Tsakos Energy Navigation Reports Financial Results for Nine Months
On average, TEN's fleet had 48.0 vessels (including the non-operating VLCCs La Prudencia and La Madrina which are held for sale) versus 47.7 vessels in the prior year quarter. Excluding these two inactive VLCC vessels, fleet utilization remained high at 98%. The average daily time charter equivalent rate per vessel was $16,602 compared to $14,055 in the third quarter of 2011. Rates for all vessel categories were better than those of the third quarter of 2011 except for the suezmaxes where rates achieved by those on spot or profit-share were down, but again this was outweighed by the impact of the LNG carrier, Neo Energy, earning substantially more than in the third quarter of 2011.
There was little change in total operating costs for the third quarter of 2012 at $33.1 million versus the $33.0 million for the third quarter of 2011. Similarly, average daily operating costs per vessel were $7,663 in the third quarter of 2012 compared to $7,681 in the same period of 2011, with higher repair costs due to extra dry-dockings being offset by reductions in most other categories of expense, in part due to a strengthening of the dollar over the Euro by 11.5%. Again, the technical managers were able to achieve cost savings on purchases in a difficult environment while striving to maintain the highest standards in safety and quality of the vessels and the operations.
Depreciation and dry-docking amortization costs totaled $25.2 million in the third quarter of 2012 compared to $27.1 million in the third quarter of 2011, the decrease being mainly due to ending of depreciation following the categorization as held for sale of the two older VLCCS at the end of 2011. Technical and commercial management fees were approximately the same as in the previous third quarter at just under $4.0 million. G&A costs increased by over $200 thousand mainly due to professional fees associated with new growth projects the Company has been investigating.
Interest and finance costs at $11.3 million were nearly 27% less in the third quarter of 2012 than the previous third quarter. This was mainly due to positive swings over the twelve months from the previous valuations of non-hedging interest rate and bunker swaps attained in the third quarter of 2011.
The third quarter of 2012 ended in a net loss of $10.4 million or $0.18 loss per share compared to a net loss of $24.1 million or $0.52 loss per share in the third quarter of 2011.
TEN's liquidity at the end of the third quarter of 2012 remained strong. Total cash and liquid investments amounted to $164 million. Cash flow from net income before depreciation, amortization and finance costs ("EBITDA") was $26.2 million. Despite the very difficult market, apart from the two non-active VLCCs and four other vessels, all the other vessels generated positive EBITDA in the quarter and all active vessels in the nine-months generated positive EBITDA. Total indebtedness since the third quarter of 2011, was reduced by $76 million to September 30, 2012. TEN continues to pay all its debt service obligations as they become due and believes it is capable of maintaining that record.
As announced today, the Board of Directors has declared a quarterly dividend of $0.05 per share payable on December 20, 2012 to shareholders of record as of December 14, 2012. This brings the total dividends for calendar 2012 to $0.50 per share. Inclusive of this distribution, TEN has distributed in total $9.575 per share in dividends to its shareholders since the Company was listed on the NYSE in March 2002.
FLEET STRATEGY & OUTLOOK
Although the third quarter is seasonally the weakest for energy transportation demand, certain glimpses in trading patterns and rates did emerge which offered insights of things that may come. During this quarter, crude tanker spot rates improved somewhat and exhibited a certain stability. On the product side, rates experienced a noticeable uplift thanks to refinery closures in Europe and the US which, coupled with increased refinery capacity in the Far East and notably in Saudi Arabia, India and China produced increased ton-mile demand and hence a healthier market environment.
As freight rates seem to be slowly negotiating themselves out of the doldrums, we enter the expected "strong" fourth quarter of the year in the hope that the sector upturn evident in the prior quarter will eventually return to exhibit signs of a sustainable recovery. The improving supply situation is helping in that direction as the orderbook continues its downward trend. According to Clarkson Research Services, today it stands at 11.7% of the fleet as opposed to 12.6% in June 2012 and 14.4% at end of 2011. By comparison, at end of 2010, the year when shipping rates took an abrupt and severe turn for the worse, the fleet orderbook stood at 22.3%. This declining orderbook is coupled with a healthy oil demand outlook for 2013, 90.5mbpd vs. 89.7mbpd in 2012 according to the International Energy Agency. In addition, special attention should be paid to certain geopolitical events around the world as they tend to increase oil demand and freight rates.
Looking ahead, management remains cautiously optimistic for the medium to long-term outlook of the tanker industry and is of the opinion that shipping will present interesting opportunities for longer term investments. Moreover, the expected delivery of the two shuttle tanker newbuildings just a few months away, the ice-class features in 21 vessels of the fleet particularly with the upcoming winter months in Northern Europe and North America, together with the Company's presence in LNG markets provide the necessary versatility to maintain its long stated objective of healthy shareholder returns including dividend payments.
"High fleet utilization, tight cost control, fleet modernity, our long term employment profile, together with our strong balance sheet have allowed TEN to navigate safely through this market downturn that started in late 2008," stated Mr. George V. Saroglou, Chief Operating Officer of TEN. "Looking ahead, we think the worst is behind us as supply of vessels shrinks while global oil demand continues to increase," Mr. Saroglou concluded.
About Tsakos Energy Navigation
To date, TEN's pro forma fleet consists of 51 double-hull vessels of 5.5 million dwt. This figure includes one LNG carrier and two DP2 suezmax shuttle tankers under construction totaling 400,000 dwt. It also includes two non operational VLCCs held for sale. TEN's balanced fleet profile is reflected in 23 crude tankers ranging from VLCCs to aframaxes and 26 product carriers ranging from aframaxes to handysize and two LNG carriers. The Company has an option for a third LNG carrier to be declared no later than end November 2012.
TEN's employment profile (operating fleet as of November 21, 2012):
Period Employment - Fixed, fixed w/profit share & min max (27)
Pool - market related (4)
Spot - market related (15)
TEN's current newbuilding program:
• Suezmax Shuttle DP2 157,000dwt Q1 2013
• Suezmax Shuttle DP2 157,000dwt Q2 2013
• LNG TBN 86,000dwt/162,000 cbm Tri-Fuel Q1 2015
• LNG TBN 86,000dwt/162,000 cbm Tri-Fuel Q4 2015 (option)
(All vessels are Double Hull -- Option vessel technical specs subject to change depending on charterer/employment)
Tsakos Energy Navigation press release