Tsakos Energy Navigation Limited

Thank you for standing by, ladies and gentlemen, and welcome to SACOS Energy Navigation Conference Call on the Second Quarter of 2025 Financial Results. We have with us today Mr. Takis Arapoglou, Chairman of the Board, Mr. Nicholas SACOS, Founder and CEO, Mr. George Saraglou, President and Chief Operating Officer, and Mr. Harries Cosmatos, co-CFO of the company. At this time, all participants are on 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 one on your telephone keypad and wait for your name to be announced. I must advise that this conference is being recorded today. And now I pass the floor over to your host, Mr. Nicholas Bornosis, President of CapitalLink and Investor Relations Advisor, to Sakos Energy Navigation. Please go ahead, sir.

Thank you very much, and good morning to all of our participants.

I am Nicholas Bornovitz, President of Capitalink and Investor Relations Advisor to Sakos Energy Navigation. This morning, the company publicly released its financial results for the second quarter and six months ended on June 30, 2025. In case we do not have a copy of today's earnings release, please call us at 212-661-7566 or email us at 10 at CapitalLink.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.tenn.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 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 Security Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, which may affect tense business prospects and results of operations. And at this moment, I would like to pass the floor to Mr. Arapoglou, the chairman of Tsakos Energy Navigation.

Please go ahead, sir. Thank you. Thank you, Nicholas.

Good morning. Good afternoon to everyone. In a tanker market with still strong fundamentals, we continue to perform extremely well. sticking to our well-known industrial model that the CEO, Nikos Tarkos, has described many times, generating healthy contracted revenue under very strict cost control, as you see in the numbers. At the same time, we're selling all the vessels and replacing them with new state-of-the-art ships, keeping a young fleet attractive to our customers. I will remind you that some time ago we identified the lack of good weighting on VLCCs. We are correcting this now and as you've seen we've gone ahead to order three new VLCCs with scrubbers plus option one. So we are rebalancing the portfolio and we are filling a gap that we always wanted to fill. So, again, the results, well done to Nikos Tsakos and his team. Best wishes for every success going forward. So over to you, Nikos.

Thank you, Chairman, and good morning to everybody. It's a pleasure to be here after the short break. summer lull whereas in 10 we did not experience such a lull because the company was very active during the summer months. We find it always interesting to make sure that during the slow seasonal months of the summer perhaps it's the best time to do business when not everybody is around his desk. So we've been busy In August, ordering the three plus one vessel, taking delivery in August and in July, starting from June, of our Suez Maxis and our shuttle tankers with long employment, selling all their vessels and ordering, as the chairman said, supporting the VLCC segment of our company. We have been traditionally... a company with a larger number of VLCCs and we renewed part of the fleet. some years ago and now it's very much time to come up with more strong environmentally friendly vessels all of them built in South Korea in the traditional yards that we have been supporting over the years like Hyundai I mean we must be one of the very few companies but we are very proud to take delivery of our vessels thanks to our new building capacity capability we are just took delivery of our 150th new building in the last less than 30 years and these vessels have been delivered from what I would say is the core peer group of shipbuilders in the world we started in April in Samsung we moved in June to Hyundai in Korea and we just renewed our relationship with what used to be called Daewoo, which we're just right now building VLCCs there. So the company is following its model of quality comes first. We have not, through the years, we have never cut corners. We have always done things the correct way by the book, and I think we are a proof that that things can work when you actually follow your strategy, follow the rules, and always aim towards quality. As mentioned in the press release, the beginning of the year and the first six months have been... a period of turmoil mainly because we are big supporters of the open seas and whenever sanctions and tariffs are imposed, of course, this puts a question mark and uncertainty in the market that we are facing. However, we have been able to navigate this I would say, interesting new times successfully. We paid our first dividend in July. We're looking forward to pay the next dividend to announce it in November. And in the meantime, we are happy to see the appetite of the major oil companies for good quality vessels at very, very accretive rates. And with that, you know, I would like to ask George Sarol, our president, to give us a more detailed analysis, not very detailed, George, more detailed of what has happened in the last six months and this period.

