Tsakos Energy Navigation Ltd (TEN) 2007 Q4 法說會逐字稿

Good morning, my name is Rich and I'll be your conference operator today. At this time I would like to welcome everyone to the Tsakos Energy Navigation earnings 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).

Thank you, it is now my pleasure to turn the floor over to your host Laura Kowalcyk, investor relations. Ma'am, you may begin your conference.

Good morning and thank you for joining us for Tsakos Energy Navigation's fourth quarter and year end 2007 earnings conference call. By now you should have received a copy of the earnings press release. If you have not please contact [Missy Firth] of CJP Communications at 212 279 3115 extension 200, she'll e-mail a copy of the release to you.

Again this quarter TEN is also providing a supplemental slide presentation with fleet employment and financial data, which can be accessed from the front page of TEN's website at www.tenn.gr. Please note that this is an informational presentation only and will not directly reflect the flow of management's comments on the call this morning.

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'd like to read the safe harbor statement.

This conference call and the accompanying slide presentation contains certain forward-looking statements within the meanings of the safe harbor provision of the privacy security litigation reformat of 1995 and thus there is a caution that such forward-looking statements involve risks and uncertainties which may affect TEN's business prospects and results of operation. Such risks are more fully disclosed in TEN's filings with the Security and Exchange Commission.

Thank you, now I'd like to turn the call over to Mr. Nikolas Tsakos, President and CEO of Tsakos Energy Navigation.

Thank you Laura, thank you for attending our conference call. Good morning to all of you, from here, from New York City where we're doing this conference together with our colleagues in Athens.

Today I will offer a brief summary of our financial and operational performance and then I will ask our COO to go into the nitty gritty and our CFO, Mr. Paul Durham to talk a bit about the numbers, the figures and the results. We are very proud to announce the year end results for voyage revenues exceeding for the first time in our 15 year history, the $0.5 billion mark. The net income for the year exceeding $183 million. Earnings per share of $4.80.

A very busy year with a delivery of nine new building vessels including our first LNG carrier. Very busy sales and purchase performance, disposal of older ships with close to $70 million capital gains. Two new contracts for the signing of DNA Aframax vessels and very importantly for all of us, the shareholders, a 25% increase of our annual dividend. And we close the year with a two-for-one stock split.

Also, the quarter has been a very exciting quarter. We saw our net income at $52.2 million. $1.37 as earnings per share increased on our time charter equivalent for the year as we have seen the end of the year market again having a seasonal effect and becoming very strong. And this has concluded our 57 continuous profitable quarters since the company's inception.

So we're very proud to announce these results in what is a cyclical market, we have maintained a continuous 15 year profitability and I will ask Mr. Stavropoulos to actually give you more details. Please, before that, if the Chairman is online from Athens, Chairman, could you please give us some wise words? Thank you.

Niko, I don't know how wise they are -- I do know that they are different. Thank you very much for the opportunity and good morning to everyone. As we all know the adage; may we live in interesting times, has been quite overdone recently and the only thing I can say is two words; enough already.

I've been associated with investments and banking environment for over 50 years now, have gone through the water torture of the early 70s, the demise of the nifty 50's. Later we had stagflation which was followed by the collapse of oil prices and the long list of banks that failed starting with Penn Square, Continental Bank, Seattle First, First of Dallas, Texas Commerce and the list goes on and on.

Well later, Greenspan was greeted by the freeze up of the banking system and the crash of '87 along with the huge losses by the commercial banks from third world debt.

Next came the collapse of S&Ls and the commercial real estate market which brought on the need for the resolution trust company to clean up the debris. Then the hiccups of long term capital and dotcom boom and bust.

That long list pales when compared to today's situation. The scope of the current crisis is deeper and broader than any we've seen in the post World War II era. Where all of this leads is still unclear. I do however, take great comfort in the strategies employed by TEN which create strong visibility of revenues, debt service capability and profit. My personal favorite test of corporate performance is return on equity. By this highly objective standard, TEN measures very tall. It has generated returns in excess of 22% in each of the last five years and it had an average result of 30%. This performance in turn has produced exceptional returns for our shareholders in the form of dividends and price appreciation.

