Good afternoon. Thank you for standing by, ladies and gentlemen, and welcome to the Tsakos Energy Navigation Conference Call on the Third Quarter 2018 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 listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I must advise you that this conference is being recorded today. And now I pass the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relations Advisor at Tsakos Energy Navigation. Please go ahead, sir.

Thank you very much, and good morning to all of our participants. This is Niolas Bornozis from Capital Link, Investor Relations Advisor of Tsakos Energy Navigation. This morning, the company publicly released its financial results for the third quarter of 2018. 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 parallel to this conference call today, there is also a live audio and slide webcast, which can be accessed on the company’s website on the front page at www.tenn.gr. I repeat, www.tenn.gr. The conference call will follow the presentation slides, so please we urge you to access the presentation on the webcast. Please note that the slides of the webcast 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 of the webcast 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 would 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, Nicolas. Good morning and good afternoon to all, and thank you for joining our call today. In the longest ever weak market in recent history, which includes the first quarter of 2018, probably the worst quarter ever. TEN posted quality performance for the first nine months of 2018. Positive operating income, healthy EBITDA, and a strong cash position, we continue to pay dividends and cover all of our financial obligations. We keep steadily reducing our debt. We maintain operational excellence and world-class cost control, and excluding extraordinary items that Nikolas Tsakos and Paul Durham will explain. We produced an EPS for the nine-month period very close to market expectations. Most probably, the weak market is now well behind us and TEN is extremely well-positioned to benefit from the positive market outlook. That’s it for me. We’ll turn again to Nikolas Tsakos and his team. And over to you, Nikolas.

Thank you, Chairman, and we hope to get some praise when we produce profits. I mean, we have outperformed the market and our peer group in our results, but our aim as major shareholders in this company is also to increase profits, but thank you anyway. And for those of you, die-hard conference call followers, I’ve been saying in the last calls that the market was showing signs of improvement. It finally has happened. Well, again, even a broken [indiscernible] is right twice a day, so be – I have to be honest and say that I have been surprised by how strong the recovery has been so far. This period reminds me of 2002, again, the fourth quarter, which coincides with the birth of my son, so it’s a good memory. And at that time was the beginning of the recovery that followed the Asian crisis, again, the long crisis, Asian crisis topped by 9/11 effects. And that was the beginning of recovery that lasted then six blessed years. Now 16 years later, all that – and wiser, we hope for at least a couple of good years over similar markets. And I think we are getting close to it, as we said in the last call, it has come to fruition. The supply and demand for relations [ph] are lining up. Other than the VLCCs, which also are being absorbed, the remaining of the fleet is in the lowest newbuilding for a very long period of time. And with scraping happening, we are seeing naturally fleet reduction for the first time in almost a decade. And on top of that, we have a 2020 saga and, of course, the results that will create that will – that means that we are in for an exciting ride from moving from the lows to a higher market. Our company, TEN, is well placed with 40 out of 64 vessels already taking up advantage of firmer rates at the start of the – during – in September. And with this, I will ask George Saroglou, the COO, to guide you for what the future holds and give you a little bit of the history of the past. George?

Thank you, Nikolas. The good news is that, I will not talk about the past, but the future, which is much brighter. We navigated nine months very difficult freight market conditions. However, thanks to our commercial strategy we managed to outperform, both the market and our peer group. And now finally, happy market days are here to stay. For those that are following the presentation, please look at the webcast that we have. Let’s start with Slide #1. Here what we see the market strength in the fourth quarter, represented in the first slide. In the first slide, when we compare the nine months 2018 spot rates with the current spot for different categories in which we operate. As you can see, VLCCs are currently averaging in excess of $56,000 versus $12,000 for the first nine months. Suezmax is in excess of $44,000 versus $8,000. Aframax is in excess of $28,000 versus $9,000, Panamax is $28,000 versus $7,400, MRs and Handys almost $16,000 versus $10,000 at the end of September. Main driver behind the market strength is strong global demand, higher OPEC in Russian production, strong toll tax for the United States through out performed miles, and limited vessel supply and the global tanker fleets had very little growth during this year. Thanks to the higher scraping levels we have experienced since 2012. Although OPEC and French currently discussed moderate production of cash flow caused another buildup of global oil inventories. The main market drivers that led to the recovery of freight rates will continue to influence the tanker markets next year. On the next slide, the left side of the slide, we see the break-even cost of all the various vessel types that we currently operate in TEN. As you can see, the cost base is low. In addition…