Thank you, Nikos. We are pleased to report today another profitable quarter. Tanker markets have remained healthy through 2025 to date. Energy majors continue to approach our company for time charter business. And as we speak today, total fleet contracted revenue, the backlog that we have today, the minimum is approximately 3.7 billion.

Which coincides, equates to more than $120 per share, just to put it in share perspective. That's the limit.

Ten is one of the largest transporters of energy in the world. We have started with four vessels back in 1993, and we have turned every crisis the world and shipping has faced into a growth opportunity. Today, we have a pro forma fleet of 82 vessels, thanks to the company's crisis-resistant model. During these 32 years, we have combined self-generated cash, traditional bank lending, and counter-cyclical capital market fundraising in order to build a corporate fleet. Fleet modernity is an integral part of our operating model. We build vessels at the best shipyards, we acquire very modern, high-specification tonnage, and at the same time, we sell some of the older vessels in the fleet. We have built a young, diversified, and versatile fleet, covering both the conventional and specialized transportation requirements of our clients, which are mainly major energy concerns blue chip names with global risk. In slide number four, we list the pro forma fleet of all conventional tankers, both crude and product carriers. The red color shows the vessels that trade in the spot market and our new buildings under construction. Since our last earnings call, we have added three new building VLCCs. to boost our presence in a sector that we felt we needed to increase the number of vessels we operate, and with very good, solid fundamentals as a big part of the VLCC fleet in the water is over 15 years. With light blue, we have the vessels that are on time charter with profit sharing, and with dark blue, the vessels that are on fixed rate time charters. In the next slide, we list the pro forma diversified fleet which consists of our two LNG vessels and our 16 vessel shuttle tanker fleet. We are one of the largest shuttle tanker operators in the world following the recently announced deal with Transpetro in Brazil for nine high specification shuttle tankers to be built in the Samsung shipyard in South Korea. We have six shuttle tankers in full operation after recently taking delivery of both Athens 4 and Paris 24 which commends long-time charters to an energy major. If we combine the two slides and account only for the current operating fleet of 61 vessels, we have 24 vessels, or 39% of the operating fleet, with market exposure, that is spot and time charter with profit sharing, while 53 tankers, or 87% of the fleet, is in secured revenue contract, time charter and time charter with profit sharing. The next slides, we list our clients with whom we do repeat business through the year thanks to our industrial model. ExxonMobil is the largest revenue client as we speak. Equinor, Shell, Chevron, Total, and BP follow. We believe that over the years we have become the carrier of choice to energy majors thanks to the fleet that we built, the operational and safety record, the disciplined financial approach, and the strong balances. The left side of slide 7 presents the all-in break-even cost for the various vessel types that operate in 10. Our operating model is simple. We try to have our time-chartered vessels generate revenue to cover the company's cash expenses, that is, pay for the vessel operating expenses, finance expenses, overheads, chartering costs, and commissions. and we let the revenue from the spot trading vessels contribute to the profitability of the company. Thanks to the profit-sharing element, for every $1,000 per day increase in spot rates, we have a positive impact of 10 cents in the annual EPS, based on the number of 10 vessels that currently are exposed to the spot markets. We have a solid balance sheet with strong cash reserves, and the fair market value is of the fleet is $3.8 billion against $1.8 billion debt, and the net debt to cap is around 42%. Fleet renewal and investing in eco-friendly, greener vessels has been key to our operating model. Since January 1, 2023, we have further upgraded the quality of the fleet by divesting from our first-generation conventional tankers, replacing them with more energy-efficient new buildings and modern second-hand tankers including dual fuel vessels. In summary, we have sold 17 vessels with an average age of 17.3 years and capacity of 1.4 million dead weight ton and replaced them with 33 contracted and modern acquired vessels with an average age of less than a year and 3.4 times the dead weight capacity of the vessels we sold. We continue to transition our fleet to greener and dual fuel vessels. We are currently one of the largest owners of dual-fuel LNG-powered Aframax tankers with six vessels in the water. The fundamentals continue to be good as global demand grows year after year. OPEC Plus really accelerated further their voluntary production cuts. Economic sanctions, wars, sanctions-listened tankers and geopolitical events affect our tanker market positively. The same is happening on freight rates, and while the tanker order book remains at healthy levels, as a big part of the global tanker fleet is over 20 years, and it needs to be replaced soon. And with that, I will pass the floor to Haris Kosmatos, who will walk us through the financial performance of the second quarter.