At our Board meeting last Friday all your efforts and those of your strong management team were recognized and loudly applauded. I can only add a further bravo and encore, encore.

Thank you, Niko.

Chairman, thank you very much for -- we will tend to give our conference calls from New York because you are much kinder to us when we're on the other side of the Atlantic. So thank you very much for these very wise words and George will give us the developments of the company for the year '07, the quarter and what has happened up to now. George.

Thank you, Nik and thank you, Mr. Chairman. It's my pleasure to speak with all of you today to provide you with the details of another very busy, but commercially gratifying fourth quarter and year.

At the beginning of 2007 we were expecting to take delivery of 11 new building tankers including the company's first LNG carrier. At the year's end we have taken delivery and integrated nine vessels in the corporate fleet. The remaining two tankers, two Panamax product tankers Selecao and Soctrates, we took delivery of them in February and March of 2008. Both vessels have been fixed ex-CPR to three year tank charters at a fixed rate to one of the company's long term clients, state oil company. Following these developments the company has six new building tankers to take delivery from now until the end of the first quarter of 2010.

What else did we do during last year? Bought back during the first quarter the 1999 built Aframax tanker, Olympia, at a price 50% below the vessel's market value which in the third quarter we agreed to sell together with her two 1998 Imabari built sister vessels, Maria Tsakos and Athens 2004, for a total capital gain of $96 million.

We delivered Olympia to her new owners on February 4, 2008. What we did with Olympia we will repeat in 2008 with Cape Baker and Cape Balboa, the company's 2002 built Suezmax tankers which have also been sold to a German KG system through a sale and leaseback transaction and where TEN holds purchase options for their re-acquisition at values 50% below the current market values. The company will exercise both options within this quarter or the second quarter of '08 and will assume the ownership of Cape Baker and Cape Balboa just before or at the year's end.

Sold the company's oldest tanker, the 1989 built Panamax tanker, Bregen for a capital gain of $6.4 million. Placed orders for two additional Sumitoma built DNA Aframax tankers for delivery in 2009 and 2010 raising the total number of new building tankers that TEN contracted since 1997 to 53. The contract values of this new building program to date is $3 billion.

Celebrated the company's fifth year anniversary on the New York stock exchange. Did the two-for-one stock split by means of 100% sure dividend raising the company's shares outstanding from 19 million to 38 million. Paid two semi-annual dividends, one in April of 2007 and one in October of 2007. The April 2007 payment of $0.75 per share was the second semi-annual distribution for fiscal year 2006 which totaled $1.37 per share. The October 2007 payment of $0.825 per share was a first payment for fiscal 2007.

We announced today an April 2008 dividend distribution of $0.90 per share raising the total dividend payment for fiscal 2007 to $1.725 per share. The 2007 dividend has been increased by 25.5% or $0.35 per share in comparison to the total dividend payment of 2006.

Neo Energy, our company's first LNG tanker, after successfully trading for a short period in the spot market was fixed on a period type charter to a major LNG entity at a profitable rate.

We also continued weathering the operating and financial challenges, which in most cases originated from reasons outside -- exogenous to shipping, and continued chartering all incoming new building tonnage in existing tankers from the fleet. The combination of period type charters and volume charters inline with our balanced chartering strategy.

More specifically during the fourth quarter we fixed two of the five spot trading Suezmax tankers, Eurochampion and Antarctic to a major European oil company for three years with a minimum base rate and a 50/50 profit share over and above the agreed minimum.

Following these fixtures the company had seven out of its ten Suezmax's it operates on time charters that have, as of March 2008, on average 33 months of remaining secured employment per vessel. Following the fixture of Eurochampion and Antarctic we had full employment for the first spot trading vessels of the fleet, the fleet (inaudible) Alaska, Arctic, Archangel and the Aframax tanker Olympia.

We had no further new building deliveries during the quarter since the two [signed on] Panamax tankers that were scheduled for a fourth quarter '07 delivery were deferred for a first quarter 2008 delivery.

