Tsakos Energy Navigation Ltd (TEN) 2004 Q2 法說會逐字稿

Good day and welcome to the Tsakos Energy Navigation second quarter earnings conference call. (Operator Instructions). At this time, for opening remarks and introductions, I would 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 second 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 Parag Dave (ph) of GCI group at 212-537-8026 and he will fax or email a copy of the release to you. As a reminder, this conference call is also being webcast. To access the webcast, 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 provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, which may affect TEN's business prospects and results of operations. Such risks are more fully discussed in TEN's filings with the Securities and Exchange Commission. Thank you.

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

Thank you, Tom. Good morning and good afternoon to you from either side of the Atlantic. Ladies and gentlemen from Olympic Athens we're here and I would like to introduce those around the table. Of course, our Chairman, Mr. John Stavropoulos; our Finance Director, Mr. Paul Durham; our Chief Operating Officer, Mr. George Saroglou and myself. And I would first of all, ask our Chairman to make his introduction.

Thank you very much, Nikko. It seems you've made it a habit to make us all quite happy. The results of your team for the second quarter and the first half of 2004 were absolutely super and indeed, are highly appreciated. The second quarter you had an unusually busy period. You distributed cash dividends of 8.6 million in April. You have raised equity of 80.2 million in May. We held the annual meeting in June when we added to exceptional new directors and I think you're going to make some comments about the contributions you expect them to make in the future. You ordered the first LNG and in the process, made a gain of 8.76 million. You also achieved record second quarter profits from operations of $1.15 per share, which I understand slightly exceeded the expectations of most observers.

The soundness of the business model indeed, you've again verified. The delivery of a quality service to demanding clients at a competitive cost has produced both profit and strong customer relationships. Likewise, your balanced deployment strategy has resulted in a reliable base of earnings and participation in strong charter markets. The rewards of this approach were evident in the down cycle of 2002 and the strong markets of 2003 and thus far, 2004.

We're very pleased with the progress of the fleet renewal and growth. The sale of the good ship Liberty moves TEN closer to the goal of a double-hulled fleet. And for different reasons we're also pleased with your decision to sell the Delos and to capture a significant capital gain. Alertness for opportunities is key in the shipping business.

Looking forward, while we're all excited about the prospect of TEN, the industry fundamentals are very constructive. The demand side is supported by the strongest growth in oil consumption in over 20 years. The key consumers, including the USA, China, Japan and now India are all import dependent. Their future appetites for oil and gas can only be fed through import. The sources of hydrocarbon production are increasingly distant from the consumer. The combination of strong growth in consumption and longer trade routes is a powerful dynamic.

Fortunately, the world's tanker fleet is also in a growth mode, so the world's transport requirements can be met. However, in the near-term, say 2005 through 2007, the supply-demand equation will indeed be tight. The supply of tankers is fixed as a result of shipbuilders operating at or near capacity and regulatory and chartering constraints forcing retirement for older tankers.

Barring unforeseen results, ship-owners and operators will be in a strong bargaining position for some while to come. TEN is very well-positioned to capitalize on such an environment. It is scheduled to take delivery of 12 tankers and one LNG carrier during the coming 36 months.

While coming into the meeting I made a quick calculation, Nikko. Over the past 365 days, your Company's shares have provided a total return of 140 percent. In the same period of time the Standard & Poor's 500 has produced a return of 14 percent. Remarkably, that magic number of TEN is at work again.

Nikko, job well done -- both you -- but you know the admirers of TEN, like admirers of art, we've come to remember only one word. It is a repetitive word. It's called Encore, Encore. Thank you, Nikko, back to you.

Thank you, Chairman, for your good words. While the second quarter was indeed busy for all of us down here in Greece. As the Chairman mentioned, we had our dividend distribution -- the equity raising, our annual meeting, where we had the pleasure to see some of our major shareholders and thank you for getting in the trouble and coming visit us. I think it was very important for us -- the LNG, the signing of our first LNG, and of course, the sale of our oldest and newest vessel at the same time.

But more importantly, Chairman, we had the completion of the roof of the Olympic Stadium in Greece, so we're waiting for all of you to come join us here. And of course the Greek national team was busy winning the European title. So this has been a busy period.

Well, joking apart, the second quarter was a very constructive period for our Company, for the strategic development, but also for the expansion of our day-to-day business. The Company reported $1.62 for the second quarter, and as Paul will tell you, he will explain to you the nitty-gritty -- the magic of the numbers. We're proud to continue to deliver solid operational finality of performance to help guide shareholder's value. From an operational perspective, we've had several notable accomplishments during the second quarter. Due to our (indiscernible) and high specification, as well as the cost of additional new vessels, we continue to take advantage of the strong rates in the stock market and arrange time (indiscernible) employment with first class (indiscernible).