Thank you. Thank you, George. So let me start with the first half highlights. With a slightly larger fleet, both in terms of vessels and deadweight tons, when compared to the first half of 2024, TEN, during the first six months of 2025, continued to place more tonnage on time charter contracts to adhere to the long-term needs of its clients. As a result, during the first six months of 2025, TEN secured charters, including those with proper term provisions, increased by about 14%, while spot contracts experienced a marked decline by about 27%. A point of note, however, is the company's continued belief in the market, which despite TEN's limited exposure in the inherent volatile spot market, which has softened somewhat from prior periods of the recent past, has increased its presence in profit-sharing contracts by about 28% from the 2024 first half, in order to capture the upside the tanker market expected to provide starting with the upcoming winter months. In addition, during the first six months of 2025, five vessels underwent scheduled dry doctrines from eight in the same period of 2024, which when combined with the shift in employment patterns explained above, resulted in an increase of fleet utilization from 91.9% in the first half of 2024 to 96.9% in the first half of 2025. As a result, 1062 vessels in the water fleet generated 390 million of gross revenues during the first half of 2025, from 415 million in the spot-heavy 2024 first half, averaging a healthy $30,754 per ship per day. The aforementioned shift in employment patterns led to a material reduction in voyages expenses. from $83.4 million in the first half of 2024 to about $68 million in the 2025 months, a $15.5 million reduction. In a similar fashion, charter hire expenses fell from $11 million to $6.6 million, a $4.5 million improvement during the equivalent six-month time frame. Vessel operating expenses, reflecting the sum of the larger fleet, both in terms of numbers and vessel sizes, or at 102.3 million, slightly higher than 2024 first half level, equating to a daily average expense of a still competitive $9,743 per vessel. A similar pattern was evident in both depreciation and amortization expenses, which closed the first half of 2025 at 83.2 million, up 6 million from the 2024 period. Unlike the 2024 first half, whose results included a near $49 million capital gain from a series of vessel sales, such gains for the 2025 first half were reduced to just $3.5 million as a result of the sale of the 2009-built Sirius Max tanker during the first quarter of 2025. Inclusive of these gains, during the first half of 2025, TENS operating income settled at near at about $111 million. Interest and finance costs during the 2035 first half, on the back of a somewhat lower interest rate environment and two refinances at lower margins, were at $49 million from $55.2 million in the same 2024 six-month period, and over $6 million improvement. Interest income during the first half of 2025 reached $5.5 million. General and administrative expenses for the first half of 2025 were $23.1 million, incorporating a management incentive and stock compensation plan. Reflecting all the above, the company generated a net income for the first half of 2025 of $64.5 million, or $1.70 per share. Adjusted EBITDA for the first six months of 2025 came in at 193.2 million, while total debt, net of 287 million of cash at hand, settled at 1.4 billion, leading to net debt to capital of a countable 43.6%. And now let's go into the second quarter highlights. During the second quarter of 2035, the employment shift towards secured employment was equally evident as available days under time charters and profit-sharing contracts increased by 12% from the 2024 second quarter, while days under spot voyages dropped precipitously by 31.5%, leading to fleet utilization increasing to 96.6% from 92.4% in the 2024 second quarter. Worth highlighting here is the 30% increase in total days of profit-sharing contracts, emphasizing TEN's employment strategy of downside protection with upside optionality. Resulting from the above and reflecting again a somewhat softer but still healthy market from the 2024 second quarter, and after having the three vessels on dry dock, TEN's fleet generated $193 million of gross revenues equating to $30,767 per vessel per day, a healthy performance. Borgia's expenses, again, due to lesser days on spot contracts, declined by about $10 million from the 2024 same period, while charter hire expenses also experienced a drop to settle at $3.3 million from $5.1 million in the second quarter of 2025. Operating expenses, as indicated earlier during our first half overview, were just $3 million higher from the 2024 second quarter at $52.7 million, or $9,982 per sheet per day, a still competitive level thanks to the efficient and proactive management performed by 10 technical managers. Depreciation and amortization costs during the 2025 second quarter, and again reflected the slightly higher vessel classes in the fleet, were at 42.1 million from 39.5 million in the second quarter of 2024. During this second quarter, there were no gains or losses on vessel sales registered compared to the 2024 second quarter, which recorded tabular gains of 32.5 million. As a result, operating income for the second quarter of 2025 settled at $50 million. Interest and finance costs during the second quarter of 2025 were $5 million lower from the 2024 second quarter at $25 million, while interest income reached $3.2 million. Taking all the above into consideration, TEN during the second quarter of 2025 generated a net income of $26.8 million. which equates to $0.67 per share. In ending, adjusted DBDA for the 2025 second quarter was at approximately $94 million. And with this, I pass it back to Nikos. Thank you.

