Tsakos Energy Navigation Ltd (TEN) 2006 Q1 法說會逐字稿

Good morning. My name is Toni and I will be your conference facilitator today. At this time I would like to welcome everyone to the Tsakos Energy Navigation Q1 2006 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) It is now my pleasure to turn the floor over to your host, Tom Rozycki. Sir, you may begin your conference.

Good morning and thank you for joining us for Tsakos Energy Navigation first-quarter 2006 earnings conference call. By now you should have received a copy of the earnings press release. If you have not, please contact Alan Katz of CJP Communications at 212-279-3115, extension 211, 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 Provision 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. Nik?

Thank you and good morning, good afternoon, depending on which part of the globe you are located in. Thank you very much for being with us here today. We are here, our Chairman, Mr. Stephanopoulos, our CFO, our COO, myself, our Deputy Chairman from Athens Greece. And I would like to ask my Chairman to start out with some words of wisdom this afternoon.

Thank you very much, Niko. I don't know if my words will be wise but I have a few to share. Good morning, everyone. Greetings from sunny Athens where we finally have spring weather here. Please forgive my nasal tone. It's a souvenir from a recent trip across the Atlantis.

I hope you enjoyed reading about TEN's first-quarter performance as much as I did. It was truly a stimulating report. However as you all know the climate has become a bit more hostile. The very tight supply/demand balance of tankers has eased from the salad days of 2004/2005. Meantime our interest rates have risen dramatically. Just as a quick review, six-month LIBOR at the beginning of 2004 was 1.22%; at the beginning of last year, it was 2.79%. At the beginning of this year it was up to 4.71 and as we speak, it's at 5.30. Obviously TEN's business is very capital intensive, but when properly managed our leverage can be your friend and I think the results that have been produced to date will suggest that our leverage indeed has been beneficial to the operations of TEN.

Another factor that is increasingly affecting the business environment is inflation. It is certainly the key focus of business management today and more recently financial markets. I think TEN has effectively dealt with each and every one of these challenges.

It gives me great pleasure to once again congratulate our CEO, Niko Tsakos, and his management team for an outstanding performance. Thank you, Niko.

Chairman, thank you very much for your good words. We will continue to strive to do the best we can and do them better and again, thank you very much. It gives me great pleasure to be here and report another record quarter of profits for TEN. This first quarter signals a very good start for our 14th continuous profitable year, it seems. So that is a good way to go.

So far 2006 has been a very busy and productive growth period for us here at TEN both commercially and operationally. Fifteen new vessels have joined our fleet, consisting of 10 vessels under operations which means vessels completely straight to the bottom line, and five new building contracts. Three of them will be delivered very soon. This adds up to a growth of 1.5 million deadweight tons with an average of just about one year's old. So I think that has been quite a significant growth in the last quarter.

Whilst we were doing this, Paul Durham and his financial team were able to translate our doings into another record-breaking operating performance and I think Paul will talk about the figures in much more detail in his presentation. I will just take some of your time to talk about our commercial developments and what is the strategy going forward.

So in the financials, our net income for the first quarter rose to $41.7 million versus $39.85 million in 2005. 2005 included the capital gain on the sale of our ships the Panos G which as we have said many times we believe it is an integral part of our shipping company's [policy]. Our earnings per share rose to $2.19 from $1.98 last year. Our revenues were $75.620 million compared to $66.74 million for 2005, and I think what was very impressive was the rise in our utilization, which reached a record of 99.2% compared to a very good 96% last year.

Also in April 27 of April this year TEN paid its final semi-annual dividend for 2005 of $1.10, bringing the total for 2005 to $2.10. So on a profit basis, the Q1 was in line with our expectations and it should be noted that TEN's balanced employment strategy contributed significantly to these record results. As I mentioned, 2006 so far has been a very rewarding and productive period full of commercial and operational events.

I think the most notable operational events we have this year were the beginning of the year were the delivery of our two ice-class Suezmax tankers which are 1A Suezmax tankers, the largest ever 1A vessels building. So far those were the Archangel and the Alaska and they were delivered to us in January and February. These vessels are currently trading very profitably on the spot market and our chartering department, we are expecting that we will see significant premiums from the trading of those ships in the third quarter this year and the fourth quarter closer to the winter months.