4 of our vessels were rechartered, a significantly higher rate in quarter 2. Currently, 21 of our 27 vessels are on term employment. We have secured 75 percent of the cargo fleet's net operating days for the remainder of 2004 and 65 for 2005. This represents almost 210 million revenue over the next 6 quarters.

The continued growth of our fleet has helped us to become recognized as the most diverse operator in the sector, being able to satisfy client needs from VLCCs to 1A ice-class product tankers and now, shortly, in the LNG segment.

Last quarter we stated our belief that the growth we had experienced in the first quarter would continue into throughout the balance of 2004. Based on second quarter results and our expectations for the third and fourth quarter we believe that 2004 will be, in fact, a more profitable year for 2003, which was a record year for the Company.

Despite the fact that continued low inventory levels consuming (indiscernible) likely U.S. and Europe have driven up good prices and futures and the Company interruptions in Russia of supply and other geopolitical issues. We believe that the amount will not abate and will be here to stay. However, as always, we continue to monitor those factors that could affect the delicate supply and demand balance in our industry and will continue to charter our fleet to achieve maximum value for our shareholders.

We continue to monitor the new building orderbook (ph) and expect that that's more nearer to the mandatory IMO day of 2010. Even more single-hull vessels will begin to be scrapped. As a result, the need for high-quality, double-hulled, modern tankers, like the vessels that makeup our fleet should increase.

We still project that the demand-side of the equation will remain strong, most likely, through 2008. At that time, the amount of new deliveries may begin to put a strain on market dynamics. However, if demand continues to rise, as it has over the past 2 years we may see continued market strength over and beyond 2008. I think we're getting spoiled here. As we have discussed in the past, TEN has made the significant investment in new highly, specialized tonnage to be delivered over the next 3 years, specifically we have contracts for the building of 10 ice-class and we are in close negotiations for the ordering of a prototype Aframax design in Japan, which we will have a press release on that, I hope shortly, when negotiations go the way they seem to.

In addition, during the second quarter we constructed for our first LNG new building. The 150 cubic meter capacity vessel will be built in Hyundai Heavy Industries in Korea, where we are building the majority of our vessels. And it will be scheduled for delivery, early perhaps, in February of 2007. LNG currently represents one of the fastest-growing shipping segments in the global energy market. In 2003 the global LNG trade grew by 13 percent and is expected to double by 2010. Low-cost natural gas reserves in the Middle East and Africa combined with a decreasing cost structure of the LNG process will allow large-scale expansion of the trade. TEN is now poised to join the select group of operators who will be able to take advantage of this growing market segment.

The high-spec nature of our LNG carriers, as well as the 10 ice-class vessels that we have currently on order, will provide significant charter premiums, increased earnings and shareholder returns.

Looking at our existing fleet, we will remain well poised to continue earning premiums for our modern vessels. The vast majority of our fleet, now more than 90 percent and rising, is of double-double design to hold our commitment of operating a fully double fleet as soon as possible. During the second quarter we announced the sale of the Panamax Liberty, one of our original, 4 vessels. As a result, we now have only 3 vessels of the single design in our fleet and it remains our intention to divest these vessels in the near future, likely at the end of the year.

The continued strong (indiscernible) markets and the timing of our expansion and our fleet are combined and they produce another quarter of strong profits. This result reaffirmed our ability to produce solid operating results brokered in a volatile stock market, as well as to enjoy major benefit in cyclically strong periods, such as the one we are experiencing right now. We maintain a balanced deployment profile in an effort to recognize strong operating results, but also to moderate the risk of the Company and the shareholders. We will continue with balance in our employment mix and we seek to fix vessels on medium to long-term charters. The strategy has served us well, so far. TEN is one of the very few shipping Companies worldwide to be profitable since inception more than 10 years now.

As oil prices continue to fluctuate, based on geopolitical tensions in the Middle East and developing governmental actions in Russia, we're continuing to see strong demand. The U.S. and other nations are trying to build reserves for the winter heating season and we expect that the third quarter will be less affected from seasonality than usual. This follows the assumption that the global consumptions is forecasted to increase by as much as 3.2 percent in '04, a number that is constantly being revised upwardly.

