Tsakos Energy Navigation Ltd (TEN) 2004 Q1 法說會逐字稿

Please Stand by. Good day, and welcome to the Tsakos Energy Navigation first quarter earnings conference call. Today's call is being recorded.

At this time, for opening remarks and introductions, I'd like to turn the call over to Mr. Thomas Rozycki. Please go ahead sir.

Thank you. Good morning and thank you for joining us for Tsakos Energy Navigation's first quarter 2004 earnings conference call.

By now, you should have received a copy of yesterday's earnings press release. If you have not, please contact [indiscernible] of GTI Group at 212 537 8026, and he will be happy to fax or e-mail a copy of the release to you.

As a reminder, this conference call is also being web cast. To access the web cast, please refer to the press release for the web address, which will direct you to the registration page.

At this time, I would like to read the safe harbor statement.

This conference call contains certain forward-looking statements, within the meaning of the safe harbor provision of the Privacy, Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements, involve risks and uncertainties, which may affect Tsakos Energy Navigations business prospects and results of operation. Such risks are more fully discussed in Tsakos Energy Navigation's filings with the Securities and Exchange Comission. Thank you.

Now, I would like to turn the call over to Mr Nikolas Tsakos, President and CEO of Tsakos Energy Navigation.

Thank you, Tom.

Good morning ladies and gentlemen. Thanks for being on the call today, and listening to our first quarter earnings results.

From Greece, joining me today is our chairman Mr. Stavropoulos and George Saroglou, our COO, Paul Durham our finance director, Michael Jolliffe, our deputy chairman and Dr Paul Lambrinakos, our Chief Marine Officer.

On this morning's call, first the chairman will offer key thoughts and remarks, and then I will provide a brief review of what has happened in the first quarter of 2004, and how things are going forward. Then Paul Durham, our finance director, will dip into the nitty gritty in the figures.

At this time, I would ask our chairman, Mr. Stavropoulos to open the call.

Thank you very much. Chairman.

Thank you. Thank you Nikolas. Good morning ladies and gentlemen.

Nikolas I'm reluctant to [indiscernible] your conduct, but I just can't constrain myself. A tremendous result for the first quarter 2004, are a testament to the soundness of the business plan, and the skill of execution by management, and the entire Tsakos Group team. A dynamic combination of producing outstanding day-to-day results, while at the same time navigating a high speed program of organic expansion, is to be admired, and applauded. On behalf of the entire board of directors, I wish to commend you and your associates.

On an additional note, I wish to remind our shareholders of the upcoming annual general meeting, on the June 7, at our headquarters in Athens. We do hope many of you will join us in person, and urge all of you to participate by proxy.

Much has been said and written about sound corporate governance, it is a standard and a process, that has always been high on your board's agenda, and will be further buttressed by more formal procedures. However, I wish to emphasize, that sound governance begins with the shareholders. Active participation in the AGM process is a keystone. The agenda will include the nomination of two retiring directors, Mr. Nicholson and myself. On behalf of Mr. Nicholson, your vote for re-election will be most welcome and appreciated.

I'm particularly excited about the opportunity to offer two additional candidates for board membership, Messrs O'Neil and Nusspickel, hopefully, you've read the press release about this development. Over the years, we've benefited from a highly participative board of directors, with each member bringing a rich and diverse experience to discussion and decisions.

The additional nominees will further square this circle, as they bring shipping industry perspective from different insights, ranging from the regulatory, to the financial, and many points in between.

Mr. O'Neil will accelerate our development perspective security, manning excellence, and regulatory conformance. Mr. Nusspickel will advance our knowledge regarding the rapidly changing environment of financial accounting and disclosure, as well as internal controls.

Most importantly, they bring with them displayed sound judgment. We're confident you'll share our enthusiasm, and endorse their candidacies with your vote for their election.

Another key agenda item, is the board's proposal of the 2004 Staff Incentive Program. Our earlier, 1998, program has been highly successful in the goal of aligning the interests of shareholders, with those of the people that produce the results. We are confident that the proposed program will further utilize and incentivise, the Tsakos Group team to excel, as they succeed and reap deserved rewards, all shareholders will realize the benefit of growing ownership value. We urge your support and vote for this proposal.

Needless to say, I want to thank you for the opportunity to highlight key AGM proposals, and to re-emphasize the boards appreciation for the accomplishments by you and your team. Thank you.