All this activity in 2007 has raised the number of operating vessels currently in the fleet to 44 vessels compared with 37 at the end of the fourth quarter of 2006. In deadweight terms, TEN experienced a net increase of 490,000 deadweight reaching 4.7 million deadweight tons while reducing at the same time the average age of the fleet from 5.9 years to 5.5 years compared to 10.6 years for the world tanker fleet.

The sales and purchase activity continues to be an integral part of our operation and philosophy as a shipping company. We look continuously and actively for opportunities that would enhance the profile of the fleet, both operationally, commercially and financially.

The highlight of the last year in our S&P activities were the unblocked sale of our three 1998/1999 built Aframax tankers, Maria Tsakos, Athens 2004 and Olympia. The sale of these three Aframax tankers generated $96 million in capital gains. A one per quarter vessel delivery was agreed with the buyers in order not to disrupt the vessels' chartering commitments. Maria Tsakos was delivered to her new buyers on July 11, '07; Athens 2004 on October 2, '07 and Olympia on February 4, 2008. This transaction generated approximately $120 million of free cash for the company.

We expect to take delivery of six more tankers through 2010 including two tankers in 2008, two Sumitoma DNA Aframax tankers, three tankers in 2009, all Sumitoma built DNA Aframax tankers and one in 2010, the last of the eight sister ships contracted at Sumitoma. Our existing new building program gives us the luxury to entertain offers for some of our third generation new builds and 90s built tankers at very healthy prices as demonstrated in the three vessel transaction mentioned above.

With the existing new building program the company is also guaranteed fleet renewal and growth over the next two years. We are always looking for vessel opportunities in the new building front, in the secondhand market and at available consolidating opportunities. In each case the investment criteria are the same. Any potential acquisition must complement the enterprise fleet, should not put an unbearable burden on the company's balance sheet and should create shareholder value.

Since 1993 when we started with a four vessel fleet these principles have been the foundations that guided our expansion and guaranteed our growth through three different market cycles. The high quality of our 100% double-hull fleet working in tandem with the increasing demand for quality tonnage from world class charters has allowed us to effectively maintain our balanced charter profile.

Our chartering policy which dictated the majority of our vessels operate on time charter with profit sharing built in ensure that we are profitable even if only the minimum rates are achieved while still at the same time reaping the benefits of a healthy spot market. This was particularly evident and helpful last year during the summer months of the third quarter and the first half of the fourth quarter.

The spot market recovered during the second half of last November after a single-hull VLCC caused the worst oil spill in South Korea's history and spiked in December to levels seen back in the banner year of 2004 especially for crude carriers. As we speak the market has come down from these headline rates which is both good and expected and still remains at very healthy levels.

These long term profit sharing contracts allow for TEN to ensure that the company can continue growing and maintain a healthy and growing dividend for our shareholders as the record shows. As of today we have fixed 80% of the fleet operating base of 2008 and 62% of 2009 with currently 39 vessels with fixed time charters, time charters with profit sharing and contract of afreightment with min-max out of an operating fleet of 44 tankers. And assuming only the minimum rate TEN has secured 912 months of forward employment or 23.1 months per vessel and around $564 million in gross revenues until the end of 2009.

On the chartering front each quarter of the year was busy since 2007 was important for the commercial integration of the nine new buildings we took delivery during the year and the continuous chartering of both the spot rating vessels and those whose charter came up for renewal during the year.

As we speak, out of an operating fleet of 44 tankers we only have three tankers trading in the spot market. All three are 1A ice-class Suezmax tankers. We could have fixed all remaining Suezmax's to period employment in similar arrangements like the Eurochampion and Antarctic, demand is there.

In early March we extended the chartering arrangements for Handysize product tanker, Didimon, for two more years until March 2010. We expect the vessel to generate approximately $15.3 million in gross revenue over the duration of the charter. We continue to see all the major state oil companies and commodity traders to fix forward both crude and product tankers as they are both features demonstrated with the above mentioned [period features].

We believe that this is a good sign for the prospects of our industry or for the tanker market for the years to follow. In fact the averages for 2007 for the one year and three year time charters are in line with the average of 2006 while rates for crude carriers are holding higher year-to-date in 2008.

