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Tsakos Vitality Navigation Restricted (NYSE:TNP) Q3 2022 Earnings Name Transcript November 22, 2022
Tsakos Vitality Navigation Restricted misses on earnings expectations. Reported EPS is $1.48 EPS, expectations had been $2.19.
Operator: Thanks for standing by, girls and gents and welcome to the Tsakos Vitality Navigation Convention Name on the Third Quarter 2022 Monetary Outcomes. Now we have with us Mr. Takis Arapoglou, Chairman of the Board; Mr. Nikolas Tsakos, President and CEO; Mr. Paul Durham, Chief Monetary Officer; and Mr. George Saroglou, Chief Working Officer of the corporate. And now, I cross the ground over to Mr. Nicolas Bornozis, Chief President of Capital Hyperlink Investor Relations Advisor to Tsakos Vitality Navigation. Please go forward, sir.
Nicolas Bornozis: Thanks very a lot and good morning to all of our individuals. I’m Nicolas Bornozis of Capital Hyperlink Investor Relations Advisor to Tsakos Vitality Navigation. This morning, the corporate publicly launched its monetary outcomes for the third quarter and 9 months ended September 30, 2022. In case you do not need a duplicate of right this moment’s earnings launch, please name us at 212-661-7566 or e mail us at ten@capitallink.com and we can have a duplicate for you e-mailed immediately. Please be aware that parallel to right this moment’s convention name, there’s additionally a reside audio and slide webcast, which might be accessed on the corporate’s web site on the entrance web page at www.tenn.gr. The convention name will comply with the presentation slides. So please, we urge you to entry the presentation slides on the corporate’s web site.
Please be aware that the slides of the webcast presentation will likely be obtainable and archived on the web site of the corporate after the convention name. Additionally, please be aware that the slides of the webcast presentation are consumer managed and that signifies that by clicking on the correct button you possibly can transfer to the subsequent or to the earlier slide by yourself. At this stage, I wish to learn the Protected Harbor assertion. This convention name and slide presentation of the webcast incorporates sure forward-looking statements inside the that means of the Protected Harbor provision of the Non-public Securities Litigation Reform Act of 1995. Traders are cautioned that such forward-looking statements contain dangers and uncertainties which can have an effect on TEN’s enterprise prospects and outcomes of operations.
Picture by Mateusz Suski on Unsplash
And earlier than passing the ground to the Chairman, I wish to remind everyone and congratulate them. This yr the corporate is celebrating its twentieth anniversary of listening on the New York Inventory Trade, and on December 9, we sit up for having with us in New York the administration of TEN and Dr. Tsakos of becoming a member of the Capital Hyperlink Spend money on Greece Discussion board on December 9 in New York. And at this second, I wish to cross the ground to Mr. Arapoglou, the Chairman of Tsakos Vitality Navigation. Please go forward, sir.
Takis Arapoglou: Thanks, Nicolas. Good morning, good afternoon to all. Thanks for becoming a member of our name right this moment. Actual congratulations to administration for historic second greatest quarterly efficiency, just under the very best ever in This autumn 07 of $52 million. So it is a nice outcome. It proves as soon as once more the technique TEN technique mannequin, protects us in unhealthy instances, totally response in good instances and permits us to serve our obligations to pay dividends and generate money for brand new enterprise. And we’re very completely satisfied that every one that is mirrored now could be starting to be mirrored on the inventory value. And particularly, I might wish to congratulate administration for the profitable new enterprise with one other blue chip buyer, Whole, on the primary deal ever on very profitable enterprise. So with out additional ado, congratulations to Nikolas Tsakos and his crew and supply the ground to him for the remainder of the assembly. Thanks, Nikolas.
