone back to the $50 level. We have - the contango has been there for a short period of time last year. But we have seen charters asking from owners the option when they have regular time charter to also include the spot as part of the overall, let's say use of the vessel. And I think most of the times owners have given this option. So from even if the contango was not there the full time to support the economics of the trade, the combination of trading the vessel, moving cargos and partially storing it for a period of time taking advantage of the change in the market that we have seen since February seems to be working.

Okay. Thank you so much, guys.

Thank you very much indeed. Now from UBS Securities you have a question from the line of Spiro Dounis. Your line is open, sir.

Good morning, gentlemen. Thanks for taking the question. Just wanted to -- Paul, maybe this is for you. Obviously leverage levels look pretty good right now. I think you guys have some of the lowest in terms of net debt. Just wondering if you can give us a sense maybe of the pro forma leverage, what that looks like when you get full delivery of the fleet?

Are we talking about balance sheet leverage or covenant leverage?

Yes, balance sheet would be great.

Yes. I think that it's at an all-time low now. So inevitably with the new debt that's coming on, it will start to creep up. In the past we've had net debt-to-capital as high as 65%. I don't think it will go that high, but certainly yes, we could go 55% to 60%. We find that's very manageable. It was manageable in the past. And we believe it will be manageable in the future. We've never had problems with our banks. Our relationships are so good due to our perfect debt service. But even if it approached breaking covenants, we would not have a problem with the banks. But we're not likely even to get to that kind of situation. But we feel fairly comfortable with a situation that could potentially arise over the next year or so, 50%, 55%.

Okay, very good. Makes sense. And just in terms of use of cash going forward, I think we talked about dividends and maybe share buybacks. But I'm just wondering on the preferred front you've got a few series of preferreds there carrying a pretty decent coupon. Just wondering how you're looking at those in relation to buying back those as opposed to something else?

I think this is a priority that we have our first preferred. I think my cures in 2018. And we would like to be able to refinance it with our cash after we finish with our newbuilding program. It fits very well. We're finishing our existing newbuilding program in the middle of next year. So I think that will give us enough time to refinance it with our cash proceeds.

Got it, okay. Last one, just on the FSRU. Just wondering if you think that maybe putting that vessel in for conversion before a contract maybe sweetened the deal or get a leg up in the tendering process makes sense, or is that just something that's maybe a little too risky?

The head of our newbuilding department just jumped out of the window. I don't think - I think the vessels that we are building, specifically the Maria, is an ideal vessel for FSRU. But I don't think right now we will be going through the investing the $50 million, $60 million in doing this on a speculation. But we have good leads on doing it for against long-term visions.

Perfect. That's it for me. Thanks, guys.

Thank you.

Thank you very much indeed. [Operator Instructions] Thank you. We've had a question come through from McQuilling Holdings. You have a question from the line of Mark Suarez. Your line is open, guys.

Hi, guys. Thanks for taking my question. Just to go back on the employment strategy here. I know you mentioned your strategy of maybe going into period charters. How do you see the two VLCCs that you have right now? I know that you have one for delivery. What's your strategy there in terms of time charter arrangements, and how do you look at profit-sharing as you move forward?

Well, hi. How are you? As you know, profit-sharing is for us the preferred way of doing business. We believe it's a win-win situation both in the charters and for the owners. But, and this is what we're - this is where we give prioritize when we talk to the major charter owners. So I think of course the quality of the charter is very important for us, and as long as we have a good quality charter with - coming up with a profit-sharing arrangement, I think this is something we prioritize. So yes, you're correct, this is what we are - it's closer to our mentality, to our strategy and it has worked for us in the past. And so we are looking, and hopefully before the summer holidays we will announce some of these type of visions.

Okay. And then maybe we could take a step back, and looking at your overall capital deployment you've done a pretty good job in your uses of cash. Now moving forward, now that you have your newbuilds coming in, you have a pretty clear roadmap in terms of newbuild growth and employment strategy. How do you view any excess cash going forward in terms of newbuild re-sales? I think you mentioned that's not really in your cards. But what about any second-hand opportunities to stress the assets that you can maybe put under a quality long-term time charters moving forward, is that something you guys are looking into here?

We are looking very seriously into something like this. I think whatever does not - I did not exclude new building re-sales. Those ships were going to be built by someone. So if they are going to be built, would rather buy them than leave them in the market to somebody else if they make financial sense. So re-sales, it's something we look at. But what I think we do not look is at speculative new buildings, of course. But we are looking at distressed fleets. I think this is something that we have done in the past and this is something we will be using our resources for it going forward.