Thank you, Chairman. I would like to take it further. The first quarter of 2004 was another year of expansion for Tsakos Energy Navigation, and for our industry. The strong work environment that we have witnessed for the past several quarters, continues into the first quarter of 2004, creating the backdrop for another quarter of record revenues for Tsakos Energy Navigation.

I would first like to give you a top line review of the first quarter numbers, and then talk a bit about our operational performance. Paul Durham, our Finance Director, will provide you with more specific details relating to our financial [indiscernible] remarks.

Once again, following the completion of our tenth continuous profitable year, quarter one was one of - -. Again we posted record revenues, approximately 43% higher, on the same period in 2003.

Today, Tsakos Energy Navigation announced net revenues for the first quarter of 2004, of $79.5m, compared with $55.7m, for the first quarter of 2003.

The company also reported earnings per share of $1.94, for the first quarter. This represents the best quarter in our company's history so far, and we are extremely proud of this accomplishment.

Turning to operations, during the first quarter we made several moves that further established Tsakos Energy Navigation, as one of the premier operations in the world. Due to our [indiscernible] and high specification, as well as the constant addition of new vessels, we were again able to take advantage of the strong rates in the stock market.

However, as I mentioned earlier, we have not, and would not change our strategy of employing a significant portion of our vessels, and the long-term charters with contracts. Currently 22 out of our 28 vessels are long-term employments.

We have already secured 75% of our current fleet net operating days for 2004, and 60% for 2005. This represents almost $220m revenue, over the next 7 quarters.

We are aggressively seeking new opportunities for all of our vessels, and have met with success in securing long term aaccretive charters for our fleet, and driving volume to the bottom line, by taking advantage of the current stock market. A recent example of the appetite for quality products, was the forward fixture of our product tanker the Crux, to a major American oil concern, six months before the end of the current charter. We hope very soon, hopefully next week, we will be able to announce additional business for our fleet.

Our strategy will continue to further growth, and add to shareholder value in the long-term. While we added a new VLCC to our fleet last quarter, we also signed new building contracts that continue to build organic expansion of our fleet. This continued growth in our fleet as Tsakos Energy Navigation has become recognized as the most diverse operator in the sector, being able to satisfy clients needs from VLCCs to ILCC product tankers.

Last quarter restated our belief that the growth we have experienced in the third and fourth quarter will continue in 2004. Regardless of season fluctuations, our industry's growth seems positive.

In addition, while the recent proclamations of low inventories by oil producing countries like the US and Europe, have driven up good prices, and futures, we believe that demand will not abate, and we could possibly see increases in demand for our high quality products. However, as always, we continue to monitor those factors, that could affect the delicate supply and demand balance in our industry, and we will continue to advantageously charter our fleet to ensure maximum value for our shareholders.

For instance, late last month the Chinese government announced that it would work to lower the growth of its economy, in an effort to ensure that the growth will be sustainable over the long-term, which almost instantly sent a shockwave through our sector, driving share prices down and eroding value. We believe that this type of growth channel especially if it relates to Tsakos Energy Navigation shares, was an over-reaction. We actually applaud the Chinese government's move to improve on the growth economy, and we are confident that the Chinese will continue to evolve as a major long-term player in the global economy.

It is in the best interests of Tsakos Energy Navigation's modern fleet for China to have long-term normalized goals. In addition, as we look forward to the mandatory IMO retirements, late of 2010, more second-hand vessels will begin to be scrapped, if this is the case, the need for high quality double-hulled modern products, like the vessels that make up our fleets will increase.

We think projectively that the demand side of question will remain strong, most likely through 2008. At that time the amount of new deliveries may begin to put the strain on the market dynamics, however, if demand continues to rise, as it has over the past three years, we may see continued market strength, even beyond 2008.

In preparation for the next part of our industry's [indiscernible], Tsakos Energy Navigation has made a significant investment in new highly specialized products, to be delivered over the next three years. Especially we have contacts for the building of 10 ice-class vessels, these vessels will be able to trade in ice blocked ports, providing access to supplying the former Soviet Union, Canada, Alaska and wherever Winter trade has been restricted. These vessels, because of the high specifications, earn a significant premium in the Winter months, in fact contracts for these vessels today are so lucrative, that they can often make a full year's [indiscernible] equivalent in a few months.