In January, we purchased the VLCC La Prudencia and after trading the vessel on the spot market for a couple of months, we chartered this ship out for a five-year period with a minimum rate that covers our breakeven and gives us a significant profit sharing above that.

And in March the acquisition of Western Petroleum. This was a fleet of nine vessels, six 2500 handysize (indiscernible) mark ice-class 1A product tankers and three 2006 delivery ice-class product tanker Aframaxes. The above transaction was then completed in a four-week time span and I would like to take the opportunity to thank the people in Western Petroleum for their professional handling of the deliveries and of course our technical managers for making sure that those ships could so quickly contribute to our bottom line.

Four of the above handysize vessels have been chartered out for three years at an accretive minimum rate and then we have a profit split above that. The remaining two are currently in the spot market and there is a big appetite by major end-users for these vessels of ours.

The above acquisition together with the purchase and charter out of the product carrier, (indiscernible), have further balanced and diversified their fleet and increased our participation in the ever-growing products market, while at the same time TEN became one of the largest ice-class players. So far we have expanded the fleet as I said 1.5 million deadweight tons. We have reduced our average age. The new acquisitions were just about one years old. And in addition we have 16 new buildings to be delivered in the next eight quarters, signaling a 95% increase in the size of our fleet. Our sales and process strategy going forward is to continue exploring accretive opportunities and of course dispose some of the few older six that we still have.

On the chartering side, the diversity and the modality of our fleet has made us very popular with our clients. Just recently we extended for another three years two of our Suezmaxes to the state oil company in Petrobras and this increased the extension of the significantly increased rate just to put it in perspective just the increase we're going to have from those ships will realize about $10 million to the bottom line for us going forward.

Also last month two of our VLCCs have been fixed for a five-year period to a major end-user with a minimum rate well above our breakeven and a profit split that allows us to take advantage of the peaks while protecting our bottom line. At the same time, two of our new building handysize vessels which will be delivered in the next two quarters have already been fixed for three years to a major end-user in a very similar structure, which means a minimum level that protects our bottom line and then a profit split in order to take advantage of the peaks in the market.

We are also currently in negotiation in extending at significantly increased rates a number of our existing vessels and the appetite for our new buildings is immense. Currently 25 out of or 35 vessels are in full utilization contracts. Seven of our vessels are on fixed-rate deployments and 18 are (indiscernible) freight following volume rates and profit sharing arrangements. 75% of the employee base for 2006 have been secured, representing at least $140 million in revenues. In addition we have already secured 60% of 2007 and we are also looking forward for 2008 and 2009.

Operationally the 99% utilization record for the first quarter speaks for itself and the quality of service provided by Tsakos Shipping and Trading, our technical managers, is very much appreciated by our clients and authorities around the world. There are systems in the timing and smooth delivery of nine vessels in four weeks (indiscernible) immeasurably. Just recently the (indiscernible) Port Authority has awarded our good vessels with three accolades for its flawless operation. The economies of scale and the support we're getting with this operation helps our bottom line immeasurably.

Looking forward, we will continue to execute our one-stop shipping policy by diversifying our fleet to meet the needs of our current and future customers even though the supply of vessels continues to grow, we are encouraged by a [solid] growth in demand. Further we are continually pleased to see the ton mile demand growing. In short, proven products are traveling greater distances leading to hire revenues. Additionally refining capacity worldwide but most notably in the U.S. and Western Europe continues to be scarce. As a result, demand for our modern product areas is stronger than ever.

We expect 2006 to exhibit a favorable supply and demand model. The delicate supply and demand correlation this takes that will still need to be cautious but our (indiscernible) and management saw that we can and will continue to take advantage of our good fleet and ensure maximum value for our shareholders. We still project that the demand side of that equation will remain strong most likely through 2008 and perhaps through the end of the decade. At the same time the amount of new deliveries may begin to put a strain on market dynamics, but we cannot discount the possibility of increased worldwide demand especially in Asia and the United States. We also believe that scrapping, which have not happened so far this year or last year, will have a favorable effect on the supply-side of the equation when and if the market has a collection.

