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Operator
Thank you for standing by, ladies and gentlemen, and welcome to Tacos Action Conference Call on the first quarter 2024 financial results. We have with us today Mr. Takis Arapoglu, Chairman, Board, Dr. Nicholas Tacos, President and CEO, Mr. Paul Durham, Chief Financial Officer, and Mr. George Saraglou, 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, at which time, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. I must advise you this conference is being recorded today. I will now pass the floor over to Nicholas Bornozis, President of Capital Link, Investor Relations Advisor for TACO Energy Navigation. Please go ahead, sir.
Nicholas Bornozis
Thank you very much. And good morning to all of our participants. I am Nicolas Bornellos of Capital Link, Investor Relations Advisor to TACO Energy Navigation. This morning, the company publicly released its financial results for the first quarter ended March 31st, 2024. If you do not have a copy of today's earnings release, please call us at 212- or email us at 10 at capitaling.com, and we will have a copy for you emailed right away. Please note that parallel to today's conference call, there is also a live audio and slide webcast, which can be accessed on the company's website on the front page at www.temn.gr. The conference call will follow the presentation slides, so please, we urge you to access the presentation slides on the company's website. Please note that the slides of the webcast presentation will be available and archived on the website of the company after the conference call. Also, please note that the slides of the presentation, the webcast, 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 questioned that such forward-looking statements involve risks and uncertainties which may affect 10 business prospects and results of operations. And before turning the floor over to the chairman, I'd like to mention that we also have today with us, as part of the management team, Mr. Kairos Kosmatos, the co-chief financial officer. And congratulations, Mr. Kosmatos, for your new role. And at this moment, I would like to pass the floor to Mr. Arapoglou, the chairman of Tsakos Energy Navigation. Please go ahead, sir.
Arapoglou
Thank you, Nicholas. Good morning and good afternoon to all. And thank you again for joining our call today for Q1 results. Despite, as you've seen, a historically low utilization of 91 percent, just over, mainly due to a large number of dry dockings that we decided to do, we continue to deliver operational excellence on the back of a very positive market. based on strong shipping fundamentals and geopolitical events, which are both expected to continue in the foreseeable future. Our very comfortable equity-generating ability and cash position allows us to double our semiannual dividend from last year's. In addition, we are mainly making use of the good market And we're using opportunities in the S&P side of the business to sell old tonnage and buy new, modern, green vessels, reducing the age of our fleet and positioning ourselves to capture a creative business that comes our way from our demanding blue-chip clients. The result of all this is the steady increase of our stock price in recent months as the recognizes our robust business model, and this makes us very happy. So, once again, well-deserved congratulations to Nikos Tsakos and his team, and best wishes for maintaining TEN's stellar performance going forward. Thank you, and over to you, Nikos Tsakos.