Further, earlier this year the company announced its intention to enter into the growing energy segment of our industry, the liquefied natural gas market, currently represents one of the fastest growing shipping segments in the global energy market. In 2003 the global energy trade grew 13%, and it is expected to double by 2010. Low-cost natural gas results in the Middle East and Africa, combined with the decrease in construction of the energy process, will allow large-scale expansion of this specific trade.

With the plans announced early this year, Tsakos Energy Navigation chose to join a select group of operators who will be able to take advantage of this growing market segment. The current energy carrier market appears very fragmented, with 40 owners operating 160 vessels, characterized by long-term contracts, that typically average about 10 years. The long-term fundamentals of these sectors are sound, as most energy vessels currently on order, approximately 60, are dedicated to satisfy specific orders.

Our commitment to a diverse fleet and to meet the growing needs of our clients will be further enhanced by our belief to share the energy market. In the future, we are confident that the global demand for these types of vessels will increase dramatically. The high-spec nature of these energy carriers, as well as the Tsakos Energy Navigation ice-class vessels that we are currently building, will provide significant charter premiums, increased earnings and serve all the shareholder returns.

Looking at our existing fleet now, the deadline for the IMO regulations [indiscernible], will remain well-positioned to continue earning premiums for our young and modern fleet. The vast majority of our fleet, more than 90%, is of the double-double design. Currently, we have only 4 vessels of the single-hull design in our fleet, and it remains our intention to divert these vessels in the near future. Most probably, we will be selling all of those ships, within this year.

The continued strong, certain market, and the excellent timing of the expansion of our fleet, combined to produce another quarter of strong profits. These results reaffirm our ability to produce solid operating results and profits, in a volatile charter market, as well as to enjoy major benefits in a particularly strong period, such as the one we are operating now.

We have maintained a balanced employment profile, in an effort to recognize strong operating results, but also to moderate risk for the company and our shareholders. We will continue a balance in our employment mix, and we'll seek to fix elected vessels on medium to long-term charters. This strategy has served us well so far. Tsakos Energy Navigation is one of the very few shipping companies worldwide, to be profitable since inception, more than 10 years now.

Currently, we have 22 vessels on [indiscernible] employment, and 6 vessels on the stock market. As oil prices continue to rise, today's political tensions, and expectations that OPEC might [indiscernible] production, we are seeing a new dynamic develop. Where as in the past, when the price of oil reached a certain point, many consuming nations would cut back on their imports. Today, even as we are climbing to $40 per barrel, we have not seen a slowdown in demand, and as the US and other nations try to bring the reserves for the Summer driving season, that is coming very close, we expect that the second quarter, which is usually slower, will bring healthy results.

This follows the assumption that the global consumption, is forecasted to increase by as much as 2% in 2004. Our fleet management strategy, and our arrangements with Tsakos Shipping and Trading, continue to allow us to keep costs low and remain competitive. This relationship, coupled with our employment profile, has allowed Tsakos Energy Navigation to be well-positioned to manage the changes in market dynamics over the last several quarters.

As always, we'll look continually to control expenses, and to drive revenue to the bottom line. We will also continue to optimize and enhance our strategy, to improve our operational results, and seek specific opportunities for Tsakos Energy Navigation to excel during 2004.

Despite the sector's unexplainable downturn, Tsakos Energy Navigation shares are still the best-performing, a year today. We believe that the market appreciates that our fleet and operating strategy, will present a solid long-term investment, and I would like to thank our shareholders for their support, and I wish to assure each of you, that we will continue to grow our fleet and provide financial results, that support even higher valuations.

We will seek out new investments for our stock, and by extension, our industry, as our investor relation maintains diversification, we hope to reach even higher valuation levels. We will preserve communication with our sales side]analysts, and we will continue to deepen this relationship, to ensure that our story is being understood in the investment community.

We will continue to [indiscernible] market ourselves to decision makers and investors, all of whom can positively impact our investment in Tsakos Energy Navigation, and understand again the industry.

During the first quarter, we made several announcements, that showed Tsakos Energy Navigation continues to establish itself as the market leader. In January we purchased an immediately chartered [indiscernible] La Madrina, taking advantage of a very strong market.

In February, we announced contracts for 2 1A Ice-class Suexmaxes, the first we will build of that size tankers, for delivery in the first half of 2007. These vessels, as mentioned before, will be able to drain the ice blocked ports, further diversifying our fleet.