Thank you, Harry, for your detailed analysis. And with this, we would like to open the floor for any questions or input that... You may have. Thank you.

Thank you. At this time, we'll be conducting a question and answer session. If you'd 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'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Poe Fratt with Alliance Global Partners. Please proceed with your question.

Yes, thank you. Can we talk about the new build orders for the BLCCs? You know, as you mentioned on the last quarterly call, you know, you previewed, you previewed, it seemed to preview that. Can you talk about how you decided to go forward with new builds versus acquiring assets in the open markets?

Yes, thank you. Well, we are always looking for good quality vessels in the open market also, so we do not exclude this to happen. We took advantage of the strong second-hand market to sell vessels. So perhaps when it's a good time to sell vessels, and we made a significant cash profit and a profit overall on the sale of 18-year-old vessels, it means that it's not perhaps the best time to acquire second-hand vessels because they are pricey. So I believe that it's very, very good. For us, we have very competent and experienced new building site offices in Korea and Japan in the past. So it makes much more sense, since we are building a big number of vessels in the first class Korean yards with a site office there, to build environmentally friendly vessels of the future that are actually following all the upcoming regulations, and they are built at the yards that we traditionally build ships. So I think VLCCs has been a part of our portfolio that we have lagging behind, and I think that's a very good opportunity to find. We believe it may be the reason we are able to run ships at, I would say, significantly lower operating expenses than a big part of our peer group is because we tend to good quality ships and sister vessels and that helps us very very much in keeping operating expenses and the experience of our seafarers, the crew and the captains it's like running let's say a very similar fleet of airplanes or a very similar fleet of voings or in order to have the training for the crew, the spare parts for all the vessels, and it gives us a lot of flexibility.

Great. And then if you could clarify whether you exercised the option that you had when you first announced the LCC new builds. And then secondly, typically you, when you have a new build, you typically have a contract or a time charter set up. in advance of delivery, do you currently have a time charter in place, or when do you anticipate securing a time charter for the bees?

Yes, I think what we did is we opted for the option, and we actually got an extra option for another couple of months. because we believe that it's good to maintain these price levels going forward in a very uncertain environment. So options are always valuable. So actually, yes, we have three firm vessels right now, plus an additional option in the same yard, in the same quality. Right now, the VLCC market is a very hot market. We have actually three of our existing VLs are opening in the next six months, and we see a lot of appetite. I mean, we're in the process of renewing some of the existing VLs going forward with significant increased base rates and profit-sharing arrangements. And the new orders, there's a lot of appetite, but it's still early to make a decision. So we will be taking care more of the three existing ships, very young ships also themselves. But it gives us, with six VLs and perhaps more coming, it's starting to get critical mass in that very, I would say, interesting segment of the tanker market.

Great, thank you. And then could you preview, I know that you talked about, you know, declaring the second half dividend in the November timeframe. Can you preview it at this point in time, or is it just too early?

Well, you know, I think it is early, but we are looking at a healthy market, so we are expecting, you know, for the board to opt for a healthy dividend. So, I think we are in a good space, I would say.