Nikos Tsakos
Thank you. Thank you, Chairman. And, yes, well, we're going to have a new... new ticker starting as of July 1st we will get 10 will finally be 10 after almost 22 years where our ticker belonged to another company which right now has moved from the stock exchange so I see this as a good sign the previous ticker which took us from $3 and change in 2019 to in excess of $30 last month, were my initials. But I'd rather sacrifice my initials for much closer identification for the company. As you said, the first quarter, which has been a strong, profitable quarter, is a springboard for us for what we are there to do. We took a lot of our vessels out of service to prepare them for the better days. We looked at ships, prepared them for sales, and, of course, we took delivery of a very large, about 14 vessels, of a very large number of ships. And at the same time, we were able to increase our capacity Our cash position, looking at it today, way above $450 million, approaching half a billion dollars in liquidity as we're finishing the second quarter. And we're expecting a much better quarter, although... I have to say that even the first quarter is a very healthy quarter. We're looking at a much better quarter. We're already at the latter part of the second quarter, so I can see a much better quarter coming. And third and fourth quarter, we will have the whole tonnage into action. I think we will see even better times. So looking for a record year for 2024, as we did last year. What makes us... Very positive is the unprecedented, in my 30-plus year history in the business, unprecedented demand by the major oil companies for any quality asset that is out there. And, I mean, we get calls, and we deal only with the major oil companies and the first-class end users or government bodies. The calls we get, even during the festive time of Posidonia, which we're all recovering still down in Greece in the last couple of weeks, we are getting, we were cornered at any time and asked to provide our tenants for long-term employment. It's a good situation. It's not always have been that way, although TEN has fared well even at times when people did not want to see any of our ships. And I believe we will see this portrayed on our share price. And this has been the most active period in the last five years, I can recall, commercially for our business. And, again, I want to thank men and women on board the ships, because they, by keeping the propellers running, they make things happen and they give us the... opportunity to serve with our loan contracts and, of course, our people on land and in our offices. Looking, as I said, looking forward, it seems that the stars are aligned for this period of time as long as our industry, other than the LNG segment, which I would say is the only, you know, grossly over-billed side of the business, with 60 percent of the order book out there. Every other aspect of our business, any other segment of the energy business, is well balanced. And we're ordering ship in some segments that there is not any growth. And with that, yes, please, I will ask George to give us more detailed developments.
George
Thank you. Thank you very much, Nikos. Good morning to all of you joining our earnings call today. 2024 continues to be another good year for tankers, as the factors that elevated freight rates in the last two years since 2002 continue. Key takeaways for TEN during the first quarter of 24, which was one of the busiest quarters in TEN's history as far as split renewal and volume of S&P transactions is concerned. First of all, we took delivery of the company's last two dual-fuel LNG-powered Aframax tankers in a series of four new buildings that were built against long-term employment to a major energy concern. We started taking delivery of the first in a series of five high-spec, environmentally friendly tankers from Viken. The delivery of the remaining four took place during the second quarter of 2024. This is one of the largest, if not the largest, concentration of LNG-powered Afromaxes. These six vessels mark 10th entrance into green tankers. At the same time, we continue the sale of all the first-generation vessels. Since the start of 2023, we sold eight tankers that were built between 2005 and 2007. From January of this year, the company took advantage and sold more vessels. We started by announcing the sale of a 2005 built Suez Max tanker in January. And since then, four more vessels have been sold. Another 2005 built Suez Max, two Afra Maxes, one built in 2007 and the other in 2008. Plus, the first steep turbine... In total, since 2023, 13 vessels have been sold with an average age of 17 and a half years, and have been replaced with 21 vessels that have doubled the deadweight capacity of the vessels that were disposed, and an average age of just one year. Part of the 21 Vessel Growth Initiative is with purpose building vessels to fit existing transportation one shuttle tanker, and five LR1 tankers. This brings our current new building order book to 12 vessels. The freight market was strong last year and remains strong as we speak. We continue to renew time charters at higher time charter base rates. Oil majors continue to fix vessels forward, which is a testament to a market that is expected to sustain current freight levels. The order book continues to be low due to the uncertainty of availability and affordability of alternative fuels other than biofuels and LNG currently. Many yards report availability after 2027. We continue to experience that trade flows to ongoing crude and oil product movements as a result of Western sanctions on Russian seaborne oil, and more recently changes in the crossings in the Red Sea and Suez Canal as a result of the Houthis' attacks on merchant vessels. And as we have said in previous calls, most of these changes appear