Looking at our existing fleet, we remain well positioned to continue earning premiums for our young and modern fleets and with a 95% vessel increase in the near future we believe that this growth will be reflected straight to our bottom line. We will continue to balance our employment promises and we will seek to fix vessels to first-class charters for long-term employments. This strategy has served TEN well since we are one of the very few shipping companies in the world who reported on the [ship's inception]for the last 14 years now.

So with all this in mind, I would like to thank our shareholders for their support and I'll ask Paul Durham, our CFO, to give us the nitty-gritty of the figures. Thank you very much.

Thank you, Nikos, and thank you all 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 and I would like to now talk about the more significant items occurring during the quarter.

The Company achieved net income of $41.8 million in quarter one 2006, compared to $39.9 million in quarter one, 2005. Diluted earnings per share was $2.19 based on 19.1 million weighted average shares compared to a $1.97 based on 20.2 million shares in quarter one 2005. While the average fleet size was only slightly larger than quarter one, in quarter one than in quarter one 2005, that is 27.1 vessels compared to 26.8 last year, our operating income was 18% higher, if we excluded last year's capital gains.

Total revenue after voyage expenses was nearly $79 million compared to $70 million in quarter one 2005. Apart from a modest increase in fleet size, the increase in revenue was primarily due to an average TCE, time charter equivalent, per vessel increasing from $30,600 daily to $33,100. It was also due to the increased utilization of the vessels to a level of 99% of available days compared to 96% last year as there were no drydockings in the same period while last year to vessels underwent drydocking during quarter one.

The increase also reflects the changed profile in Asian category of our vessels between two quarters. In quarter one 2005, the fleet included four elderly non double-hulled vessels which together contributed $1.8 million in net income to last year's quarter. These vessels were sold in 2005. The quarter one 2006 fleet includes the new Suezmax's, Euroniki and Eurochampion, and for part of the quarter the newly acquired VLCC, La Prudencia and newly delivered Suezmax's Archangel and Alaska. These five new vessels together contributed $8.9 million in net income.

Also during quarter one 2006, some [21]% of the fleet's operating days were under market rate related charters including time charters and profit sharing, compared to 54% in quarter one 2005. Our spot exposure during the quarter doubled to 25% of total days, mainly due to the pacing of the new deliveries straight into the relatively buoyant spot market. This increase in spot exposure plus significant increases in bunker costs explains the increase in voyage expenses that you will note in our income statement from $7 million in quarter one 2005 to nearly $17 million in quarter one 2006.

Average [rounded] rates achieved per category compared to last year were as follows. VLCC earned approximately the same, with an average of approximately $53,500, compared to a $53,800 dollars last year. Suezmax's $34,500 compared to $29,200 last year. Aframaxes $33,200 compared to $28,000 last year. Panamax's $28,500 compared to $35,500 last year. Product carriers $21,100 compared to $19,800 last year. Total operating costs increased from $13.7 million in quarter one 2005 to a $14.5 million in quarter one 2006 and on a daily average cost per vessel basis increased by 4% since last year's quarter one from $6653 to $6931 in quarter one 2006. We believe that to be a fairly modest increase thanks in introduction of new and disposal of the old vessels mentioned earlier and to effective cost controls by our managers despite the pressures of creeping inflation, higher insurance and higher lubricant costs. Depreciation costs have risen by 25% between quarters, in line with the new deliveries and change in fleet profile I mentioned a moment ago.

Amortization of deferred drydocking charges was down 18% mainly because deferred charges relating to the vessels sold in 2005 were written off. However, we recently changed our basis of explanation and such charges are now amortized over approximately 2.5 years instead of up to 5 years. As a consequence, amortization in quarter one is in fact higher than it would have been if we had continued using the previous basis.

Daily G&A expenses were slightly down from last year and management fees were the same given the similar size of the fleets. Taken together, our overhead cost per vessel amounted to $773 per day in quarter one, compared to $786 per day in quarter one 2005. Total finance costs for the quarter amounted to $3.6 million, more than double quarter one 2005 due to increased loans and increased interest rates.

Loan interest and charge in fact amounts to approximately $7.5 million, but these were offset by interest rate swap benefits of $2 million and capitalized interest also of $2 million.