In March, we announced that we are exercising our options for 2 1A Ice-class Product Tankers, which are [indiscernible] 37,000 dwt of capacity, tailor-made for the Baltic Sea. In all, we currently have 10 Ice-class carriers on order for delivery after 2007. As our Newbuilding program continues, we will of course endeavor to fix all of our Newbuildings, prior to their arrival, and have already entered into discussions with major oil concerns, to secure employment for some of our future vessels.

Financing for our vessels in our Newbuilding program is well underway, at very competitive rates. 70% of our launches have been fixed forward.

The company is strong financially, and we are well-positioned to continue to grow organically, through our new building program, or corporately through corporate acquisitions. Including our 2 [indiscernible] orders, Tsakos energy Navigation will take delivery of 15 new vessels between 2004 and 2007. The order consists of 6 Suezmaxes and 7 Handysize vessels, with a total capacity of another 1.5m Dead Weigh Tonnes.

We will look to extend the reach of our modern fleet, by adding new vessels and reap the benefit of the strong stock market, while balancing our charter [indiscernible] with long-term employment.

We are confident of the company's position to generate the revenues necessary to expand over the coming years. The second quarter of 2004, as I stated earlier, gives us a reason to believe that the seasonal slowdown will be more moderate this year, than in years that have passed. As always we really appreciate the support of our loyal shareholders, and we aspire to increase the value of their investment in Tsakos Energy Navigation.

We look forward, as the Chairman said, to seeing you in Athens, at our annual meeting, at 1.00PM, on June 7, which coincides with the opening of the Shipping Exhibition for [Sedonia].

At this time, I would like to turn the call over to Paul, who will talk to us about more details from the financials.

Thank you very much.

Thank you, Nikolas, and thank you all, once again, for joining us today.

Before I begin, please note that a summary of selected data is included in the press release, for your reference. The most significant items of note, from a financial point of view, are as follows.

Firstly the quarter saw a dramatic increase in revenues, earned by vessels in all categories, surpassing all our earlier optimistic expectations. A major contribution was played by the 6 new vessels acquired during 2003, which provided over $17m of revenue, approximately 22% of the total. To this should be added that nearly $6m in revenue provided by the newly acquired VLCC.

Even though several of the vessels have been newly employed on a time charter basis in recent months, the terms secured often still allow the company to take advantage of the exceptional rates. Overall, [indiscernible] for vessels was $20,000.

For the category, the VL's earned nearly $53,000 per day. The Suezmaxes, $27300, the Aframaxes, $34100, the Panamaxes, a very gratifying, $29400, mainly emanating from their pool employment, and even the not-so-young Handymaxes, earned $15000 a day.

We were especially grateful for our Technical and Commercial Managers, to ensure that nearly every vessel, was fully employed during this prosperous period, with an overall loss of days amounting to only 3.5%, mostly due to scheduled dry-docking and other essential repairs.

Vessel operating expenses amounted to $13.7m during the quarter, compared to $10m during quarter 1, 2003, an increase of 37%. This is mainly due to the increase in operating days of 500 days, or 28% over the previous year, in those vessel's varying operating expenses. That's equivalent to almost 5 and a half new vessels.

Vessel operating expenses, per ship, per day, for the fleet $6,263, an increase of 5%, for the average of $5,946, for 2003. As we have discussed in the past, most of this increase is due to the impact of the weakening dollar against the Euro, over the year, approximately 25% of the company's operating expenses higher in Europe, caused to some extent, by increasing insurance costs, extra repairs and spares on the older vessels, and by the addition of the VLCC. Against the dead operating costs incurred in the preceding quarter, there was in fact a 6% decrease.

Financing costs were similar to the previous year's quarter at $3.2m, despite a 10% increase in average total loans. Average loan interest rates, fell, from 2.6%, to 2.3%, and all-in average finance costs, including interest borne on swap]instruments, fell from 3.7%, to 3.3%.

Earnings were boosted by the amortization of the gain, on the sale of the 2 Suezmaxes in the fourth quarter, which contributes nearly $800,000, each quarter, for the next 5 years.

2 vessels underwent dry-docking during the quarter, the chartered in Olympia, although the costs were borne by the owner, and the Tamyra, which only recently completed it's survey in the second quarter.