to be permanent. At the same time, global oil demand continues to grow. 2024 is expected to be another record year for global oil demand. We expect demand to reach approximately 103 million barrels per day, versus approximately close to 102 million barrels per day in 2023. we see that since inception in 1993, we have faced five major crises, and each time the company came out stronger, thanks to its operating model. The average company growth is 21 percent in terms of total debt weight-on. In slide 4, we see the company The slide has all the five ex-weekend tankers that are now fully integrated and operational. This means that TEN is well positioned to continue capturing the positive tanker market fundamentals. In slide number five, we see the company's fleet growth and capital market action. and asset prices were usually low. In the slide, the numbers in the blue boxes represent the company's common share offerings, and in red the series of preferred shares offerings since the company's New York Stock Exchange listing. The first three preferred series totaling $188 million of par value, the series B, C, and D, plus a private-placed In the next slides, we see the company's current and long-term clients. As you see, we have a blue-chip customer base consisting of all major global energy companies, refineries, commodity traders, In slide 7, the left side presents the all-in break-even cost for the various vessel types we operate in tents. Our operating model is simple. We try to have our time-chartered vessels generate revenue to cover our company's cash expenses. That means paying for the company's vessel operating expenses, finance expenses, overheads, chartering costs and commissions, and we let revenue from the spot-trading vessels contribute to the profitability of the company. Lift utilization as a result of the eight vessels undergoing scheduled maintenance and repairs during the first quarter of 2024 was 91.3% versus 96.1% the prior year quarter. And thanks to the profit-sharing element for every $1,000 per day increase in spot rates, this has a positive 14 cents impact in annual interest Managing debt is an integral part of the company's strategy and capital allocation. The company's debt, as this slide shows, peaked in December of 2016. Since then, we have repaid 250 million of debt and redeemed 211 million in three series of preferred shares, plus a privately is also important. It's a cornerstone of TEN's strategy and the resulting fleet modernity, a key element of our operating model. The left side of the slide shows the divestments in tankers since January 1, 2023. We showed 13 vessels totaling 1 million deadweight tons, having an average age of 17.5 years. On the right side of the slide, under growth, we have the number of vessels we are currently currently a new building program of 12 tankers consisting of three DP-2 shuttle tankers for delivery in 25 and 26, one vessel, two eco-friendly scrubber-fitted Suez Maxis for delivery also in 25, two scrubber-fitted MR tankers for delivery in early 26, and five LR-1 average age of one year and 2.3 million deadweight tons. We more than doubled the cargo capacity of the fleet with new, more environmentally friendly, eco-built tankers. This slide highlights the company's financial performance since 2004. As the fleet was growing through the years, so did the company's cash position. to manage the ups and downs of the shipping cycle. We have maintained strong profitability, with the last two years generating record profits, and we have kept manageable debt levels throughout this 20-year period. The first five months of 2024 have given TEN the opportunity to further upgrade the quality and earnings power of the fleet. We expect the new additions to contribute positively in the overall financial performance of the company, In addition to paying down debt, dividend continuity is important for common shareholders and management. TEN has always paid a dividend irrespective of the market cycle. Our dividend policy is semi-annual. Last year we paid 30 cents in June, a special dividend of 40 cents in October, and 30 cents in December. This year we announced 60 cents per share to be paid July Inclusive of this upcoming dividend, which is double the first semiannual dividend of 2023, Ken has distributed over 800 million of common and preferred share dividends, 546 million of which to common shareholders since the company 2002 New York Stock Exchange listed. Global oil demand continues to grow. Despite financial and geopolitical headwinds, the International Energy Agency expects global oil demand to grow by approximately 1 million barrels per day to approximately 103 million barrels per day. It's going to be another record year after last year. Most of the growth is coming from Asia and Asia-Pacific region, mainly India and China. On the supply side, most of the growth in 2024 the United States of America, Guyana, Canada, Mexico, and Norway. The majority of the additional supply is in the Atlantic Basin, while demand growth continues to be concentrated in the Pacific, boosting long-haul tanker demand. As global oil demand continues to grow, let's look at the forecast for the supply of tankers. The order book as of May 24 stands at 10%, or 577 tankers over the next three years. The figure still represents a low number of new buildings. At the same time, a big part of the fleet, almost 42 percent, is over 16 years. And 893 tankers, or almost 60 percent, of the fleet are currently over 20 years. The next slide shows the scrapping activity since 2018. We believe scrapping activity will pick up as the global fleet gets older, and older tankers are getting out of favor for long-term business by major charters. And with that, I will ask Paul to walk you through the financial highlights of the first quarter. Paul? Thank you, George.