Looking at the working environment in which we operate, the global economy. Following the strong growth of the third quarter global economic expansion has begun to moderate in response to the continuing turbulence in the world financial markets. In the latest report by the International Monetary Fund the forecast for the global economic growth is growing from 4.9% in 2007 to 4.1% in 2008 due to reductions in the 2008 growth forecast of the world's major economies. Projected growth in the USA has been lowered to 1.5% compared to 2.2% in 2007. In the Euro area 2008 growth is projected at 1.6% versus 2.6% for 2007. For Japan 2008 growth is expected at 1.5% versus 1.9% in 2007.

Emerging and developing economies continue to expand although the ongoing turmoil in financial markets is expected to impact their export growth potential. In China growth has been revised downwards, as well, from 11.4% in 2007 to 10% in 2008. Globally growth in emerging markets and developing economies is expected to decline from 7.8% in 2007 to 6.9% in 2008.

Global oil demand remains robust at 87.6 million barrels per day in 2008, up 1.7 million barrels per day from 2007 or 1.9% increase. In its March meeting OPEC decided to maintain crude oil production targets steady for 12 of its 13 members as Iraq is the only member with no quotas in production for approximately 2.3 million barrels per day. The quotas currently stand at 29.67 million barrels per day.

In February 2008, with the exception of Japan, commercial oil stocks in the USA and Europe were above the five year average. OPEC's decision to keep production steady during the second quarter of 2008 at a time of slower demand should assist in the build up of global oil inventories which could be very good for the tanker market.

The global economy is now in its sixth year of expansion and despite the recent downwards revision for global growth, global growth is continuing to grow at healthy levels. Despite this there are many factors that could destabilize the growth as advanced economies are still facing risks and challenges affecting the financial condition and negatively impact the financial state of the emerging and developing economies currently leading the growth charge.

Oil demand is growing which can only be positive for tankers. However, the tanker industry is still facing the same set of risks and challenges with the power to affect the revenue and cost base of owners and operators. The falling dollar, increases in personnel expenses, insurance premiums, higher bunker prices and lubricant prices, rises in risk premiums and the international credit market tightening could create strong headwinds.

TEN has proved that it thrives in challenging environments. The Asian crisis of 1997 and the subsequent financial meltdown of emerging markets in Latin America and Russia were times when TEN commenced its new building program and build strong relationships with leading shipbuilders in the Far East proving beneficial in securing new building slots and resales. The 53 tankers TEN has constructed since 1997 have supported the company's profitability quarter-after-quarter and assisted in the company's growth.

The company's relationships with bankers who supported TEN's growth at every stage of its development are very strong, as well. The company will continue to exercise prudence with its liquidity and cash reserves and expects, irrespective of any turbulence ahead, 2008 to be another healthy year.

The company continued its impressive growth and profitability for the 57th consecutive quarter. Our dividend policy continues full speed ahead raising the distribution every year since the cash dividend payout was introduced in 2002. The full 2007 distribution of $1.725 which includes $0.90 that will be paid on April 30, 2008 is 25.5% higher than the dividend payment of last year. TEN outperformed the major indexes during 2007 registering a total return of over 70% at the time when S&P 500 and Dow Jones were below 9%.

Following the two to one stock split the company started buying back stock for cancellation. We have so far in 2008 purchased back and canceled stock worth over $6 million in comparison to $1.3 million in 2007.

We still have a long way to go. The balance of our new building program fleet guarantees expansion. We're also looking at and for growth opportunities in all energy transportation related asset classes and at the same time we continue on a daily basis to manage the challenges and risks on the environment in which we operate and run the business we built together since 1993.

We believe the turbulence in the financial markets will create opportunities and well capitalized companies with strong cash flows like TEN will start to benefit. In our daily business endeavors we feel that we're not alone. We therefore wish to thank the Board for their support as well as all our shareholders whom have held our stocks over the year. Also our thanks goes to the land personnel in TEN in Tsakos shipping and training for their able and constant service. We also thank the officers and crew onboard our vessels who give their best 24/7.

As always we welcome all of you to our headquarters in Greece. This June in Greece we are hosting another posidonia event and we hope to see many of you there.