Thank you, George. Well, as chief bean counter, I thank heaven, the nine months are behind us and the next nine months look very promising. In quarter three, we saw the prolonged soft market continuing until it began to turn in late September, helping revenue climb 2% of our quarter three 2017 and rising more vigorously as we entered quarter four. Operating days on spot in quarter three increased, but a surge in fuel prices hit spot rates, especially the product carriers, two of which also lost days on repositioning, bringing net revenue $4 million down from the prior quarter three. However, as the market strengthens within quarter four, we are now seeing more consistent signs of recovery, with crude carriers now attaining rates not enjoyed for over a year. In addition, recently in quarter four, LNG Carrier, Neo Energy, saw an extension of its time charter at a considerably higher rate well above break-even. With nearly 40 vessels either on spot or on time charter with profit share and with several more tankers to come up time charter in forthcoming months, TEN is in an excellent position to take advantage of a stronger market leaving remaining vessels to provide a secure cash flows. Last December, we sold Suezmax’s Euronike and Eurochampion in a sale on leaseback deal. And since then, we paid $2.7 million quarterly to charter in the vessels. However, having repaid the debt on those vessels with the proceeds, the chartering payments are mostly offset by the end of associated quarterly loan and interest installments. [indiscernible] vessel remained – has remained relatively stable for the quarter at about $7,600 and $7,700 for the nine-month period. Average vessel overhead costs will also remain stable at just over $1,000 a day. Finance costs increased by $2.4 million, mainly due…

Thank you, Paul. [indiscernible] next call, we’ll be more profitable. But I think it is very important to again explain the TEN’s policy of running a very tight ship both operationally and commercially has allowed the company for the last 25 years to continuously pay its dividends and its – and service all its obligations and be left with a very healthy world just in case – dividend, having every year, we increase by more than $2 or $3 the value of the company by repaying our debt. And with, that, I would like to open the floor for any questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We will now take our first question. Please go ahead. Your line is now open.

Yes. Hello, this is Fotis Giannakoulis from Morgan Stanley and thank you. Nik, both you and the Chairman mentioned the improvement of the market. I want to ask you what do you think is different this time, given the overhang of the potential cap from OPEC in Russia? What makes you sound opportunistic that any potential cap next year will not derail the recovery of the tanker market?

Thank you very much, Fotis. I think that the market right now has learned to live with cap. Today, the oil prices and the wide difference between the WTI and Brent is giving a lot of developing countries, even not developing countries like India and China to stop their spot buying. I do not expect a dramatic OPEC cut. We believe that having really the three major producers of oil outside the OPEC or independent of OPEC that beat United States, Saudi Arabia and Russia, I mean, they are almost an interest of 35% of oil production in oil make OPEC’s rich less. I think what could happen if we see a large daily cut of about 1 million barrels, the market will normalize. I would rather have a longer-term normalized market. And when I say normalized, if you look at the rates of that show – talks about, I think, I will be very happy to have a normalized market [indiscernible] markets in the mid-20s together with Aframaxes and so on and so forth. So I think, this is what we are looking at right now. We’re looking at a soft market that could be normalized if we have some – 1 million cap the next year, which I’m not sure it will happen.

Thank you, Nik. I want to ask you about any changes in the trade flows, given the U.S. exports are ramping up and U.S. becoming increasingly a net exporter of crude products. Have you repositioned your vessels differently compared to, let’s say, a year ago? Do you see the more delays, more vessels instead of concentrating in their usual areas moving to different directions? How does this impact the – your trading activity and the positioning of your fleet?

Yes. I think, that’s a very valid point. We think a lot of our crude carriers, which will – that we’ll expect to have in the Middle East or West Africa five years ago, right now being in the United – a lot of them in the U.S. Gulf. As we speak today, we have ships that are learning in excess of 12 markets of $40,000, $50,000 or $60,000 depending which day the vessel was fixed that are – that had because of the backlog, there is a floating storage right now in the U.S. Gulf. And in some cases, it’s a mixed blessing. We have ships that we have to wait. Therefore, one month earnings $45,000 to $50,000 a day, but missing on the next cargoes that could be the same. But, of course – so this shows that there’s a bit of concentration of crude carriers in the U.S. Gulf. And then on the other hand, we ship most of our products, including the Panamaxes, which were, in a sense, considered dead, they’re useless size of ships. Right now, trading a lot in the clean Far East, that market is starting to heat up. And that has to do a lot with people, as you said, moving cargoes to be ready for 2020. So we have more products where usually Mediterranean and North European traders have moved to the Far East. Suezmax in [indiscernible] we have to say that used to be a – of Middle East and the West African traders have moved mainly to the United States and exporting from there. So and then high-rise [ph]class vessels depending what could happen with the weather, we have action kit, all of them open right now, because we’re expecting to have increased products coming out from the more [indiscernible]

Thank you, Nik. Given this positive outlook and the recovery of the rates, you hold a very strong liquidity position, lot of cash in your balance sheet. Of course, you have to be prudent regarding the repayment of your debt. But it seems that the market helps to have a more flexibility and then look for alternative uses of capital, either acquisitions, buybacks. I was wondering if this is in your thoughts, you had recently your strategy meeting if you discussed any alternative uses of capital rather than sitting in your balance sheet, and what prevents you from buying back your stock that seems to be trading at steep NAV discount?