Interest earned in quarter one on bank deposits, sale of investments, and positive changes in the value of investments provided nearly $2.8 million. During quarter one we added approximately $157 million net to our total debt mostly to cost finance new deliveries in the quarter. This brought our total debt to $591 million and our net debt to capital ratio to 45% at the end of the quarter. We now have 16 vessels under construction, two of which will be delivered before the end of the month and three more before the end of the year. There is approximately $640 million remaining to be paid on these vessels, $179 million in the remainder of 2006, $355 million in 2007, and $106 million in 2008.

As we have paid most of the yacht installments to date out of our own cash, all the remaining installments will be ultimately covered by debt, which apart from three vessels has already been arranged on very favorable terms.

This concludes my comments and now I will hand the call back to Nikos.

Thank you, Paul. Thank you very much. We are very happy to answer any questions or any comments from the audience. Thank you.

(OPERATOR INSTRUCTIONS) Jon Chappell, JPMorgan.

Good afternoon. Thank you. Nik, I have a question for you regarding the ice-class fleet, not yours specifically but more to the market. I had read that [Sophcomplat], who is obviously a big player in the ice-class market admitted that they didn't see much of a premium in that fleet this past winter because of the mild winter weather conditions. Can you speak a little bit about the history of the ice-class premiums, how significant they've been, what you have seen this year as far as were you in agreement with Sophcomplat? And what your expectations are for the ice-class premiums going forward, given the large amount of those types of ships on the orderbook right now?

Thank you very much, John. We are not building those ships in expecting to make a killing as some would say from the ice-class premium. And just to take it a bit further for us, the ice-class premium is the icing on the cake on those ships. We were able to build the ships from a very good yard with whom we have a very long relationship. We had to pay -- we paid what I think is a low level of option price for having this 1A and 1B capacity of breaking the ice. And in years, like a couple of years ago I guess in 2004 the premiums for those ships were mind-boggling. You might recall that Aframaxes charted at that time for a six-month period for about $130,000 a day where a similar ship would get a charter for six months for $45,000 a day. So we believe we will face similar situations. We have seen clients who are experts in this trade requiring the chartering of this asset of ours if they could take all their ice-class ships on the charter they would.

So we believe that we are looking at opportunities. We are actually chartering our ships out with minimum profit sharings and we make sure we get the good profit sharing if we have a timecharter on those ships when the winter period arrives. So we are expecting to have significant contribution from this specialization to the bottom line without of course excluding and making sure that we will be trading the ships in any weather conditions to be profitable.

Okay. I have asked this question on previous calls but now that we draw closer to the delivery of the LNG carrier, has any employment been fixed for that? And are you considering possibly selling that ship as demand may be outpacing the shipyard's abilities to deliver LNG carriers?

As you know, we will be taking delivery of our ship in nine months and I have to say this is the first time that we are seeing the firm business coming out in the market. We have a lot of interest for actually selling the ship as you said for a healthy profit and we have firm employments offered to us on our days. We do not exclude any of the two scenarios. We said that we are in this business to grow. We believe the natural gas will be the future, but we have never been shy in taking a profit.

Okay, that is very helpful. I just have one follow-up for Paul. The net interest expense interest income line items were a big surprise for me. And just as we look at modeling that forward, now that you have taken the Western Petroleum ships and trying to gauge that interest rate swaps -- I know it is probably difficult for you and capitalized interest -- what do you think the right run rate might be for those line items as we look in the second quarter and then going forward?

Clearly the loan interest itself and as the loans increase and we know what the interest rates of that particular line will continue to grow. Whether we can get the same degree of benefits remains to be seen. We have some very excellent swaps in place. They more than ever are showing increased benefits. The capitalized interest of course will eventually run out as the ships are all delivered. But that line will obviously disappear within a year or two. So the overall [mix], finance cost line will certainly be growing.

Equally if you like to deduct the interest income line as well, there we had some very good gains on our investments but there is a degree of speculation in that, so we don't know which direction that will go in. You can't rely too much on that.

Okay. Thank you.

Doug Mavrinac, Jefferies & Co.