Nikolas Tsakos: Thanks, Chairman and good morning, good afternoon to all of you. Thanks for being right here and supporting and following TEN’s 20-year efficiency on the New York Inventory Trade and at 30 years, subsequent yr, which goes to be our thirtieth yr anniversary because the firm was established on the Oslo Inventory Trade. So and hopefully, our share value will likely be above $30, we hope to be nicely above $20 within the remaining of the yr. So, we labored on $10 or $20 within the subsequent yr, it may be $10 or $30 at the very least, however thanks for bringing us the place we’re. Because the Chairman stated, this actually was our greatest quarter within the final 15 years. Now we have not had such a excessive return in because the fourth quarter of 2007. So and however I consider that if issues proceed to go and you recognize I’m very conservative often however I hope that we are going to break the report, Paul.
Paul is engaged on it already and our chartering crew on the identical time within the fourth quarter of this yr issues look to be even stronger or rosier and it is a time that the TEN mannequin proves it really works, as a result of we will work at troublesome instances, but additionally significantly better instances. Now we have, as George Saroglou goes to level out, we now have, that is our fifth disaster that we’re popping out from, for the tanker market based mostly on geopolitical occasions and market-related occasions and financial occasions and our purpose is all the time to have a sustainable progress. We’re in a position to repair enterprise on the time and make gross sales of ships on the instances on the excessive instances that may carry us on to the subsequent cycle. And I feel that is the time we’re doing. Now, we’re having fun with 6-figure returns or income time constitution revenues in a majority of our Aframax, Suezmax, and VLCC fleet which hopefully will likely be portrayed on the fourth and the primary quarter.
And what provides me consolation is correct now, we’re in a state of affairs the place little or no new constructing provide is coming in and so this good market maybe not at these excessive ranges as all the time, however it will likely be sustainable for at the very least the subsequent 3 years. In TEN, we use the low markets to have the ability to buy new fashionable property as we now have finished after which constitution them out when the instances are higher for long-term to have the ability to cowl the cyclical markets that we would the cycle that the market may deliver. And with this, I wish to ask George Saroglou to not take an excessive amount of of his time to offer us slightly description of the final 9 months and give attention to the following occasions, which we’ll speak additionally after the throughout the query time.
George Saroglou: Thanks, Nikolas. Good morning to all of you becoming a member of our earnings name right this moment. Let’s go to the slides of our presentation. Beginning with Slide 3, we see that since TEN’s inception in 1993, we now have confronted 5 main disaster and every time, the corporate has come out stronger, because of its working mannequin. This time is not any exception. We handle the COVID pandemic with none critical results for each fleet and onshore operations and we’re presently navigating the challenges created by the battle in Ukraine. The market fundamentals, report low order e-book, and an getting older fleet, even with out the tragic battle had been optimistic for the tanker trade. The mixture of self-imposed and mandated sanctions on Russian oil because of the battle served as a further catalyst to propel freight charges larger as long-established commerce routes had been disrupted and voyage distances lengthened.
A brand new spherical of European sanctions on oil imports from Russia is anticipated in December. The total influence can’t be assessed till particulars are recognized. Nevertheless, it’s anticipated to maintain the lengthening of voyage distances which coupled with regular winter components like climate delays and a rise in oil demand resulting from gas-to-oil switching because of larger pure fuel costs in Europe is anticipated to maintain the freight charges within the tanker market serve by way of this winter and the months forward. Russia might want to reroute its oil exports away from Europe. In Europe, we have to backfill these quick coal imports from different extra distance places, each of which is able to proceed to create vital ton-mile demand for tankers. With report low order e-book and the redesign of the worldwide vitality map for each crude and oil product trades, we count on the tanker trade to undergo a sustained robust markets within the years to come back.