Our arrangements with Tsakos Shipping and Trading continue to allow us to keep on-hand management of our vessels and control expenses. Our core structure is one of the most competitive in the industry. While we're not immune to raising costs of fuel, insurance and other considerations, we have managed to keep operating expenses as low and to keep revenue to the bottom side.

We will also continue to optimize and enhance our strategy to improve our operational results and fixed strategy opportunities for TEN to excel during the balance of 2004 and beyond. The market continues to believe that our fleet and operating strategy represents a solid long-term investment and I would like to thank our supporters for their support and wish to assure each one of you that we will continue to work to grow our fleet and provide financial results that support even higher evaluations.

We will continue to travel to the United States and wherever our shareholders are on a regular basis to actively marketing our service to decision-makers and investors, all of whom can positively impact and affect your investment in TEN. In addition to the events mentioned above, during the second quarter, we made several other announcements that showed TEN continues to establish itself as a market leader. In mid-May, the Company raised $80 million in order to finance our LNG project and enhance the liquidity of our stock. To those new shareholders who participated in the offering, we want to thank you and welcome you onboard and to those existing shareholders who fortified their positions we (technical difficulty).

In May, we announced the nomination of William O'Neal, the former Chairman of IMO and Mr. Francis T. Nusspickel to our Board of Directors. These nominees were subsequently approved at our annual meeting in June. The depth of experience in financial and industry knowledge that these two individuals bring to our Board has already begun to make an impact. As our Company continues to grow and regulations in our industry in the capital markets continue to change, the (indiscernible) will enhance management's ability to execute strategy.

Finally, in early June, we announced the sale of the newly delivered product carrier Delos to the Australian Navy. While we do not make a habit of saving our new buildings the premiums that we have gained on these vessels are approximately $8 million made this a very advantageous move for the Company, since we have another 6 similar ships on order and as many old-timers know, capital gains are always important to have been shipping. As our new business program continues we will, of course, endeavor to fix all of our new buildings prior to their arrival and have already entered into discussions with major oil (indiscernible) to secure employment for some of our future vessels. Financing for the vessels is our new building problem is well underway at competitive rates. We will manage the fleet aggressively, but carefully, to ensure maximum utilization and return on investment.

The Company's strong financially and we're well positioned to continue to grow organically, either by acquisitions, or through additional new building orders. We expect to take delivery of 13 or maybe 14, as I mentioned earlier new vessels between 2004 and 2007. The order consists of 6 Suezmax's, 6 Handysize vessels, 1 LNG and maybe one Aframax. The total capacity of this order -- of the new buildings orders is 1.8 million Bedway (ph) dollars.

We will look to extend the reach of our modern fleet by adding new vessels and reap the benefits of a strong spot market, while balancing our charter portfolio with long-term employment. We're confident that the Company's positioned to generate the revenues necessary to expand over the coming years. The second quarter of 2004, as I stated, gives us reason to believe that the seasonal third quarter slowdown will be more moderate than this year than it was last year. As always, we greatly appreciate the support of our loyal shareholders and we strive to increase the value of that investment and our investment in TEN.

At this time, I would like to turn the call for more important information to our Finance Director, Mr. Paul Durham.

Thank you, Nikolas, and thank you all once again for joining us today. Before I begin please note that a summary of selected financial data is included in the press release for your reference. The most significant items from a financial point of view are as follows.

Total net income for the second quarter was $30.2 million resulting in earnings per share of $1.62, or if you want to exclude the gain in the sale of vessels of 8.8 million, net income was 21.4 million and earnings per share $1.15. This is still a 14 percent increase over the net income of $18.7 million earned in quarter 2 2003. The 6 month period, net income was $63.6 million, or 54.8 million without the capital gain, an increase in operational net income of 49 percent over last year. Again, the quarter's results surpassed our original expectations as rates remained buoyant due to continued higher oil demand and increased oil supplies to the market.

Since quarter 1, we had placed a further 4 vessels on timecharter at very competitive rates and although, there were 200 more days available in the quarter over last year due to vessel additions, the total number of days on the timecharter was nearly 500 more than in quarter 2 2003.

So we expected across (indiscernible) a secured second quarter. Fortunately, our policy of maintaining a balanced, charging strategy included having 10 vessels on period employment and with variable rates, i.e., 3 three in the pool, 3 on contract of a freightment and 4 under timecharter with a profit-sharing element. All, therefore, were able to take advantage of the quarter 2 firm rate.