Okay. And then on the last call, you talked about potentially, you know, given the current valuation in the equity market, you talked about potentially restructuring the company or looking at alternatives, maybe splitting the company into, you know, a company that's has twofold one with you know long-term time charters in place um especially on the you know when you look at the deep you know the shuttle tankers versus you know um assets that have shorter term um time charters any progress or any comments on you know that type of move

First of all, we are not restructuring the company. We have never restructured any part of our debt or the company. So I think, you know, TEN is one of the few companies that, you know, I'm just joking, but we're not restructuring. We're always thinking out of the box. I think we are very happy to where we are today with the growth of the company, with the profitability of the company. One thing that I would say, like other shipping companies, but especially ourselves, we are disappointed is with the with the share performance, and we're trying to, you know, I think our company should have easily a market cap of $2 billion from where it is today. So we're always thinking of ways to get shareholders' interest and appreciation. I think we are going through a period with inflation being around. We are going through a period where real assets matter. So I think this is, you know, and we have very, very, very real assets and quite undervalued real assets. So I think what we want to do is to be able to have a much more efficient, to make it more efficient for our shareholders. So we have thoughts of perhaps having one of the largest southern tanker fleets plus a lot of long-term business and specialized vessels. to do something down the road in the next eight quarters, I would say, in perhaps putting the more specialized vessels in a vehicle that, of course, 10 will be by far the major shareholder. But, again, these are ideas that we are discussing with our investment bankers. But it's nothing imminent, I would say, for the next four quarters.

Okay, thank you. And then could you preview or give me an idea of sort of the direction of OpEx and GNA over the second half of the year? It looks like the first half, GNA especially, might have had some one-time items in it.

Yes, well, I think we are putting a lot of emphasis if we are running things hands-on. and we look at our technical managers almost on a weekly and monthly performance. We are facing some inflation issues, but I think we have been able to cap the majority and we still have an average for such a big diversified freedom, which includes DP vessels, which the operating expense of those ships are in the high teens, and we're still under $10,000 on operating expenses. So I think we put a lot of emphasis in running a tight ship, literally. I believe that we will be able to maintain the expenses there.

Great. Thank you for your time.

Thank you.

Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. There are no further questions at this time. At this point, I'd like to turn the call back over to Mr. Sakos for closing comments.

Well, again, thank you for attending our call in the first six months, and I think moving forward has been an exciting time for the energy markets. I believe that we are here to see even more solid results coming forward. The energy part of the world economy is becoming more and more important. The players right now are getting more. We're seeing a shipping energy part of the business where really you have a two-tier market. You have vessels and they're growing in numbers that are, I would say, They do not serve the core part of the business, which allows us with modern high-specification vessels to be able to have more opportunities in order to serve our major clients. So I believe I am optimistic that we're going to be seeing at least in the near future another 18 months of a very solid, perhaps getting even stronger market. And we see also actions from the administration in the United States to support shipping, which is important because shipping and energy transportation have always been in the background. We provide a significant service, a very big service for the world economy, but in a way we are kind of the unsung sailors, not heroes, the unsung sailors of the world economy. And I think it's good to see that people are paying much more attention to actually the services we're doing, be it on the LNG, be it on the crude, on the product... I will be in the United States in the next couple of weeks having meetings specifically on ways where seaborne transportation and especially energy transportation is going to be appreciated and assisted more. And I think it is going to be good for the charters and the seaborne. So I think we have an optimistic view going forward. And with that, I would like to thank everybody. Mr. Arapoglou, our chairman, if he wants to have a closing statement.

Thank you, Nikos. Just to say that we believe that the market continues not to appreciate the nearly $4 billion of minimum contractor revenue for 10 and keeps looking at us like any other shipping company with high volatility and low predictability of income and revenues. We feel that perhaps the market has begun focusing on it, but we feel that the value of the stock is much higher than where it is today. And as far as dividend is concerned, the CEO just mentioned that the board is going to look at the results of the third quarter and be able to perhaps announce, make a decision on the dividend in a few months' time. So we continue to be very positive on that front. So with that, thank you very much. Thank you, Nico.

Thank you. And I think we will be I think the team will be attending events in London for London International Shipping Week including Capital League event where our CFO is going to be a speaker and the following week in New York so hope to see you face to face and thank you very much and have a good rest of the day

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.