Tsakos Energy Navigation Ltd (TEN) 2008 Q1 法說會逐字稿

Good morning. My name is Judith, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tsakos Energy Navigation first quarter earnings conference call. (OPERATOR INSTRUCTIONS).

Thank you. It is now my pleasure to turn the floor over to your host, Mr. Tom Rozycki. Sir, you may begin your conference.

Thank you, and good morning. And thanks for joining us on the call. By now you should have received a copy of the earnings press release. If you have not, please contact (Inaudible) of CJP Communications at (212) 279-3115, Extension 209, and she will e-mail a copy of the release to you.

Again this quarter TEN is 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 information 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 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 operation. Such risks are more fully discussed in TEN's filing 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, and good morning to all of you. And good afternoon to those ones on this side of the ocean. I would like to thank you very much for being on our call today. I would like, first of all, to introduce the team here. We have our Chairman, Mr. Stavropoulus; our COO, Mr. Saroglou; our CFO, Mr. Durham; and (Inaudible), our Chief Marine Officer; (Inaudible) and the whole team here to answer any of your questions. And I would ask, first of all, our Chairman to give us some of his thoughts for this exciting first quarter so far. And then I will take it from there. Thank you very much.

Thank you very much, Niko. Good morning, everyone. If we sound cheerful this morning, it's for good reason. I turned on Bloomberg earlier before coming in and made a note that, on December 10 of last year, our share price hit an all-time high of $39.48. Remarkably, 43 days later, on January 22, it was down 30% to $27.51. Fortunately, people have corrected their sin. This morning, it's north of $38 and hopefully still climbing.

As we've noted in the past in periods of contrasting and conflicting tendencies, they can maybe best be described as - It was the best of times; it was the worst of times. This certainly applies to the tanker industry today. Tanker charter rates are at historical highs for this time of the year. Major charterers continue to display a strong appetite for extending period fixtures. Resale prices of modern tonnage are at or near record levels. Surely, these are symptoms of the best of times.

On the other hand, the IEA and OPEC have made a habit of frequent reductions in their forecasts for oil demand. Hopefully, this trend will stop. Top line inflation is rising at a rapid rate in most economic bases. Central banks are hard pressed to contend with this at the same time as some economies (inaudible). In our own industry, operating costs, including crew wages, maintenance expenses, bunkering, insurance payments-- The list goes on. General overhead. All are under increasing pressure. Capital needs are vulnerable to less favorable credit conditions, and higher interest rates are maybe what we have in the future. We continue to have the vulnerable and the soft dollar, which is affecting everyone who is basically a U.S. dollar revenue based enterprise.

Overall, today's conditions offer the potential for excellent results, but management diligence is at a premium. A fine balance between assurance of top quality of service to clients and prudent control of costs is essential. I have high confidence that TEN's management team will excel in these tests.

Thank you, Niko. Keep up the good work. Full speed, and safe journey.

Thank you, Chairman. Thank you for your good words and the positive attitude.

The first quarter of '08 was, so far, our best quarter ever since our inception in 1993. What is quite reassuring is the traditionally slow second quarter, the one that we're going through right now, is even stronger so far than what the first quarter was. In [real] terms, the market in this quarter, in the second quarter of '08, is even higher than the last peak of November of 2004. It seems that the tanker market gets excited with the U.S. election years. So we are always looking for a much more exciting period as we go to the fourth quarter of 2008. There are suggestions in our Board that our next ship, which is actually on delivery for November 4 of 2008, will be called the [Hillary MacBama]. So this is something that the Board will take in serious consideration in our next Board meeting in May.

Now for some (inaudible). I will go down to just give account of what has happened in the first quarter. And then George Saroglou, our COO, will get into more detail, and our CFO, Mr. Durham, will talk about the numbers and how they have produced such a good result.

Our net income rose to $65 million. That's almost a 50% increase from a year ago. Our operating income rose up 61% to $53.5 million, and our revenues reached $137 million. Our earnings per share have risen by 51% to $1.72. And, of course, we paid a semiannual dividend on April 30 of $0.90 per share, raising the dividend to $1.725 from $1.375 for the 2006 operations. In this first quarter, we had two exciting deliveries of our Panamax vessels, the Selecao and the Socrates. Both ships very immediately and profitably have been chartered to a major end user. We had the sale of our 1999 Aframax, the Olympia, with a capital gain of $34.5 million. And we purchased about 265,000 shares, with an average of about $31. So our timing was not perfect, as the Chairman said, but not bad in comparison of how our share price has performed since. And we have entered our fifteenth year as a public company, since 1993, and have 15 years of profitability.