Overall, daily timecharter equivalent per vessel for the quarter was 23,500 and for the half-year, 26,740. Nearly every vessel was fully employed during this period with productivity at 98.1 percent; the lost days are mostly due to one dry-docking and other essential repairs. The vessel operating expenses amounted to 12.3 million in quarter 2, compared to 11.9 million during quarter 2 2003, an increase of only 3 percent. However, for those vessels which bear operating expenses there was a 14 percent increase in total days. In fact, therefore, we enjoyed a fall in vessel operating expenses per shift, per day, by 2 percent to $5,723 in quarter 2 compared to $5,865 in the previous years' quarter 2 and a decrease of 4 percent from the average for the year 2003.

The average daily rate for the 6 months was 5,993, an increase of less than 1 percent from the total 2003 average. The reasons -- firstly, there was some easing of the impact of the dollar Euro rate in the quarter -- the average rate of quarter 2 being $1.21, compared to $1.25 in quarter 1. More importantly, we have spent considerable sums of the previous 2 quarters on spares and maintenance, primarily, with the objective of improving the ongoing cost-effectiveness of the older vessels. This (indiscernible) paid off in quarter 2 with some noticeable declines in daily operating costs on certain vessels.

General and administration costs were $700,000 in the quarter, compared to $400,000 in last year's quarter. And daily cost per vessel increased from an average of $734 for the year 2003 to $751 for the 6 months. The increase is due to extra traveling for Investor Relations purposes and additional professional fees relating to corporate governance requirements.

Financing costs were $2.1 million in quarter 2 compare to $3.3 million in last year's quarter 2. Average total loans were approximately the same last year at $475 million. Average loan interest rates fell from 2.5 percent to under 2.4 percent and all-in average finance costs, including interest born on swap instruments, fell from 3.6 percent to 3.4 percent. Most of the decrease however, is due to capitalized interest, which, because of the new construction program, was over $600,000 compared to $100,000 last year.

The net gain from the sale of the Delos and Liberty was 8.8 million, which accounted for 47 percent of our earnings per share. The sales released approximately $36.5 million of cash. The amortization of the gain on the sale of the 2 Suezmax's in the fourth quarter last year contributed nearly $800,000 in the second quarter. There were no new dry-dockings in the quarter. Only the Tamyra completed its survey in quarter 2. Total costs incurred during the quarter amounted to $2.2 million. Only one more dry-docking is scheduled for the year, the Bregen from quarter 4.

The public equity offering in May raised $80.2 million with the issuance of 2,875,000 shares. The dilutive effect of the issuance on the quarter's results was approximately $0.12 cents. Temporarily, we have used $64 million of these funds to repay drawings on a revolving credit facility. Due to this prepayment and normal repayments of $8 million in the quarter, total loans decreased in the quarter from 485 million to 408 million. There were no new loans during the quarter. Our debt to capital ratio fell to 47 percent, while our leverage ratio, as defined by our banks, is 39 percent, well below the 70 percent covenant.

We have placed an order for an LNG carrier and paid the initial tenth sentence (ph) installment of $17.4 million. We now have 13 vessels under construction at a total contract price of $652 million, of which $78 million had been paid by the year end -- I'm sorry, by the end of quarter 2.

Incidentally, the estimated total resale value of those contracts is now considerably higher than the total contract price. Debt financing has now been arranged for all the new buildings with the exception of the LNG carrier. Assuming an amount for the LNG, the new debt will amount to approximately $514 million, which was starting to be drawn from the next delivery in January next year. This concludes my comments on the financial results and position. Now I will handle the call back to Nikolas.

Thank you, Paul. Thank you very much. Well, I think Tom will be more than happy to have any questions that any of our friends would like to -- colleagues would like to ask us.

(Operator Instructions). John Chappell, J.P. Morgan.

Paul, I just wanted a clarification on the costs. They were down significantly, sequentially and you gave the reasons why. How much of it was the timing issues of the stores purchasing and as you can look in the second half of the year, do we look at a number that's kind of in between first quarter and second quarter levels -- the kind of take-out the timing issues there?

Of course, we kind of hope that these savings are sustainable. If you remember, at the year end conference call I did remark that we have had a lot of expenditure on spares and maintenance and, in deed, the same in quarter one. So yes, I think that would be a fair estimation if you were to pick a number between the quarter 1 and quarter 2 of -- per day.

John Hi it's Nikolas Tsakos, also. Take into consideration of course; when you compare the 2003 that we are running at a much larger vessels -- we have a VLCC in the commitments we didn't happen 2003, which of course increases the average. But with the on hand management we have in (technical difficulty) to sustain the course to comfortable levels, including going from -- starting from a VL down to product carrier.