Total costs incurred during the quarter, amounted to only $400,000, compared to nearly $5m, incurred on 3 dry-dockings in the previous year's quarter.

2 more dry-dockings are scheduled for the year, the Bregen, in quarter 4, and the Liberty in quarter 3, unless the vessel is disposed of first.

We acquired the VLCC La Madrina, on January 28, at a cost of $51.5m, which in [indiscernible] of $40m was obtained, with the first repayments, of $2.25m, in July of this year.

Total loans in the quarter increased from $453m, to $485m, due to this new loan and repayments of $8m during the quarter.

Our debt to capital ratio, remained at 59%, while our leverage ratio, as defined by the banks, is 50%, comfortably below the 70% maximum covenant level.

Including a new swap arrangement in early April, we now have interest rates swaps which cover a notional amount of $300m, or about 62% of our loans. They all meet hedging criteria, with the exception of to swaps, that expire within 3 months, and will need to be replaced with hedging instruments.

We have 13 vessels under construction, at the moment, at a total contact price of $505m , of which $63m, had been paid by the end of Q1. Some $36m, within quarter 1. All out of our own cash.

The remainder will be paid as follows. $64m, during the rest of 2004, $112m, in 2005, $150m, in 2006 and $114m, in 2007. Approximate new debt requirements, in 2004, will be $36m, $85m, in 2005, $109m, in 2006 and $122m, in 2007.

Cash resources currently stand at approximately $8m, an [indiscernible] the current forecast, our existing Newbuilding program, and covenant requirements and anticipated other cash requirements, we believe that we will have adequate cash resources for the period through 2004 and 2005. Of course, this does not take account of other aspirations on our part, such as our new focus on LNG.

This concludes my comments on the financial results and position, and now I'll hand the call back to Nikolas.

Paul, thank you very much. I think that was a very clear explanation, and we would like to open the floor, for anyone that might have any questions. Thank you.

Thank you. The question and answer session will be conducted electronically. [Operator's Instructions].

We will go first to Gary Goldstein, with [Dom and Rose Weisz]

Good morning. Congratulations guys on a fantastic quarter.

Thank you Gary.

Just one thing, to clear up a couple of things, and then just 1 line item. It looks like the time-sharing, 2004 over 2003 has increased by 10%, is that about the right number?

Yes. That's accurate. As new ships come in, also we are covering those ships, and we are seeing an appetite by charters, which is a very good sign for the future of the market, we have major charters right now, out there, talking about 7 year contracts. Which was not around in 2003.

As I said, even on the Crux, [indiscernible] on the timeshare, we are earning 25% higher rate over the next 60 months, and that has been fixed for a 6 month charter, seeing that the market might be moving higher in September.

Okay. That was--. Youy next question Nick,the Silia T was coming up in September, are you guys going to keep that for, right now you're not going to charter that out, you're going to hang on to that and see the way the markets go? Or, are you going to [indiscernible] the Silia?

I am trying to, you know, to keep the Silia open for September, but I have my chartering team calling me on a continuous basis, and I think we might be very close in fixing the Silia for another 2 years forward.

In September, again, at about another 30%, 25% to 30% higher rate, than what she's earning today.

So I think this gives us a very good feel, looking at major companies actually looking to acquire the ships and offering the higher rates, and also fixing forward, I mean, we have the case of at least 2 of our ships a day, and if we had more of our Suezmaxes, we start taking delivery of our new Suezmaxes next year, they will be very easily fixed for 7 year periods.

You're saying that the Silia could potentially get a 25% increase in the charter revenue?

Yes, that's right.

Wow. Okay, and just one last question and I'll let some other people ask. There was a line item, on a gain of selling a vessel?

Which ship was that?

I think Paul spoke about that, I think those were the sales of 2 Suezmaxes in October 2003, and [indiscernible] this year, we took those 6 back on a 5 year charter, so we are taking advantage of using those ships in the market, and we're advertising the gain of those ships for the next 5 years.

Got you. Thank you very much, and again congratulations on a fantastic quarter.

Thank you, Gary.

We will move next to Magnus Fear, with Jeffries and Company.

Thank you. Good afternoon. Just a couple of questions, starting with, you know, looking at the share price declining, currently the stock is turning about a 50% discount to the steel value. You indicated, you know, LNG expansion plans.