This week though we are in New York and we hope to see many of you during the JPM shipping conference and the capital link shipping forum in New York. Please contact Mr. [Rosiki] who handles our schedule during management's visit in the US.

At this time I would like to turn the call over to Paul Durham for a review of the finances. Paul.

Thank you George and thank you all for joining us today. A summary of selected financial data is included in the press release and now I'll say a few words more on the significant items occurring in quarter four and 2007.

In 2007 TEN's net income was $183 million compare to $196 million in 2006. Diluted earnings per share [$4.79] compared to $5.15 in the previous year. Capital gains were $69 million in 2007 compared to $63 million in 2006. Excluding these gains net income for the year 2007 was $114 million compared to $133 million in 2006.

Operating income for 2007 increased by $44 million over 2006 and without capital gains increased by $14 million. However there was a sharp increase in finance costs by $35 million and this contributed to the decrease in net income from 2006.

For quarter four our net income was $52.2 million in 2007, including nearly $31 million in capital gains, compared to $77.1 million in 2006, including $15 million in capital gains. Diluted earnings per share was $1.36 based on 38.3 million average shares compared to EPS of $2.02 or 38.1 million average shares in 2006.

Total revenue for the year surpassed $500 million for the first time in our history, a 17% increase over the $428 million for 2006 mainly due to the increased size of the fleet. Total quarter four revenue was $131 million compared to $112 million in quarter four 2006, also a 17% increase.

The average number of vessels in quarter four was 43 compared to 37 in last year's quarter four. And productivity in the fourth quarter of 2007 was 97.3%, slightly higher than in quarter four 2006.

The average charter equivalent rate achieved was $29,900 for quarter four 2007, just slightly higher than the fourth quarter of 2006. Both quarters experiencing a soft market in October, November and the December recovery coming a little late to significantly impact the quarter average.

For the year 2007 the average was slightly down to $29,400 from $30,150 for 2006. There was a further significant move in 2007 to time charter with profit sharing, the number of days on such charters almost doubling. However, our overall exposure to market rates decreased from 78% in 2006 to 73% in 2007 mainly due to our exit from pool arrangements in quarter one 2007.

December VLTC and Panamax average rates were again impacted by the accounting for [fixed] monthly profit share charters at minimum until determination in quarter two 2008 when the extra hire will be accounted for.

Total operating expenses in quarter four amounted to $31.5 million, a 33% increase from quarter four, 2006, mainly due to the [six] extra vessels. However, daily average costs per vessel also increased from $7,811 to $8,542 in quarter four 2006 and on an annual basis increased from $6,979 to $7,669. This is due to higher crew costs, in part due to higher dollar costs. The addition of an LNG carrier and extensive repair work we've performed on certain vessels in dry dock, the costs of which could not be deferred.

G&A expenses for the quarter increased to $2 million from $1.4 million in quarter four 2006, primarily due to increased audit related fees because of the increase in the fleet and due to Sarbanes-Oxley related work. The incentive reward to the management company for 2007 is $4 million compared to $3.5 million in 2006, both accounted for in the final quarter of the respective years. Amortization of the stock grants amounted to $1.7 million compared to $200,000 in 2006, most grants being awarded within 2007.

Total net finance costs for the year amounted to over $77 million compared to over $42 million in 2006, mainly due to the increase in average loans outstanding by almost $500 million. While average interest rates mitigated by swap cash receipts remained at the average 2006 level of 5.6%.

The negative non-hedging swap evaluations which affected our results in the second half and which are a reflection of lower forward rates amounted to an $8 million non-cash hit for the year compared to a positive $2.5 million in 2006.

In quarter four the total finance charge was $23.5 million versus nearly $15 million in quarter four 2006. And although we start to see rates coming down that also means that certain non-hedging valuations were again negative, resulting in another non-cash $4 million hit in quarter four. In quarter one 2008 we are terminating most of these non-hedging swaps.

At the end of 2007 outstanding loans amounted to $1.4 billion and we expect that new draw downs less repayments during 2008 will add another $100 million to the outstanding amount by the end of 2008. Our net debt to capital ratio was 59% and leverage of fixed accounts of vessels fair values was 39%.