So, overall, the first quarter, the environment was positive. The tanker rates have stood quite strong. And it seems that, so far, the subprime crisis around the world has not touched immediately our business.

For more details on this exciting quarter, I will ask George Saroglou, our COO, to give some more details. And we will be available for questions after that. Thank you.

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 busy and commercially gratifying first quarter, the best quarter we had so far since the Company's inception in 1993.

After a very busy year in 2007 following the delivery of nine newbuilding tankers, including our Company's first LNG vessel, we started the first quarter of 2008 with 43 tankers operating in the water and 8 newbuilding tankers, for a total pro forma fleet of 51 tankers. We entered the first quarter of the year, a typical strong quarter for energy transportation, with a spot and time charter rate environment, carrying over the healthy December '07 rates.

Although our physical market was very strong, these rates for some vessel types reminiscent of the headline rate achieved during 2004, the rest of the operating environment and, particularly, the financial sector in the U.S., was in a dire state trying to assess, contain, and, in some cases, survive the defaults and damages inflicted after the emergence of the subprime mortgage crisis in August 2007. How are we doing in this mixed environment? We keep executing the same strategy that helped TEN grow its fleet size and its financial metrics in good and in bad times since 1993.

We operated the fleet of 44 tankers at 98.3% utilization capacity during the first quarter, with 31 tankers taking advantage of the current spot market, where 3 of them trade 100% spot and 28 [fixed or time] charges with profit-sharing arrangements with the vessels' charterers to share spot market rates. We extended of the fixed-rate charter of the 2005 Handymax product tanker, Didimon, for two more years. We took delivery of two newbuilding Panamax product tankers, Selecao and Socrates, in February and March '08, where both vessels have been fixed (inaudible) three-year charters at a fixed rate to one of the Company's long-term clients, (inaudible) company. We completed the sale of the 1999- built Aframax tanker, Olympia, by delivering the vessel to her new owners in February, registering a $34.57 million capital gain from the transaction. We declared the option to buy back Cape Baker and Cape Balboa, the Company's 2002-built Suezmax tankers, which have also been (inaudible) to a German (inaudible) sale and leaseback transaction. And we acquired the vessels at values 50% below their current market value. We expect to reacquire the ownership of these two vessels just before or at the year's end.

We celebrated the Company's sixth anniversary on the New York Stock Exchange.

We paid on April 30, 2008 a dividend of $.90 per share for a total dividend payment for fiscal '07 of $1.73 per share, which represents a 25.5% increase over the dividend paid for fiscal 2006 of $1.38 per share.

Following the November 2007 two-for-one stock split, the Company resumed buying back its stocks for cancellation. And, in this respect, we bought back 265,600 shares during the first quarter for $8.26 million. A further 126,800 shares have been repurchased since that date at a cost of almost $4 million. The total of 392,400 shares canceled year to date represent 1% of the Company's shares outstanding following the stock split. The average per-share price was approximately $31.18. Since the beginning of the program in 2005, we have bought back in total shares valued at [56.6 million shares].

During the quarter, we operated the fleet of 44 tankers compared to 38 at the end of the first quarter of 2007. In deadweight terms, TEN experienced a net increase of approximately 400,000 deadweight tons, reaching almost 4.7 million deadweight tons; however, at the same time, keeping the average age of the fleet to 5.5 years, less than half the industry standard of 10.7 years.

As we have said in the past, sales and purchases are an integral part of our operations and philosophy as a shipping company. The highlight of last year's S&P transactions were (inaudible) sale of our three 1998- and 1999-built Aframax tankers, Maria Tsakos, Athens 2004, and Olympia. At present, potential sales candidates are the last three remaining [19-built] tankers that have time charter employment that could be sold as the Company aims at maintaining fleet modality and one of the lowest average deadweight ages in the industry. We expect to take delivery of six more newbuilding tankers from now until 2010, including two DNA Aframax tankers in 2008, one in mid October and the other in mid November, three tankers in 2009, also from (inaudible) DNA Aframax tankers, and one in 2010, the last one of the eight sister ships contracted in Sumitomo.