How do you go about making decisions going forward? I mean the timing of your Newbuilding program has been excellent, and very accretive to earnings, but you know, with share price down at these levels, you know, could we expect some buy-backs here in the near future?

Well, this is a very good point. We are basing organic growth, as you correctly said, we have been very right with the timing of our Newbuildings. Orders, even our most recent orders, of Suezmaxes, we're taking delivery next year, they are still ordered at the low [indiscernible].

When we identified the market of new buildings, we'll retire as early as January, where the new building sites now have moved now by 20% to 30%, we decided that that would be the end for us building our usual ships, and we went out for higher quality ships that nobody else, or very few people wanted to build, and that is how we got into building our Ice-class Suezmaxes, and our Ice-class product tankers, and looking at the LNG's.

On the same price, one of the things that we were told when we started in this business, and we'll be in the shipping business, hopefully, for many, many years, and about 10 years on of having a public company, we were asked not to always look at the share price on a daily basis. I have to say, I try not to, but many of our people, since our Chairman gave out the options, are doing this on a constant basis.

I think if the share price continues to weaken, yes, we will be looking for, I think, a good investment for us to have a buy-back and of course, this is up to the board to do so. However, looking back a year ago, almost to date, our share price was at $11, it has gone as high as, close to, $34, we believe in the buying opportunity, but this is not for us to say, it's for all you analysts to say, it is true we are again under our net value significantly, whereas the total market is performing well. This is not only our sector, it is the whole sector, I believe, for no reason is being punished.

You know, as long as we can keep on doing our business and chartering those ships and making sure that we take care of the nitty gritty of the operating expenses, ultimately, with your help, we will get the investment community to understand that the shipping industry is really, right now, has very, very low multiples.

Okay, and for my second question. You have a letter of intent for the construction of 1 LNG carrier, and I guess options for 1 more.

What, I mean, do you need a long-term contract to confirm, or to firm up that letter of intent?

Also, maybe you can give us an update on what type of near-term tenders, I know Exxon-Mobil is out there for several, but maybe you can give us an update on the outlook for the LNG market?

Well, the LNG market, as you appreciate, it's a market that is growing. It's not going to happen overnight. Right now, there is a lot of business out there. We never made the order subject to our business, but we probably will be signing the contracts very close to the time that we will be looking at this for 10 year business, with major end-users.

So there are businesses out there, there is an appetite, and we see it everywhere, and in country like the United States, consumes 1.5b tonnes of oil every year, of which 50% we carry, when I say we, when I say we all [indiscernible] that all the shipping companies carry, so we import 50% of the oil, and at the same time, we consume the equivalent of 500m tones of LNG, and in the United States, the import is only 11m, so there's huge growth potential from the United States and the other Western countries for this market.

It's a market for the long-term. I don't think people who enter in this market just for the short-term gain, they will not be satisfied. We are looking at it as a long-term continuing process of our ship, of our diversified fleets.

So, yes, we are looking at employments, we have been offered employments, so the returns on these employments are [indiscernible] to make us [indiscernible].

Okay. As a new convert to this market, with really no track record on LNG, do you see any obstacles, you know, getting contracts with the major oil companies?

Yes. I think the opposite. I would say because the growth has been around for many, many years, as a tanker owner, and our services have been appreciated by our charters. But I think that they are the ones that they are pushing as we would like to see more players in this market.

Okay, and maybe one more question for Paul, if I may? On the 2 dry-dockings, third quarter, fourth quarter, how many days, I mean if you do go ahead with those dry-dockings, do you expect those to be down?

The Bregen did undergo quite substantial intermediate and upgrading, fairly recently, so hopefully that will be through pretty quickly, within 20 or 30 days.

The Liberty, again that went under quite a big survey about 18 months ago, so that if it did go through--. Okay it's an old ship, we'd expect between 30 and 40 days in that respect.

Okay.

Most probably, I think that the Liberty will be sold before her survey.

Okay. Thank you.

Thank you.

[Operator Instructions}. We will move next to Natasha Boyden with Sidoti & Company.

Good morning gentleman. Congratulations on a great quarter.

Thank you, Natasha.

Just wanted to follow up, Nikolas, on your comments about China. Obviously they did come out with that announcement. Have you seen any impact from the actual business side of it?

Aside from the impact on the stock prices?

Do you expect to see any?