I had a quick question on a your new buildings on order and with the shipyards being filled for the next few years and you guys having such a large fleet on order, what sort of interest are you seeing from other owners in terms of potential bids or offers for some of your ships that are set to be delivered over the next couple years in terms of trying to gauge interest and getting capacity before 2009 and 2010 of new tonnage?

Yes, well I think that is a very good point. We are seeing a lot of interest on sales. We have shown since in the past even as soon as we've taken them sometimes from the yard, our aim is to grow the fleet and satisfy our clients' needs, but we believe that buying and selling ships is a part of the game. As you may know and I think it says in our 20-F, the prices in which we have ordered the majority of our new buildings in some cases are almost 50% of what a new building would be worth today or close to that. So we might be attracted and sell a ship but there is a lot of upside for new buildings out there.

You'd say that that you guys see a decent level of interest in terms of people expressing interest towards potentially some of your vessels, but you're just weighing your employment prospects and everything else? There's more towards trying to figure out what kind of -- the level of interest in some of those ships on the parts of other owners?

Okay, and the second question, for in terms of your chartering strategy going forward, for some of your Suezmax's in particular I know that you just reupped a couple of those vessels, but you have a couple more coming off of timecharter, a couple in the spot market. Do you anticipate maintaining your employment strategy going forward in terms of having a good balance of timechartered vessels with some market rate exposure on those?

Yes, I think this is -- we have had a policy that has been successful with us. We are not -- if the market booms, we might not be able to take full advantage of the upswing of the market because of our strategy, but in the meantime when the market has been weak we have always been protected and profitable and growing. We will be doing more of that.

We have as we mentioned two of our Suezmax's that we are adding an average of about $25,000 a day and they have been fixed for another three years at in excess of $10,000 more than that, so closer to $36,000 a day for three years forward. We have one of our Suezmax's [at sea] coming up in September. We are seeing similar huge interest for '06. So we are looking at putting those ships to work and we always like to serve with our end user part of the profit and that is why we just did a transaction with (indiscernible) VLCC's, two product (indiscernible), minimum rate covering our bottom line, accretive to the bottom line and a profit share above that and of course we did the same with the four handysize vessels. So one, we have first-class charters. We are ready to sit down and we like the spoils with them you say.

Perfect. Thanks, Nik.

[Jin Chung], S. W. Bach & Co.

I have a follow-up question on the ice-class side. It would seem to me as we are seeing the volatility in the market going -- lessening the upside, it seems like the importance of relationships are going to increase in importance and it would seem to me that you -- [TNP] has a lot of faith with potential relations with Russia in particular if they made such a large commitment to the ice-class segment, regardless of the vagaries of whether from a year-to-year. Can you give us some more color on that, Nik?

Yes, I think we are seeing a lot and we are feeling a lot more oil to be coming out from the ex-Soviet Union, Russia as we say and I was just come early this morning from St. Petersburg on a visit to see some of our clients up there and we believe that Ports of Primorsk and [Mervyns] are going to be producing much more oil and export and much more oil. They are already doing it. So yes, we believe that the type of ships we are building although they are very flexible, they can as easily operate in the West Africa trades for the Suezmax's, they will be in a lot of demand for the Russian trade.

Can you expand on the flexibility of these vessels? Is there also a feeling in the off-season so to speak that they may be on the top of the queue in terms of preference if they are built to higher specifications? Do you think that if maybe not on the headline number and the TCE rate, but the fact that they will be employed quicker and that you'll have better visibility just for planning-wise?

The ships are very much in demand for the whole year round. They are very well built. They have the flexibility. The new technology allows them to economically operate in as I said in the Caribbean market, in the West African market, in the [Cross] net market and given the possibility maybe the 1A where we have focused the 1A vessels which is the highest pushing ice capability to operate in adverse ice conditions.

Okay, fabulous. Let me leave you with my best wishes and enjoy the Poseidonia.

(OPERATOR INSTRUCTIONS) Hardin Bethea, DePrince, Race & Zollo.

A couple of questions if you can talk in more detail about the recent chartering activity. You did describe the economics of the two, the extension of the two sale leaseback vessels for three years. When does that new charter start?

On the Cape size vessels?