Well, the – I would say, the motto of this company and I – the motto of this company is you only appreciate cash when you do not have it. And we have remained for the last 35 years, and then we decided not to try this motto. Because having ample liquidity, of course, it puts us in a strong position and gives us the flexibility to move in acquisitions. I think one of the things that will make us – would not make anybody more happy than myself and the management here, who control more than 40% of the company is to be able to announce a significant increase in dividend rather than buy back when the time comes with the next results. So I think that would be the priority. I would say, opportunistic acquisitions would result for shareholders. And then dividend, I think a buyback that we have to be really, really in a steady state to do that. But that – those two an idea where you are the next steps.

And one last question about your views on IMO 2020. I know that you were skeptical about the rush of the industry and the regulatory authorities to move so quickly before the fuel situation, the new compliant fuel safety has been resolved. Do you feel more confident right now that the industry can safely transition to 2020 with safe fuels? Has your view on potentially installing scrubbers has changed? And where do you see the spread developing? It seems that there are many conflicting views among ship owner? What is your view?

I will keep it simple. I think my view from scrubbers is, please refer to [indiscernible]. So I will not get into this. I think we say a lot of the same views. As you know, I’m – as you know, and perhaps you have read just this week, the Port of Singapore among other major civilized ports is banning scrubbers, open-loop scrubbers. So I think this is a bit of a victory. What we have said along the issue of 2020 is a refining problem, not a shipping problem. And this is – we feel very strong with it. And I think that finally, the refiners in the oil companies, I think, they show that the owners have, in fact, very strongly did not fall in the trap, and minute number of ship owners have won for scrubbers. So I think we will have a significant distillates for all five, and why not only one, which is examples can be [indiscernible] in the areas to do our job. So I think it’s a charter with a long charter who wants to pay for a scrubber, I mean, this is something we consider. We are client-friendly. We don’t have any reason against – but as a company, we feel very strongly that if this is a refiner’s problem, they should provide weather ships to burn safely and environmentally friendly. I believe that there is this reversed theory that I’ll be mentioning to. As you know, my position [indiscernible]. I’ve been spending more time at the IMO than I want to remember. There’s this reversed theory that because a lot of the refineries are giving up fuel production, the fuel production would be expiry and expensive. So, the difference between the problems and go find them, the first will be less. It’s not here nor there. But I believe every day that goes by, there is proof that more and more quality product will be put in the market.

Thank you very much. Nik, I appreciate you [indiscernible].

Thank you.

Thank you. [Operator Instructions] We will now take our next question. Go ahead. Your line is now open.

Hey, guys, this is Randy Giveans from Jefferies. How are you?

How are you?

Good, good. Fotis asked most of the questions there. But I guess a few quick ones for me. So you mentioned tanker rates across board pretty much doubled or even tripled during 4Q 2018. So can you give some guidance on your quarter-to-date spot rates earned on some of the opened Aframaxes or the Handymaxes?

Sure. I think what we’ve done in – of our Suezmaxes that are on the open market, so we think they’re in about the mid-40s, and Aframaxes in the high 20s.

And that took about 75% of date book?

We’re talking about the fourth quarter for the ships that are on the open market or with those sharing arrangements.

Right. So with that’s about 75% or so of the days already booked for 4Q?

Yes.

Okay. And then with the crude tanker rates still outperforming product tanker rates. Have you thought about switching more of your products tankers over to the crude rates?

We’re down, I think, to 13. Not, I mean, we have a balance split of about 25 product carriers. But in the last year, I think we took the view that those that the – the after market portfolio, so there’s crude and fuels are outperforming the product show, we have – certainly -- we’re down to just the pink ships that are clean. I’m not sure if all those ships are on long-term charters with major oil companies that are removing clean products. And we have seen some signs of recovery from more ships in the Far East, I would say, in the last month. So we have the last of Aframax [indiscernible] coming up renewal in February. And I think that shouldn’t be – if the market continues, we will also turn it back to – we will have one less product carriers in the water.