The existing newbuilding program of the Company has guaranteed fleet renewal and growth over the next two years. We are always looking for vessel opportunities in the newbuilding front, the second-hand market, and available consolidating opportunities, and TEN is well positioned to take advantage of any opportunity that will be presented in this market without the need to access the debt or the equity markets. For every transaction, the investment criteria is the same. The 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, this brings about helping the foundation that guided our expansion and guaranteed our growth through three different market cycles.

Commercially, our chartering policies dictated the majority of our vessels' [operating time] charges with profit sharing built in, and this ensures that we are profitable, in only the minimum rates are achieved, while still taking advantage of the benefit of a healthy spot market. These long-term, profit-sharing contracts allowed our Company to ensure that we can continue growing and maintaining the healthy dividends that we pay to our shareholders, as our records indicate. As of today, we have fixed 88% of the fleet operating days of 2008 and 66% of 2009, with currently 39 vessels with fixed time charters, time charters with profit sharing, and (inaudible) out of an operating fleet of 44 tankers. And, assuming only the minimum rate, TEN has accrued 858 months of forward employment, or 21.6 months per vessel, and around $616 million in minimum gross revenues until the end of 2009.

Demand for tankers seems to be getting stronger since early December of 2007, and the going quarter makes April and May the best months in any second quarter for spot trade and crude carriers, meaning VL, Suez, and Aframaxes, anybody can remember going back to the 1970s. Strong Asian demand for crude oil sourced from longer distances. Angola was the biggest supplier of crude oil to China, surpassing Saudi Arabia, Iran, Oman, and Russia in the first quarter. Stockpiles are in line with the five-year average for the main OECD countries, which is a bit worrying, considering the fears for future supply disruptions. Saudi Arabian price discounts to U.S. and European clients, the Iranian short-term charter of VLCC and Suezmax as floating storage, increased discrimination against single-hull tankers, and limited year-to-date tanker fleet growth are the reasons behind the unseasonably strong spot rate environment in the second quarter of 2008. Oil majors, state oil companies, and commodity traders continue to time charter quality tonnage for long periods at healthy rates, which, for VLCCs, Suezmax, and Aframax crude carriers, are above 2007 levels. This continuing trend is a healthy sign of a balanced market. In fact, in this spot rate environment, owners are reluctant to commit their vessels and time charter, and this, again, is good for rates for the [period] market.

As we speak, in an operating fleet of 44 tankers, we have only three tankers trading spot. All three are 1A ice-class Suezmax tankers. We could fix all three remaining Suezmaxes to period employment since demand is there; however, we think three tankers trading spot is the minimum tonnage in order to keep existing relationships with our charterers and clients. 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 revenues over the duration of the charter. We have not yet decided on the employment of the two Sumitomo DNA Aframax tankers. We will take delivery in October and November. We have indications of interest for time charter and similar arrangements like their sister vessels, Izumo Princess and Sakura Princess. On the other hand, the Company always has at least one Aframax tanker trading in the spot market, servicing on-demand [COAs] from the Company's clients.

On the global health, the global expansion is losing pace in the face of the recent world financial crisis. In its April 2008 report, the IMF, International Monetary Fund, revised downwards its forecast for global economic growth from 4.9% in 2007 to 3.7% in 2008, a 0.5% drop from the January 2008 forecast. China and India continue to be the main growth drivers in our world. In 2008, China is expected to grow at 9.3%, versus an earlier-year estimate of 10%, and 11.4% growth in [2007], while India is expected to grow at 7.9%, down from an earlier forecast of 8.3%, and 9.2% in [2007]. Globally, growth in emerging markets and developing economies is expected to decline from 7.9% in 2007 to 6.7% in 2008, a 0.2% downward revision from the earlier-year forecast. Despite the expected slowdown, the global economy will grow in 2008. However, there are risks and challenges that must be addressed and contained. Oil prices continue to surge to new record highs. A weak dollar (inaudible) emerging as an alternative asset class for investment funds. Geopolitical tensions, fears of lost spare capacity and supply disruptions, together with record (inaudible) and strong demand from China and other non-OECD countries, are responsible for the [late oil rally]. In April 2008, the International Energy Agency predicted that demand for 2008, revised down by 310,000 barrels per day, to 87.2 million, after the downgrade of the global GDP by the IMF. Demand growth over 2007 is now expected at almost 1.3 million barrels per day, or 1.5% over the 2007 demand figure of 86 million barrels per day. Asia and the Middle East are still accounting for over 80% of the oil demand growth in 2008, with China being the single most important growth driver.