On the Cape Balboa and the Cape --?

They are starting in September (multiple speakers) and that is when their existing employment was and they have been renewed for three more years and of course we have appetite to renew even for five years if we wanted similar types of ships. So we are very -- I have to say we are very happy and satisfied with demand from major oil companies to take vessels forward.

Okay, the other charters that you discussed, the two VLCCs, the two handysizes, and four MR product tankers, can you describe in a little more detail the profit-sharing and minimum rate as well as when those charters began?

I'd have to look and see if any of our competitors are listening in. I am just joking. Yes, I will give you the basic arrangements. I think on the VL's, our VL's were on the spot market until a month ago and they were delivered to major a end-user who have a [rig] that covers their own breakeven, which is still in the high 20s let's call it. And anything between that rate and $40,000 a day goes straight to us and anything above $40,000 is being split 50-50 between us and the end user.

Of course just to make it easier for you guys to follow up how we are going to performing in the profit splits, these profit splits are based not on actual performance of the charters, but on fully indexes -- so it will be easy for our shareholders to look on the screen and come up and see how much the performance is.

Okay, and what about the handysize and -- (multiple speakers)?

The handysize vessel, it is in the four Western petroleum ships just from last week they were delivered to end-users for three years each, two and two. Again we have a minimum rate which more than covers our breakeven. It is something starting with a two and then we have some like 20,000 and then we have a 50-50 profit split above that again based on indexes, so if a major who wants to use the ships for their own cargo and might decide not to charge anything for the consultation and they still have to significantly pay us depending on what the market is doing.

Okay, then you mentioned two other handysize new builds that were chartered out for three years.

We've been very busy with charter, yes. The other two vessels are new buildings. One of them will be delivered on May 26. The next we believe on October 12 at 12:00 in the afternoon because the Koreans are very precise on their deliveries, fixed for a period three years again on the minimum that covers -- that will lose money for us and the shareholders then anything above that is being split again based on an index, 50-50 with us and also another vessel, another handysize vessel has been fixed for two years to a South American (indiscernible) government for about $26,000 a day on a fixed basis.

So it has been a very busy first-quarter chartering-wise, and that gives us a lot of courage for the remaining of the year.

I am happy to see you fix a larger portion of the fleet. The final question I guess related to Paul. If you could tell me again what the new building expenses or capital expenditures are for the next three years, I think I missed those numbers.

Sure. For the remainder of this year, we still have about $179 million to spend on the deliveries and (multiple speakers) deliveries.

How much of that is cash and how much is finance?

All of this will ultimately be covered by debt. We have already paid the initial installments on most of our new buildings from our own cash, so from now on virtually all of the installments which are in the most place, the final installments will be covered by debt. But that really depends on our own cash situation. All of the debt that we are taking on is mostly in the form of credit facilities. So it is really up to us how much we want to draw down on those. At the moment we're going under the assumption that yes, we will draw down all of it. So we will be covered let's say for time being that we are going to take debt to cover that. So that's others 179 for 2006; 355 for 2007, and 106 million for 2008. In total about $640 million. Those are based on contract prices and then you can assume for each vessel something ranging between $1 million to $3 million for pre-delivery costs, supervisionary expenses.

Okay, that's helpful. Nik, maybe you would comment a little bit on your view of the market right now, seasonality, and the impact of new building delivered into the world fleet and what you think that means to rates in '05 -- sorry, in '06?

Yes, I think looking at the market and I have to say 2004, '05 and '06 so far have been almost very similar with the seasonality showing up in the middle of the second quarter and then having the third quarter and fourth quarter significantly I would say stronger. We are looking at new ships coming in, but what we are not looking and I think this is very, very in a sense positive, we are seeing there is no scrapping and if we have a six-month or in nine-month slowing in the market, I believe we will see scrapping. And I think that will be healthy for the whole market. However the appetite of charters for the long-term employment of similar products like ours is very, very encouraging. I don't want to sound full of ourselves because all the shipping companies will do quite a bit of tonnage in (technical difficulty) every situation, but we could actually charter our ships out from anywhere between five and 10 years. All of our vessels today. I mean we have three ice-class 1A product tankers Aframax's coming in for delivery June and July, September, and we have first-class major oil companies, state oil companies out there to take all the ships out of our hands. And this gives us encouragement that at least they know the market a little bit better than us. We are just the truck drivers of the seas. So they know the market better than us and they are ready to take a long-term cover. So we have always been sure and always protecting the bottom line where we are building -- (indiscernible) growth but we are encouraged.