Earlier in 2007 we sold the Bregen and Maria Tsakos. In quarter four Athens 2004 was sold for a gain of $31 million. In quarter one 2008 we have sold the Olympia for $63 million, having repurchased it for $31 million in quarter one 2007. With the delivery of a Panamax Selecao and Socrates this quarter we're now left with six Aframax tankers under construction with a total contract value of $360 million of which $290 million remains to be paid; $100 million in the rest of 2008, $150 million in 2009 and $40 million in 2010. Of those $250 million is expected to be covered by debt.

And this concludes my comments. I now hand the call back to Nikolas.

Paul thank you very much for a very informative presentation and I think at this stage we would like to open the floor up for any of our shareholders or analysts that would like to ask some questions here on the market or on our results or on operation. So thank you very much for the presentation and we'll be very happy to answer any of your questions.

Thank you. (OPERATOR INSTRUCTIONS).

Your first question comes from Jonathan Chappell of JP Morgan.

Thank you. Good morning and good afternoon to those in Greece. A question about your growth initiatives and I have a part for each person on the senior management team.

Nik you had said in an interview last week that you saw some potential credit crunch issues in shipyards and that some opportunities may be emerging. I was hoping you could maybe give us some insight as to what type of fleets you're seeing out there? Are these very near term deliveries or are these longer term slots that are available, maybe 2010, 2011 that are becoming open?

George, you'd mentioned that you're looking at some non-energy segments for your fleet growth, and I was wondering if you could elaborate on that a little bit, what type of sectors you're looking at?

And then finally for Paul, if you can speak to the financial flexibility and what type of debt-to-market value you'd be willing to go up to, to fund some of these initiatives that Nick and George will talk about?

Well thank you very much for your questions. I think that, as George mentioned, TEN tends to have a conservative employment policy, which always does us good in times of some sort of market corrections, either be it because of our industry or be it because of the general environment.

We started in 1997 our new building program, and it must be one of the largest in such a period of time, new building programs for an independent tanker owner of building 53 tankers in almost -- in the period of 10 years. And the way we did this is we were (inaudible) all the time and (inaudible) have to say on our relationship with the shipyards during the Far East crisis.

We are seeing a different scenario happening. As you know steel prices and the (inaudible) of course have almost doubled since that period of time. And the new building market has been quite strong. We have taken advantage of the very good relationships and the many options we have taken forward in order to continue growing our fleet and also specialized ships like LNG and a new designer, Aframax [and] ice-class vessels. This, since the beginning of the year, is the first time that we are seeing more because of the credit crunch situation, [yards] coming to large clients like ourselves with long relationships, without wanting to go out in the market. And talking about berths as early as 2009 and 2010, that will be available on the tanker and energy sector.

So I think we are seeing perhaps a small -- we're not seeing a reduction in prices, but we're seeing earlier availability that we have seen before, and I think this is a good sign for TEN. We have built our liquidity to the highest level, we have in excess of $1 billion of buying power with a lot of cash at this time, to be able to take advantage of this situation when some smaller companies, or some KGs who have placed orders, opportunistic orders and options in the future, will not be able to take this. And we are seeing this on the Aframax and also on the Suezmax sector. I cannot be more specific, but I hope you got the picture, thank you.

Now, hi. This is George. Non-energy investments, we don't have any non-energy investments. All our investments are energy-related. Maybe I have said something which was not very clear, but let me (inaudible) out. All our investments that we have are, in the energy transportation, are energy-related.

Okay, I must have misunderstood you, George, sorry.

That's okay.

Hi, this is Paul in Athens. With regards to the potential debt situation, I think our general policy has always been to finance the vessel one-third by equity and two-thirds by debt, and I think that policy still holds good for the future. At the moment given that we have a 40% leverage, as defined by the covenant, and we are allowed to go to a maximum of 70%, we could theoretically borrow another $800 million or $900 million, and still remain within our leverage covenants.