Okay. And then, I guess, last question here. Can you kind of – obviously, a lot of news about OPEC meeting in Saudi, Russia, and they were cutting about a 1 million barrels a day. Can you quantify this impact on the crew tanker trade?

Well, as we previously said, that we’re in an environment that demand is very, very strong. And the expectation for next year is 1.4 million barrels per day. So now we have some wildcards, I mean Iran with the waivers being one of them. So we don’t know what will happen when this waivers will come closer to the -- their end. And we know that the discussion about the build of the inventories and the office supply maybe a little bit overblown. And therefore, any cuts that OPEC and France might decide to do. We believe they’re going to be moderate. And therefore, the effects on the tanker industry are not going to be significant. Let us not forget that usually the market focuses from one-month – production data for one-month. And the latest data that we have from OPEC, Saudi Arabia is producing the highest that they had in quite sometime. And also troubled spots like production has not been stable like Libya and Venezuela appear to be coming back in a smaller wave. But I mean, if you compare their productions for 2018 and you take out the last month, you should not be certain that these gains can be sustained. When we think – always things are under consideration for those people that will make the decision whether to cut and by how much.

Got it. All right. Okay, that’s it from me. Thank you.

Thank you. We will now take our next question. Please go ahead. Your line is now open.

Hey, guys, this is Greg Wasikowski on for Mike Webber at Wells Fargo. Starting with the scrubbers, have your charters indicated any interest in installing the scrubbers, or do you anticipate them expressing more interest in the next few months?

Yes, hi. Well, about the year, no. I would say, about nine months ago, there was an – almost every single charter wanted a scrubber option for the contracts. And then, as you know, we have a very – one of our – perhaps, our largest charter is Equinor. We have nine vessels for long-term business. And they had an option for scrubbers, and I think they are environmentally very responsible, being a Scandinavia company and they decided that they gave up the scrubber. Some other of our clients for other reasons have requested for us to look into scrubbers. But it has – it is winding down, which means the uses of scrubbers become less and less. We used to have banks running around trying to offer various ways of finance. A lot of those banks now are looking at it as a not a very green approach, and a lot of the shareholders are criticizing it. So it has been winding down. I would say from – in a fleet of 66 vessels, less than 10% of our charter has shown interest in doing that in scrubbers.

Okay. That makes sense.

And we’re chartering ships out and that was the idea, charter ships out in a period of two or three years, so that they can – the majority of this – how it’s going to turn into. And the charters are happy to charter ships to move out into the other [indiscernible] for a period of time.

Okay. And then from a modeling perspective, correct me if I’m wrong, but it looks like you may have changed your methodology for calculating adjusted EBITDA from this quarter from last quarter. Do you exclude the effects of the preferred dividends? Why the change? And what will you be using going forward?

I think we will be using exactly the methodology we have rolled out. That will do so we’ll just be using this one.

Okay. And is it – and why – can you give me any color on why the change to exclude the preferred dividends this quarter as opposed to prior quarters?

Well, that was – I mean we will – the actual EBITDA will be the end of the year EBITDA. And you’re in the period that – the quarterly period, we had discussion with the auditors and they came up that this is the right way to calculate. I’m not sure, we’ll follow on what the calculation is.

Okay. That makes sense. And then just on the crude spot rates, I think I saw somewhere in the data cadences that the Q3 rates average lower than Q2 rates for your crude carriers when many of your peers reported higher Q3 rates than Q2. So can you just – can you give a little bit more color around the rates that you’re able achieve in the third quarter and maybe compare to the second quarter for your crude assets?

Yes, yes, I think – this is a very good point. I think, I said we have outperformed the spot market by 60%. What happened, because if you remember, I’ve always predicted this market will turn one day. But – so what we had a lot of our – we decided that in the third quarter, a lot of the ships that were coming up from very long and profitable time charters, we took them on the spot hoping that the market will turn. So that brought our comparison from what we have done in the previous quarter lower, because we used the repositioning in the spot market. I think, to be honest, yes, the market changed two months later than I was expecting. So we had to absorb that period of between the reposition from the long time charters to the new deliveries.

Okay, that’s helpful. That’s it from me. I’ll turn it over. Thank you for your time.

Okay. Thank you.

We have no further questions at this time.

Well, thank you very much. And we are looking forward and let’s hope that this will be at least the beginning of a positive couple of years. In the meantime, we’re always making sure that our company outperforms the peer group and the market regardless of the cycle. We have navigated nine rough months without even – keeping our liquidity and our dividend intact, and we hope to be able to have more of that. Thank you very much.

That does conclude the conference for today. Thank you for participating. You may all disconnect.