The CapEx budget, I don't think you have any new buildings coming out in the second half of this year. So what are the capital requirements for the last 6 months of this year? And then if you can just remind us what the capital requirements are for '05 for the new building deliveries?

For the rest of the year we have about -- we're just talking about the new buildings now, as we only had one small dry-docking. So we're talking about $23 million within 2004, $165 million (sic) within 2005, $168 million within 2006 and then in 2007, when of course we get the LNG carrier we have $218 million.

Okay. And then one final question. I just wanted to be clear on the dividend policy. If I remember correctly, it's 25 to 50 percent of the previous year's earnings. So I just want to make sure, we assume the October dividend can still be $0.50 cents semi-annually based on the '03 results. But as we look at the '04 results, it looks like the number could be much higher than '03 and if you get to your 25 to 50 percent range there; it looks like you had the potential for your first significant increase in dividend. Is that the right assumption to be making?

I will leave this question to our Chairman.

Obviously, our Board of Directors will look very carefully at the expectations for the full year 2004 when we meet at the end of September. Depending on what that analysis is and also what our projected capital needs are, we indeed, will come up with a dividend that will reflect policy that's been well-publicized.

Okay. Thank you very much, guys.

Magnus Fyhr, Jeffries & Co.

Congratulations on a great quarter. A couple of questions. First, on, I guess, future new building strategy or expansion. I mean, you have aggressively expanded the fleet during the past few years and the timing has been excellent. You also mentioned that possibly, 2008 could be a little bit weaker. So I guess if you order vessels today they would be delivered potentially into a softer market than today. What historically have been following your customers who have more recently entered into the LNG market? Can we expect more of a focus on LNG new buildings going forward or will you still be active on the tanker side with 2007, 2008 deliveries?

Well Magnus, as I said that we will not -- we will, for sure, continue to look more into the LNG business. So we a very high capital, of course, the business and we always do it hand to hands with one of our major clients. But the intention is to continue our mainstream shipping as we go on. What we have noticed and I think, is late last year we could see that new building prices for the normal day-to-day workforces were getting much higher, much steeper. Demand for ships and the prices of steel have caused that. That was the time that after we made our orders for our Suezmax's, which today they might have a premium -- our new building simple Suezmax, not the 1C Suezmax's. We have almost -- we could have a $25 million premium per vessel on those ships.

So when we noticed the new building prices moving up, we focused on highly specialized vessels and that's why we went very strong on the 1AI class vessels and the LNG. And of course we are right now under negotiations for the building of a prototype Aframax that will be a new design of ship that will have a lot of advantages. So we're looking at specialized vessels now, because we may stream -- the workforces are getting very expensive.

Right. You've got one LNG vessel now. You bought it, I guess, ahead of the contract. What is the next tender coming up here that you could possibly be involved in?

It will be much probably in the LNG sector.

And would that be Qatar or -- ?

I would say it will be -- the Middle East will play a significant role in it. But also I wouldn't want to say it much more than that.

Okay. Maybe a question for Paul. In your press release you state that you expect several cost increases for next year. In what order of magnitude -- what are some of the bigger cost increases that you'll see? Is that on the insurance front or maybe you could elaborate on that?

Honestly, we kind of hope that the Euro will decline against the dollar -- the dollar will retain its strength. But we have our reservations in that context. Insurance is always an area where we expect increases. Fortunately, this year we've managed through our captive insurance company and their wonderful relationships with the reinsurers to hold back significant increases, but we don't know how long we can do that for. So yes, I guess it's still the potential weakness of the dollar and potential insurance increases next year that could affect it.

What kind of magnitude are we talking about? 10 percent, 20 percent?

No, no. Not to that kind of that extent, well within the 10 percent range.

Okay great. Just went one final question. I just wanted to confirm that you guys are ready for the Olympics?

Yes. We have the roof and we're looking forward to see you here.

Great.

(Operator Instructions). Gin Chung (ph) with Dahlman Rose Weiss.

Good morning. Let me also extend my congratulations on a great quarter. We're seeing some ships coming off timecharter in the second half. I was wondering if you can comment on spot time chartering mix strategy in the remainder of 2004 and maybe it 2005?