We do not anticipate, if we had to, confronting any problems in doing that. In fact, in our discussions with financing the last few vessels under construction, banks have been very willing to listen to us. They've been making offers to us for those vessels, and the only impact that we have faced so far, because of the credit crisis, is a slight increase in margins, but in fact only going back to where we were about a year ago. So all-in-all we feel we are in a very comfortable position, even though we also had on hand about $300 million of cash, theoretically therefore we have $1 billion in place, if we wanted to make an acquisition or take advantage of an opportunity.

Okay.

Sorry, Paul, we're not planning to spend this $1 billion, but anyway I just want to clarify that this $1 billion that you were talking about represents on our facility on our existing fleet. Of course in case we look at an opportunity, that new opportunity will have its own financing (inaudible) 60% or 70%. So actually I just want to refer that, you know, it's in excess of that. The $1 billion just refers how much equity we can raise on our existing fleet right now. Thank you.

Okay. Well I'll turn it over. Thanks for your patience. Thank you Nik, George and Paul.

Thank you. Your next question comes from Natasha Boyden of Cantor Fitzgerald.

Thank you operator. Good morning and good afternoon. Just wanted to just move on to your sort of fleet renewal program. You've obviously been fairly active there and after the sale of the Maria Tsakos, Athens and the Olympia, are you finished now with the renewal program or are there other vessels that you are targeting to sell? I mean you do have one of the youngest fleets in the business?

Well, hi Natasha. You know we want to always -- every single day that passes some of the ships are aging, they're a bit like humans, so we want to keep on keeping them young. And yes, we are looking at some of our first generation, let's say, double-double ships, ships like the Victory and the (inaudible) were very profitable chartered right now to the South American Oil companies and the Vergina, which is also employed forwards. So this is our next target of selling some of those ships.

And if the market continues its increasing value, we do not exclude, because as you have seen from our statistics, we consider that buying and selling ships is a part of the business we do. Of course without this reducing our participation in the market, because we always reinvest. So if we see that the market continues to let's say the [VLTC], I'm sure you know a couple of weeks ago, we had sales of [VLs] for delivery late '09, early '10 in excess of $160 million, which I think, looking back four years or five years ago, the value of those ships was $60 million. So I think we have a number of those ships that we might not, that we might consider also taking a capital gain.

Right. I guess what I'm trying to gather, I mean you have six ships left for delivery in your new building program and given that the asset buyers have increased, I mean substantially, since you began your purchasing program, I guess, what five or six years ago, isn't it going to be somewhat difficult to replace assets over the next two to three years?

Well, that's why we are seeing -- just to remind you, we included to our six Aframax's we have the purchase option of two of our Suezmax vessels, which we sold to a KG five years ago. So that most probably I think this option is almost twice in the money today, so we will be taking over those ships so that makes eight ships coming in the fleet. And I think that -- so we have a good valuation there and a good cushion.

And Natasha, you're absolutely right, and that's why we're saying that we do not expect the values of new buildings to drop to where they were five years ago, but perhaps what we're seeing is that the lack of finance for some owners might create opportunities too for us to buy again, to enter the market again for new buildings.

Actually that's a great reminder of those options on the Suezmax's, thank you. And if you could just clarify, I think you had mentioned that you were repurchasing shares, did I hear that right?

Yes, we are always -- we believe that our share price is very competitive to say the least --

Absolutely.

And so we believe it has value to buyers. The reason we actually had this [fleet] is to create some more liquidity that allows us to grow -- extend our buy-back program without making the company very liquid, sort of thing.

Okay, great, I just wanted to clarify. Did you actually say how many shares you had already repurchased this quarter?

Well, we have purchased 6 million in value, we have this automatic system, because of Sarbanes-Oxley, we cannot be very big participants - not only us, any publicly traded company - in the -- in this we have an automatic system which triggers at different levels.

Okay, great. Well, thank you very much, gentlemen. I look forward to seeing you in New York.

Thank you, thank you very much.

Thank you.

(OPERATOR INSTRUCTIONS).

Your next question comes from Greg Lewis of Credit Suisse.

Yes, thank you and good morning. I guess my first question is, and you've touched on it briefly, given the fact that your stock is significantly undervalued, is there any thought about potentially increasing the dividend?