In Slide 4, we see the fleet and its present fleet employment. 40 out of the 66 vessels or 61% of the fleet within the water has market publicity, a mixture of spot contract of affreightment and time charters with revenue sharing. 44 out of 66 vessels or 67% is in secured contracts fastened time charters and time charters with revenue sharing. Because of this TEN is well-positioned to seize the prevailing optimistic tanker fundamentals. And we now have taken benefit of the great tanker market as our earnings launch of right this moment exhibits. Fleet was there, and it’s a key ingredient of our working mannequin. 12 months up to now, we bought 2 vessels, 2003 constructed Panamax tanker and the 2006 constructed of our 2 Aframax tanker, and took supply of three fashionable vessels. Two new buildings in January, we took supply of LNG service TEN Vitality and in July of the shuttle tanker quarter.
On this month, we took supply of it to construct eco-friendly scrubber fitted VLCC which we now have renamed as DS1, the Greek identify for . All 3 vessels are chartered towards lengthy accretive time Charters. In actual fact, right this moment we introduced the beginning of the three-year time constitution with revenue sharing for DS1 to a big oil main. Asset costs continued to pattern larger. Administration is actively exploring alternatives to divest a few of its earlier technology vessels and substitute them with extra fashionable eco-friendly greener vessels. On the newbuilding entrance, we introduced right this moment a undertaking with a significant vitality concern to construct and Time Constitution as much as 3 shuttle tankers towards minimal 5-year as much as 15-year contracts. That is along with a be aware that we now have in place for 4 newbuilding Aframax tankers, which we count on to begin taking supply from the fourth quarter of 23.
And that are a part of the corporate’s inexperienced ship twin gasoline LNG powered initiatives. All vessels are coming with long-term employment connected. In Slide 5, we current the corporate’s present and long-term purchasers. As you see, we now have a blue chip buyer base, consisting of all main world vitality corporations, refineries, commodity merchants with Equinor presently topping the listing as our largest constitution with 9 vessels and 4 new buildings all on long-term time charters. On Slide 6, the left aspect presents the all in breakeven price for the assorted vessel varieties we function. We preserve as you see a low-cost base. Now we have a easy working mannequin. We attempt to have our Time Constitution vessels generate revenues that cowl the corporate’s price bills, which implies paying for the vessel working bills, finance bills, overheads, chartering prices, and commissions and we’ll add the income from the spot buying and selling fleet contribute to the profitability of the corporate.
Regardless of the prevailing inflationary pressures, we wish to spotlight the buying energy of our technical managers and the continual price management efforts by administration to take care of a low OpEx common for the fleet, whereas on the identical time holding a excessive fleet utilization and quarter-after-quarter, yr after yr. Regardless of 14 particular surveys, some are forward of schedule in preparation of the anticipation and the anticipated market upturn we achieved an OpEx general utilization of 93.7% for the fleet. And because of the revenue sharing ingredient, for each $1,000 enhance in spot charges, we now have a optimistic $0.29 influence in annual EPS based mostly on the variety of vessels we presently function within the spot market. Slide #7. Debt discount can be integral to the corporate’s capital allocation technique.
The corporate’s debt peaked in December 2016. Since then we now have repaid $428 million of debt and we bought $100 million in two sequence of step-up most popular shares we had excellent. Along with paying down debt, in Slide 8, we see that dividend continuity is vital for frequent shareholders and administration. TEN has all the time paid the dividend regardless of the market cyclicality. $0.15 per frequent share will likely be paid in December 22 to shareholders of report on December 14. The December dividend cost represents a 50% enhance from the July $0.10 a share dividend. The corporate has paid $0.5 billion in dividends since we listed the corporate within the New York Inventory Trade in 2002. International oil demand continues to recuperate regardless of lockdowns in China because of the zero COVID coverage and mounting world financial headwinds.
For the yr, oil demand is anticipated to develop by 2.1 million barrels per day. Subsequent yr, we count on progress to be 1.6 million barrels per day. Developed economies lead oil demand progress in 2022. In 2023, oil demand enlargement is forecasted to come back from the non-OSB international locations. On the availability aspect, we now have the current OPEC+ cuts, the sanctions and self-sanctions on Russian crudes and that may play out in 2023, and additional releases presently from the OECD strategic petroleum reserves. International oil shares proceed to fall and are presently under the 5-year common within the durations 2017-2021. Non-OPEC 2023 manufacturing is ready to rise coming primarily from Brazil, USA, Vienna, Canada, Mexico, and Norway. As world oil demand recovers continues to develop. Let us take a look at the forecast for the availability of tankers.