Sure. Well as we said -- as we have ships like the Silia T is coming off timecharter in September. It's one of our new Suezmax's -- new building Suezmax's. The vessel’s earning 23,500 on a long timecharter. And it has been fixed for 3 years to option 1 years for a significant higher rate than that. So that has been already -- this ship has been already fixed forward. The next vessel we have is the vessel the Crux, one of our product tankers. The vessel has already been fixed and is earning $15,000 as we speak today and has been fixed out for another 14 to 16 months from September forward, again, at a significant premium to that level. So we have those ships. And of course, we are in negotiations as we announced in the press release on the Tula Z for a 3 year timecharter with Exxon. So as the ships come closer to their delivery, they are being fixed out.

Also, are you seeing more opportunities on long-term timecharters right now or charters trying to resist as long as possible, despite the continued strength and the outlook?

Well, let's put it this way. I think our chartering department is full with proposals for timechartering our ships. We are resisting a little bit. We have always been very choosy, I would say, for whom we do business with and we continue the same policy, but if we could timecharter all our ships today and could make more. If they knew we were feeling in the tanker business up to about 2 years ago, that did not exist. The container market was similar to that where all the ships had timecharters attached and now it's happening in the tankers.

And have you -- we are you even willing to consider chartering in more ships that were not part of initially part of your fleet? I know you only our chartering 5 ships -- 3 ships right now -- chartering in. Are things so heady (ph) that you would even consider that in the mid-term?

It's something we do not exclude, but what we like to do is we like to run a Company where we control the assets. We feel -- to put our name on something that we do not control we do not feel very comfortable with. So I think it will take some time for us to change this strategy.

Just one last comment. Utilization rates remain quite high. Is this something that we can expect in the near-term -- including the older assets?

Yes. I mean we have the significant (indiscernible).

I think if you look at our historical record you will find that TEN has enjoyed a utilization rate around the 96 plus percent area throughout its history. It's only been exceptionally when it has fallen below that because of an unusual scheduling of dry-docking or unexpected repairs and the like. But yes, I think you can expect that that record, which is has been established, will continue in the future. The primary drivers of that, of course, is the level of vessels that were under contract. Vessels that are on contract with freight men, vessels that are on term charter, are employed at a much higher level than those in the spot market. So yes, you can expect them to be high going forward.

I guess my -- this follows my other question on the guidance -- a little more specific guidance, perhaps on when we can expect the non-double hulled assets to be sold, especially if rates continue to drive upwards?

For ourselves as a Company we said that we will try to have a fully double-double fleet within 2004. That's where we're striving -- our single ships are very good assets, they're earning a very good 20, 25, $30,000 but this is a strategy -- a decision the Board has taken and we're moving to that direction.

Fabulous. Thank you very much. Congratulations again.

Natasha Boyden, Sidoti & Company.

Congratulations on a great quarter. I especially -- I think most of my questions have been answered. I have a bit more of a macro question. I've heard some concern in the last few days that rates in the Gulf especially, have been coming down. And I'm curious -- if OPEC has increased production in July and just did again of 100,000 barrels on August 1st, what is causing this, I guess, short-term decline in the rates? Is there any particular reason or --?

I think we look at this as a seasonal -- a seasonal effect is the one.

But even with the increase in the OPEC output, do think it's that strong?

I think -- well I think that's a bit of a decision on the summer lull that has brought the rates in the last couple of weeks a bit lower. And what I think is more importantly is that the September stems (ph), the ones that usually drive the market up, are not out yet. I think we will see the September stems out in the next week.

Okay. Well, that pretty much answered my question. Thank you very much.

(Operator Instructions). At this time, there are no further questions. I will turn the call back over to Mr. Tsakos for any additional or closing remarks.

Thank you very much for -- thank you very much for your time and we would like to thank our shareholders who are supporting the Company. And we will continue to grow the Company being ourselves the largest shareholder here as strong as possible. We want, also, to again congratulate all the other shipping companies that are producing excellent results and making, hopefully, our sector more exciting for shareholders and hopefully getting our evaluations from this very low, single digits to better evaluations, which is the reason we are all striving.

We will be visiting the United States and other places to see our shareholders soon. On Friday the 15th, Friday the 13th -- it's not the movie. Friday the 13th of almost -- it's actually the opening ceremony of the Athens Olympics and the New York Stock Exchange has honored our Company to ring the closing bell. So if you are around, watch out. You will see our team dressed in the Olympic uniforms on the podium there. Thank you very much and Chairman, would you like to close this call?

I just have one question, Nikko. Will they have the Olympic flame with them?

Oh no, we will be carrying it, yes.

Okay. Thank you very much.

That will conclude today's conference call. Thank you for your participation and you may now disconnect.