Natasha Boyden, Cantor Fitzgerald.

I just wanted to, Nik, get your view on the current high asset prices. Despite a fairly significant softening in rates, what you think it will take for asset values to come down if in fact they do?

The asset values in the time sector are still -- as you know we have not seen any weakness in -- and we're seeing significant transactions and VLCCs are being built in excess 100 to $110 million a day. We have had the typical seasonal correction in parts of the trade. Again VLCCs are up well above 100 (indiscernible) which is close to $70,000 in the West Africa Gulf area. The Suezmax's in the Mediterranean are performing again close to $70,000 a day. We have seen the typical seasonality of having levels going lower whenever we saw some sort of finally upgrading but as soon as the product is in the sea, we see the rates again very healthy.

So although we have seen some weaknesses overall, the expectations are that prices are still very firm.

Okay. Just to follow up on that, you filed a $300 million shelf registration this morning and you said in the release you have no immediate plans on (indiscernible) the capital markets at this point. So I suppose what I'm trying to get at is at what point do you think it becomes more reasonable to start investing again in the market? I know you did the recent ones, but that would seem to be a fairly rich price given that it was at full value it seemed.

We have the convenience of having the three members of the capital markets committee sitting here about two meters apart and our CFO no more than another meter away and the decision to go for the shelf was basically that it will be a matter of prudence to have it done along with the year-end audit in order to conserve expenses if indeed there is any need to go to the capital markets over the next year or so. But I can assure you at the moment we have no plans to go to the capital market.

Okay, so it was more a question of dry powder kind of thing, if and when?

That's right.

Just following on from that, at some point one would assume that you may go to the capital markets. What kind of vessel segment are you most interested in at this point? Do you see the most return or you think has the best outlook?

As you know, we are we call ourselves one-stop shipping, so we are not really -- we have not invented what is the most profitable type of vessel so we are participating in all types of tankers and we are client driven. Most recently we have looked more and more on the product side. We believe that product vessel gives the flexibility because a product vessel can be very easily used as a coal carrier, a fuel carrier, it doesn't have to carry products. But we might continue on that looking for our flexibility.

Okay just one last question if I may, you obviously have the LNG carrier coming on in nine months, as you said. Have you given any thought to potentially perhaps branching into the LPG sector given the fundamental outlook there?

I think we are focusing on the products. We are focusing on crude fuel, the LPG market, we have participation and interest some years ago and without excluding that we might participate, we are not looking at anything specifically now.

Okay, thank you very much.

Ruairidh Stewart, Simmons Company.

Apologies if you have covered this. I was cut off part way through the call, but I just wondered if you could given the level of chartering activity, the level of secured revenue you have for the rest of this year and then perhaps the next two years following?

Are you asking about we have already chartered out 75% of this year with a minimum 140 million of revenues on that, and about 60% of '07.

Okay. Are you going to share the revenue level there?

It is starting to approach 100 million.

Around 100 million. Okay. That's all I have. Thanks.

At this time, I would like to turn the floor back over to management for any further or closing remarks.

Well, thank you very much for the support to our Company. I think we are trying to continuously enhance our bottom line. As you know, the management and the insiders are the major shareholders here and we are putting our money where our mouth is. We are looking forward to see as many of you as possible on our annual meeting that is going to take place on June 1. That is just a couple of days before the big shipping exhibition, Poseidonia, starts here in Greece. Hopefully we see as many of you and I know our Chairman would like all of you who are shareholders to make sure that you cast in your votes. So we are looking for a very high return on the voters.

We had a report this morning that we have had a 75% response. We hope you'll help us get it to 90. We want active shareholder participation, and that is one way of demonstrating that interest. So please help us.

Thank you.

Thank you. This does conclude the Tsakos Energy Navigation conference call. You may disconnect your lines at this time and have a wonderful day.