Paul
And first, I'd just like to say how happy I am to be with my colleague for a long, long time. It feels like a long time. Thank you, George. Since the beginning of 2024, we have been very active on the sale and purchase front, which enabled us to divest from some of our first generation tankers and replace them with new ones in high-end green technology. From the sale of our older vessels, we generated cash flow. The fleet has earned and enabled us to retain very solid cash reserves. During this time, while engaging in this green chip initiative, we took eight vessels for our scheduled maintenance and repairs, a necessary activity which should fade away into the second quarter. The result of this with a natural drop in the joint.
George
It's like, you know, it takes two to tango, so let's continue the tango. So let me take it over from here. So as Paul started saying, the result of this maintenance voyage revenues totaled $202 million, and operating income, including $16.2 million in capital gains from a vessel sale, settled at $76.2 million. The resulting net income reached $54 million Operating expenses continue to be somewhat influenced by inflationary pressures and reached $48.6 million, similar to the 2023 first quarter, which did have approximately two vessels more on average. Operating expenses per ship per day were at about $9,400, not far off the 2023 first quarter, with the average TCE, time charter equivalent per ship per day, at around $3,400, so a big notable difference. a still healthy number, but impacted by the reduction in vessels and the steep dry dockings and repairs evident in the quarter, as mentioned earlier. EBITDA at the end of the first quarter of 2024 was at about 101 million and expected to return to higher levels once the new vessels begin to generate their lucrative returns. From the beginning of Q1, for our vessels, and we expect this to help further build our cash reserves going forward. As the tank and market fundamentals continue to remain firm and assisted by the various geopolitical events around the globe, we are confident that TEN will continue to be the main beneficiary. And I think that concludes the summary from the financial point of view. So over to you, Nikos.
Nikos Tsakos
Thank you, thank you, guys. I think it's good to let our shareholders know how busy we have been. I think this has been one of the longest presentations by our president because we have been so busy. But, George, it's better to be accurate than do nothing. But as I said, I think we used this period of time as a springboard of our next phase, which is very clearly to be one of the first, if not the first company. to run the most environmental fleet out there. And we did this before. We were about 30 years younger, for those of you who have such a long memory. And the reason 10 is around today was a very quick reaction to the OPA-90. And that was the big change of the industry's design of ships. That was the biggest really structural change in our industry's design since the ancient years. And we were the first company to have a fully double fleet way before the due time, the obligatory due time. And we're looking to do the same with our fleet with the help of our clients. And in the meantime, make significant profits. And with that, I would like to open the floor to any questions that you may have. Thank you.
Operator
Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Clement Moylands with Value Investor Edge. Please proceed.
spk03
Good morning, or well afternoon. Thank you for taking my questions. I wanted to start by asking about the recent order for five LR1s. Should we think about it as fleet renewal, or is there a plan to increase your exposure to that subsegment? And secondly, do you plan to fix those vessels on medium-term contracts before delivery, or would you be comfortable trading them on spot?
Nikos Tsakos
Very well. I think that's a very good point. If you look at our fleet list that our president was presenting, you see that we have vessels there. We still have the Andes, which is kind of our oldest vessel. It was built before most of my children would have been born. I'm an empty nester, but... We have fond members of her performance, and that ship is, of course, a big candidate per se, but she has performed very well for us being built in Mabari in Japan. And you see that we have a significant fleet built between 2008 and 2016, let's say. So it is a category of ships that we believe they have been profitable for us. And if you look at the order book, I don't think anybody's building any of those ships. I think the order book is, anyway, 2% to 3%. So it's a combination, yes. It is fleet renewal. It's a side of the business that very few people operate, and it's something that I think it's a good opportunity. It is the least-built segment of the vessels that we operate.
spk03
Makes sense. Thanks for the cover. And would you be willing to trade them on spot, or do you still plan to follow your usual strategy of securing a charter?