Well, I think this is one of the things that - if you look, I think and we have a chart in our presentation, a very significant increase of the dividend. I think one thing we are not in -- we are a growth company, and for some reasons all the growth companies are being negatively valued, which is something we do not understand. If you look our valuation is perhaps from last count a bit better than that of companies with (inaudible) like TK, OSG, Torum, and we're all in close to 70% under our asset value, which -- and all these companies are very respectful companies with a growth strategy.

And for some reason, these companies which should be appreciated by the market are not, so we have increased our dividend from something like $0.75 back in 2002 to almost $1.75 in 2007, so year after year after year. That's, I think, very good, it's anywhere between 5% and 6% yield. We are not going to become, because we are not, we're a long term player in this market, we are not going to become a higher, we're not going to be paying 10% or 12% at yield just to get the share price up, because this is not the company's strategy. The company is investing in shipping and at the same time providing a very large and competitive dividend, and I would ask if our Chairman is on line from Greece, because he is a dividend driver, if he has to add anything on that.

Niko, I think you outlined it very specifically, the dividend policy is designed to generously reward the shareholders on a current basis, and at the same time, reinvest a significant portion of earnings into the future growth of the company.

We probably wouldn't have that attitude if we hadn't demonstrated that we can earn very handsome returns on the reinvested earnings. You'll recall in my comments, I said that over the last five years, in each year we've had return on equity in excess of 22% and have averaged 30%. There are very few companies in the world that generate that kind of return on equity, and I think it would be foolhardy not to reinvest a significant part of earnings into that future growth.

Yes, okay, great. Switching gears a little bit, it looked like OpEx went up around 10%, and it was attributed to currency. How much of the increase in OpEx was currency related?

Well, the appreciation, or I should say the depreciation of the dollar against the Euro was about 10% during the course of the year. Our officers, which account for about half the payroll cost of our crew, are paid in Euros. So all-in-all, of that 10%, I would say that half is at least due to the dollar.

Okay, so when we look out at 2008 costs and if we were to strip out the dollar or use our own currency estimates, you'd maybe expect, what, another 5% to 10% increase in daily OpEx, exclusive of currency?

Exclusive of currency, I would say yes, about 4% to 5%. Currency, well we don't know where that's going but obviously to date this year, it doesn't look good.

Okay, great. And then my last question is, regarding the LNG vessel, it looks like that comes off contract sometime in the early Summer, has there been discussions about extending the current contract?

Well yes. The LNG has been a very, we have been very pleased with the performance of the ship, it has performed very well for us operationally, and it has gained a very good reputation, as you know. This is a limited market of about 200 ships, perhaps of [your] generation and [your age], not more than 40 or 50 ships at this stage, so they're in comparison with thousands and thousands of tankers, at the market value and closely looked at by the major oil companies and the end users. So yes, there are discussions in a lot of levels for that ship, for sure for expansion, for joint ventures, it's quite an exciting part of the business.

Okay, thank you and congratulations on a good quarter.

Thank you very much.

Thank you. There are no further questions at this time. I will turn the floor back over to Nikolas Tsakos for any closing remarks?

Well, thank you very much for your attention. The management is in New York for the next, well, in the United States in the next ten days, and we will be very happy to answer your questions in person. We are having, for those of you on line, on Wednesday 26th, we are having an analyst and shareholders' lunch at the Park Lane Hotel in New York City, I think about 12:00. And please if you want to, talk to Mr.[Rosiki] to let him know which ones of you would like to attend. We'll be very happy to have you come and listen to our presentation and spend a little bit more personal time.

So for those of you who cannot meet us on the one-on-one during the conferences, or for those that can see us twice, which is a bit hard, we would like very much like to see you at that lunch, Wednesday March 26 at 12:00 at the Park Lane.

And with that, I will ask our Chairman to close and thank you very much.

I too would also like to thank you for your participation and your insightful questions, and we'll try to keep doing a good job for all of our shareholders. Thank you.

Thank you, Chairman.

This concludes today's Tsakos Energy Navigation earnings conference call, you may now disconnect.