We have no seen anything, I will clear you up on it, the market, again, the market starting this week is firming up. There has been a psychological effect, mainly on the dry cargo market, the supply--. What we bring in today's very low inventory, and what we bring to China, India, the United States, Europe, goes straight to consumption, so it's not really [indiscernible] product. I think what we saw, there's no doubt the dry cargo market, where they have all their own deals, and we saw that market drop by 15% to 20% in the very high rate that they're experiencing anyway, we are experiencing are even higher than the tanker rates in many inceptions of that market. But we have not seen it. I was also pleasantly surprised to see that our [indiscernible] delivery is on the fourth consecutive volumes, he has [indiscernible]you know, first volumes was top of the market, maybe around $90,000, we went down to $70,000, which we can not be very sad about.

I was expecting something, that the market would weaken, we're ready to charter the ships again in the upper $60,000 and that will be another 60 day volume, that will carry also most of the second quarter, and part of the third.

So, so far the market is very well. We would like China to grow, we wouldn't want to be placed in the bubble in China, we would like China to go up moderately and again, although we directed for the young fleet we have, we do not have that many of our ships trading to China and India, even as the lower market there will take some of these second-hand single ships out of the market, and enhance the profitability of our double ships to earn more money.

Okay. Great. Thank you very much.

We will move next to Jason [indiscernible], with Osprey Fund.

Hi Guys. Super Quarter. I just wanted to touch base on a strategic question, and then look at your diverse need, going into more higher spec ships, with higher premium runs.

Can you share a little bit of your vision? What the company's going to look like in 2 years? [indiscernible] your plans [indiscernible]. Are we going to see a tanking company across all classes, at the highest spec?

Do you worry that if you are successful, it maybe, and will be when the inevitable downturn comes?

Yes. [indiscernible] Thank you very much. We look at our business, following, you know, the very long history of the group, as a client-driven business. We are seeing that the, first year's volumes, in less than 2 years, our fleet will be all of the double-double design.

We are looking at businesses like the Ice-class market, and the LNG, where fewer players are involve, and what we're trying to do with continuous strategy, when the market will soften and, you know, we are in a typical market, although it's becoming less and less typical, and shipping is becoming a much more [adaptable] business. We're away from the times of, you know, the buckets that were supporting the market, I think that you have out there, many first-class companies, like ourselves, doing a very good job, in their relationship with major oil companies. We are seeing the pools helping, we are seeing the pooling arrangements, you know, keeping the competition between owners, at a lesser state.

So, I think the typicality, will become less, but it of course it will happen and what we are trying to do, is fix forward our business, to make sure that the company will never suffer a loss year. Which is a goal that we have in the typical business, and I think that we have been successful in putting to use 10 years to be one of the few, we [indiscernible] shipping company has made profits even in 1999, which was a bad year, and we want to secure, and we will be able to continue to do this with high spec ships.

That's really just an expertise you transfer across classes, whether it's LNG Ice-class, product tankers, EL's. The same formula just, [indiscernible].

Exactly. I mean we have not, you know, we do not have the size in one sector, or we have not invented which type of ship is the best, but when we talk to a major oil company, or a client, I would like in my visits, to be able to talk to them about, you know, Ice-class ships on a [indiscernible] project, or I would like to talk to them on [indiscernible].

So, we would like them to think of us as someone that they could talk values through types of their requirements, rather than just as one type of ship owner. This is just a strategy, and it's perhaps because we have not invented the perfect ship ourselves, but we will, you know, continue with this strategy.

Wonderful. Thanks very much.

Thank you very much, Jason:

We will take our next question from Jin Chung, with [Dom and Rose Weisz].

[indiscernible] Great quarter. We've been hearing a lot of concern on yet another regulation to ISTS regulations, that's going to take effect on July 1. How does TNT back-up preparation for that versus the industry, from what you can see?

[indiscernible] I understand this concern, it [indiscernible] a great potential for us, I mean, as we talked a couple of weeks ago, we have again, a pact on vessels in [indiscernible]. It is very worrisome, I think, the industry has spent a significant amount of money, perhaps $1b will be sent, to educate the skippers, [indiscernible], our skippers are mariners, they are not marines, so they are not used to be attacked by fanatics [indiscernible].