The order e-book begins stands at slightly over 4% over the subsequent 3 years, which is the bottom that it has been in additional than 30 years. On the identical time, a giant a part of the fleet is 32% is over 15 years and we now have 8.3% that’s presently over 20 years. So, these are very robust fundamentals and because the subsequent slide exhibits the scrapping exercise since 2018. Now we have upcoming laws and trade with decarbonization initiatives and virtually 9% of the fleet over 20 years. So we expect that every one of those components level to a really balanced tanker provide marketplace for a few years forward. And with that, I’ll ask Paul to stroll you thru the monetary highlights for the third quarter and the 9 months of the yr. Paul?
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Paul Durham: Thanks, George. That is moderately going to be a type of tremendous numbers beginning with internet earnings of over $51 million totally realizing our expectations for a powerful quarter. On this quarter our vessels reaped an additional $92 million income over the prior quarter three, leading to a complete income of $224 million, a 70% enhance, principally from spot earnings of $103 million as charges surged. As well as, our time constitution vessels in quarter three, together with $14 million revenue share generated over $120 million protecting most of our operational bills. The influx of money within the third quarter from our operations resulted in EBITDA of over $100 million in comparison with simply $20 million within the earlier third quarter. Whereas within the 9-month interval, EBITDA totaled $236 million.
From the beginning of this yr to the tip of September, TEN’s income reached $590 million, whereas internet earnings within the 9 months amounted to over $130 million with revenue share of practically $21 million. Common every day TCE exceeded $32,000. Due to market circumstances that allowed our fleet to attain virtually most utilization of 94% regardless of 5 vessels finishing dry-dock in quarter three. The numerous money movement generated within the current 9-month interval and the plentiful money reserves generated as a consequence has positioned us in a really favorable place. We anticipate these reserves will present us new alternatives, corresponding to these created by the corporate over the previous months, corresponding to, particularly, the brand new LNG service, the shuttle tanker, and extra lately the brand new VLCC.
These newly acquired vessels are already working on accretive Time Charters and are anticipated to generate appreciable income of their lifetime. These are the sorts of alternatives that we consider will proceed to generate accretive returns and safe our money movement and naturally as George has talked about to scale back our debt. George?
George Saroglou: Sure. Thanks, Paul. Decreasing debt was all the time good and we have been doing it fairly drastically. We’re not solely decreasing debt from the highs of 2016-2017 by near $470 million. After which one other $100 million of shopping for again our prep. So I feel what we now have completed is an even bigger fleet, a way more fashionable fleet with a lot much less obligations and we have been doing this by way of thick and thins by way of the great instances, the unhealthy instances, maybe we’re one of many few corporations on the market that we now have by no means delayed or renegotiated any of our banking relationships. As an alternative, and for this reason we now have all the time been supplied excellent phrases, very aggressive phrases in rising the enterprise at troublesome instances. I imply, the image that Paul and George are displaying to us is an image of a powerful market, a sustainable market going ahead.
That is what we wish to do, however we all the time shield the corporate’s draw back as we now have finished prior to now and we might have to additional lower our debt and enhance our dividends to the shareholders. And with that in thoughts, it appears that evidently the very best is but to come back at the very least for the foreseeable future. I count on that we’re fortunately there so I count on the fourth quarter to be there to be a report quarter with the numbers that we’re seeing right this moment. I imply our spot from Axis a lot of them are above the $100,000 a day degree along with our Suezmaxes which is considerably larger, we’re within the third quarter was, and for certain the primary 9 months. And with that optimistic be aware, I wish to open the ground for any questions. Thanks.
To proceed studying the Q&A session, please click on right here.
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