Nikos Tsakos
Well, I mean, the way things are today, we do not have a big chance of trading ships on spot because our clients are actually grabbing those ships as soon as we ink a new bidding order or, you know, a discussion or take delivery of a ship. What I try to do, and I think our clients are now much, much more open to it, is put market-related features like profit-sharing in the market. So most probably those ships will be either entering some of our very successful pools or will be working on profit arrangements with our clients. So, yes, you know, we are always looking for the highest utilization and the propeller to earn us money every hour.
spk03
That's helpful. Thank you. And actually, talking about long-term contracts, I noticed that your exposure to every $1,000 per day increase in rates has decreased to 14 cents relative to last quarter's 18 cents. And I was wondering, could you provide some commentary on some of the fixtures you have added over the past few months?
Nikos Tsakos
Yes. I think by the end of the second quarter, it will be closer to 20 cents from our calculations because we have refixed at some vessels in the third quarter at unprecedented levels. I cannot say too much because, you know, our competition is listening, and although we're all nice friends and we can have a drink in marine money or capital linkage, it's better for everybody to run his own business. But in some cases our minimums have doubled from where they are from the profit source. So you will see that increasing significantly. The reason is that in the first quarter we took some vessels that had with its previous owner's fixed employment.
spk03
Thanks for the call, and final question from me. This is more on the shareholder return side. Last year, you declared a special dividend alongside Q2 earnings, and I was wondering, considering you expect Q2 earnings to be significantly better than Q1s, is it fair to expect a special dividend as well when you report earnings?
Nikos Tsakos
That's a very good question. I mean, all of your questions are good, but I think that I want to clarify something. Yes, last year we actually announced and paid an extra dividend, which went unnoticed by the analysts in the market as a, you know, a one-off experience. So we did not get any additional valuation for our shareholders. We will not pay an extra dividend, because it goes unnoticed, although I thought dollars and, you know, should be paid after we pay them, they should be noticed. And we will add it on the second half dividend, so it will go unnoticed. So I guess, you know, our intention is if the market continues to increase the second half of the year, but not with a special dividend. Because the market seems to think that it's a one-off occasion and they do not give it any value. So we will include it in our second half, in our December dividend.
spk03
Makes sense. That's all from me. Thank you for taking my questions. Thank you.
Operator
As a reminder, it is star 1 on your telephone keypad. If you would like to ask a question, we will pause for a brief moment to see if there's any final questions. With no further questions at this time, I would like to turn the floor back over to the CEO, Dr. Nicholas Takos. Please conclude.
Nikos Tsakos
So it's a pleasure to be able to share the company's developments with you. It's our 31st year. Hopefully we will see, you know, last year we were 10 at 30 and we broke 30. Now we're 31. I want to break 31 and more and much more above that. And, you know, we hope that our performance and our results and our dividend payments will help the shareholders and our share price go much closer to where it should be. although it has moved positively, but we're still a long way from where we expect it to be. And, again, I want to thank everybody for their support. It has been a frantic period in the last six months for commercial developments, for renewing the fleet, for growing the fleet significantly, at the same time making earnings, positive earnings and profits by selling all the ships and then replacing them with much younger ships, growing the company, modernizing the company. So, yeah, we are in a go-go always mode right now, but we only do it when there is solid business. You know that we are trying to avoid putting ever our company into any trouble. We haven't done this for 31 years, and we're always growing it responsibly. And we want to thank you for your support and looking forward to see you face-to-face very soon. And I think we're organizing a European roadshow, and, of course, we're always in the U.S. quarterly to see our shareholders. And, again, thank you very much, and have a nice, relaxing, and peaceful summer. We will not have one because we will be working. Thank you.
Operator
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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