However, we are taking measures at least to protect the ship. What we need now is from the land-based authority's support, if our industry is to be able to protect their facilities too, because when a ship is at port, it's tied up, it has very little flexibility to avoid anything and it is at the mercy of the port facilities.

We at the company, I think, we are very proud and honored, I think as our Chairman said, to have the former secretary of the IMO, Mr William O'Neil joining our board. He will be, hopefully, appointed by the shareholders in June, and he is the man who has the expertise, to guide us on those issues [indiscernible], and on all the regulatory of this industry, and as I said, we are very happy to have a man of his expertise on our board. I think with his help, we will be able also to have, I would say, an advantage against our competition on these type of issues.

I see. Going on another, more happier point. I was very pleased to hear you say that you're looking to sell all your single hulled vessels, this year. How flexible are you with that forecast?

Well I think we will be able to achieve this project, as I said, our 4 ships are very nice ships, you know, if you look their annual--. If you look at our years, we will hopefully [indiscernible] this year's annual report, you will see, because we are in our tenth year, we'll have fixes of our initial 4 ships, with some of them are still on our fleet. They are very good ships, but I think it is time for us to part with them. There are interests in the Far East for those ships for trading, we are currently negotiating. We might have news on a sale of a couple of them as early as next week.

Well, and one last question, there is one option for a Handymax, deliverable in 2004. We are already in May, I guess the question is, why hasn't there been any more guidance regarding the decision on [indiscernible] yet?

I think the company right now, as I said, we have 2 deliveries for 2004 of our ships, and on the option, the reason we are waiting is we are actually looking to see how are LNG project is developing, before we do anything on that, because as you understand, this is a project that enters us in a completely new industry, and we are paying attention to that part of the business now, and if that business goes forward, we will not take the option on one of the product tankers, because you understand, we have many of them already.

Understood. Thank you very much. Great quarter.

Thank you.

Moving on to John Selzer, with Maple Leaf Partners.

Yes, good morning, and congratulations on a great quarter. I appreciated your comments, couple you gave on China, I was kind of hoping you might answer on China further. Have you been able to, I guess, you know, from just being in the industry, have you gotten a sense of how much, I guess crude is being imported these days, have you noticed a change, I guess in demand or--. I know you're monitoring the tanker rates, but actual volumes? I know you probably don't track that exactly, but just the level of activity, have you seen any change there?

Then further, and regards to OPEC, obviously they made some comments, Saudia Arabia did yesterday, I was just wondering, when OPEC makes changes like that, do you see a noticeable change in the amount of traffic in vessels?

Well, as I said, 1m barrels, more or less, are in discussion, and that's a very good point your bringing up, 1m barrels, more or less, has more a psychological effect on the market, and the charter's expectation, rather than an actual one, talking about the OPEC.

I mean, we saw that back in March OPEC announced capping by 1m barrels, and now we had a 2 week [indiscernible] market, and then the market shot up again. I think it is a good a sign, you know, the more oil our ships move, I think 1m barrels will not make a huge change, but it is a signal, I think people are getting fed up with $40 oil prices, and OPEC countries don't want to completely lose their respectability and we are seeing more and more oil now being turned out from Russia, and that's why we are building the Ice-class ships. We are seeing countries that are non-OPEC countries, like the North Sea, producing more oil, and OPEC has to take measures to stay in the [indiscernible]

So it is good news. As far as your question in China, we are--. I think the Chinese government's announcement is a warning signal to the budding economy, the infrastructure has to go on preparing for the 2008 Olympics, so I think we are not seeing anything yet, any reduction on the oil inputs.

Thank you very much.

Thank you.

That concludes the question and answer session today. At this time, I'd like to turn the conference back to Mr Tsakos for any additional or closing remarks.

Thank you very much, ladies and gentlemen. I would also like to basically thank our men and women on board our ships, who make it much easier for us to produce these results, because we should not forget that on our 28 vessels there are 20 or 30 people running them, 24 hours a day, so I would like to thank them very much for making my job much easier, having, you know, a [indiscernible] shipping company, and also to congratulate all the other shipping companies that have already or will announce their results, they are doing also a fantastic job.

If we continue this way, I think we should talk our industry up. We are offering a very big service to the world economy, and I think we're not yet appreciated as much as we should, but with some more hard work, we should be able to achieve it.

Also thank you very much for being, and listening to us.

That concludes today's conference. Thank you for your participation, and ypu may now disconnect your line.