Okay.

Maybe banks are approaching us with this type of deals because a lot of owners have mixed fleets. We're not one of those owners. We happen to have mixed fleets, and they tend to be in a crisis, as they say, sell the jewels of the house in order to go forward.

Right. And so that was going to be my follow-up question, and you mentioned the banks coming to you with these opportunity. Do you see that more on the crude tanker side, on some of the larger size vessels, or on the product side, what's your sense?

I think mixed. It's funny you asked this because I guess we're looking, as you know, at the mixed fleets coming out which they have, I think they have a good flavor of products of big sizes. So they have a combination of crude and product and I think that makes sense. That fits very well in our fleet profile, which I think we have during the presentation, which we are the most diversified energy mover out there.

Great. Appreciate the color, like always. Thanks for your time.

Thank you.

Thank you very much indeed. Now then your next question from Seaport Global comes from the line of Magnus Fyhr. Your line is open, sir.

Yes. Hi, guys. Just one last question. If you can maybe elaborate a little bit on your strategy for LNG going forward. You both looking at FSRUs and also LNG, regular LNG. So what do you think as far as buying ships, either new builds or consolidate some of the existing supply going forward against long-term contracts? I suppose you wouldn't buy anything on speculation?

Magnus, are you talking mainly on the gas side?

Yes.

I think this is a business that we are using, as I said, we have been immune from the crisis of the price in the market. We were likely to have the Neo, one of the best quality ships out there operating profitably during a difficult time. This has given us time to beef up our expertise on the operating side. We are doing this in house. Also on the commercial side, we're increasing this significantly. And we will be looking at the situations that if a major oil company or another end-user would like to part from one of their assets with a longish, because what is long in LNG now is not as long as it used to be but it's 5 or 7 years employment, it's not 20 years, we would be there to this. And as long as the same time use our existing vessels in that employment, in that deal. So we are looking to beef up the LNG segment.

I think you mentioned that you think the market is going to firm up here in 2016, 2017. But what do you see the size of the fleet here in three years? I know you mentioned maybe five ships before 2020. Is that still kind of a goal, or has that changed at all with the weakness that we're seeing in the market?

I think as a minimum would be to double the size to four vessels. I think we are also in a wait-and-see situation right now because, I was joking, we have discussed in the past this industry changes quicker than the iPhone technology. By the time you get LNG, LNGS appears in fact you have to compete with Galaxy and the Android. So this is a technology that changes quicker than other technologies. So we don't, unless there's a long-term employment, we don't want to invest in something that might not be a long-term vessel with a long-term use.

Okay, great. Thanks for clarifying.

Thank you.

Thank you very much indeed. [Operator Instructions] There appear to be no further requests. So I shall pass the floor back to Mr. Nikolas Tsakos for closing remarks.

Well, I would like our Chairman to do the closing remarks. But I would again want to thank all of you for your questions. I think that it shows that there is interest for our Company, and hopefully we can figure the interest also reflecting on our share price very soon. The company's going from our strength to strength. It has always been built on a very conservative long-term process. I think our view is we're not looking to try to impress our shareholders for the next quarter, but we are taking decisions for the next generations to come. So I think this is our logo here, and we try to adhere to it as much as possible. That's why we have stated that 2016 and 2017 would be years of extraordinary growth for us, almost 30% increase of our EBITDA with another $100 million regardless of market conditions because most of it is fixed business focusing on specialized segments, which include, starting tankers and long-term strategic projects with profit share. We are looking at the market, which is right now as we speak, is well balanced. We might have to absorb some oversupply of tonnage going forward for '16 and the remaining - for the remainder of '16 and '17. But I think the market has, I would say, has the legs to be able to go through this. We are going to maintain and increase our dividend. And looking forward to welcome as many as possible of you in the next week at Posidonia. And after myself, I would like to ask our Chairman, Mr. Arapoglou, for the closing statement. Thank you very much.

Thank you, Niko. I just once again want to highlight that TEN always announces a clear plan of actions and it executes exactly what it commits to do. There are no surprises. If there are surprises, they are positive surprises. It continues to grow according to plan, generating accretive business. It is most diversified tanker transport business. And all this together continues not to justify its share price. So I believe that gradually, the market will be convinced of the hidden value. And this will soon be reflected on the stock price. Thank you. Thank you and have a nice afternoon.

Thank you very much indeed, sir. And with many thanks to all our speakers today, that concludes the conference. And thank you for participating. You may now disconnect. Thank you so much, gentlemen.

Thank you, Jamie.

All the very best to you. Bye-bye.