Another important issue to consider in addition to the various financial problems that we are facing, and this is an emerging common global challenge, is the macroeconomic consequences of the climate change, as recent commitments to develop a post-Kyoto framework aim at designing policies that will limit carbon and other related emissions without negatively impacting growth. The Board of Directors of TEN have established a special environmental R&D committee to address environmental issues that affect the present and future of our industry. The Company is in the meantime proactively investing in systems and the training of (inaudible), and four of its vessels have already received green-flag environmental awards from the port of Long Beach in California for 100% compliance with the state's voluntary vessel speed reduction program.

The Company continued its impressive growth and profitability for the 58th consecutive quarter. Our dividend policy continues full steam ahead, raising the distribution every year since the cash dividend payout was introduced in 2002. Since inception, we've paid back $270 million in the form of dividends and $56.6 million in the form of repurchased-back stocks. TEN outperformed the major indexes during 2005, and its continuing to do so year to date in 2008. Our NAV is over $56, if you account metrics for the operating fleet, the value of the options for Baker and Balboa, and the value of the remaining six newbuilding contracts. Our share price trades at a discount to NAV, like almost all growth public tanker companies in the period.

We still have a long way to go. Our ongoing remaining newbuilding program guarantees fleet expansion and growth. We are also looking for growth opportunities in [other areas of] transportation-related assets, and, at the same time, we continue on a daily basis to manage the challenges and risks of the environment in which we operate (inaudible) together since 1993.

We would like to thank everybody for their continued support since 1993, especially the Board of Directors and the shareholders and also the land personnel of Tsakos Shipping & Trading for their able and constant service. We also thank the officers and crew aboard our vessels, who give their best 24/7. Success is the result of a coordinated team effort.

As always, we welcome all of you to our headquarters in Greece in June. Greece is hosting another Posidonia, a must-see in the shipping universe, from June 2 until June 6. We have our AGM on Wednesday, June 4, at 3:00 in our Athens headquarters. So those of you who will make the trip down for this are welcome to attend. Please contact Mr. Rozycki or ourselves in Greece in case you need additional information.

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

Thank you, George, and thank you all for joining us today.

A summary of selected financial data is included in the press release, and then I'll say a few words more on the significant items occurring in quarter one. TEN achieved net income of $65.1 million in quarter one, including a $54.6 million capital gain, compared to $43.5 million, including a $6.4 million capital gain, in quarter one 2007. Diluted earnings per share was $1.70 based on 38.3 million average shares, compared to $1.14 based on 38.1 million shares in quarter one 2007. Total revenue increased 19% to nearly $137 million from just over $115 million in quarter one 2007. This was mainly due to the increase in the average size of the fleet from 37.7 vessels to 43.1 vessels.

Also, vessel utilization increased to 98.3% in available days compared to 94.4% in the previous quarter one. Lost days in this first quarter primarily related to the Maya and Inca special surveys.

Between the start of 2007 and the end of quarter one 2008, four vessels with an average age of approximately ten years were sold, and ten new vessels joined the fleet. In quarter one, we sold the Aframax Olympia for $62 million net with a gain of $34.6 million. As there was no debt on this vessel, all the net sales proceeds represented free cash for us.

During the quarter in terms of days employed, 55% of the fleet was employed on time charter with profit sharing, and 27% was on straight time charter. That left 9% on contracts (inaudible) at market rates and 8% on spot. That puts 73% of our fleet subject to market rates, even though over 90% of our fleet in terms of operating days was and is employed on fixed order-carrying employment.

The average daily time charter equivalent rate achieved per vessel was $31,400, similar to the previous first quarter at $31,650. While the VLCCs and Suezmaxes achieved better than last year, the crude Aframaxes and Panamaxes were slightly down. Although the three Aframax product carriers on profit share achieved strong results, the market for the smaller product carriers, as last year, remain soft. Having said that, these vessels are all on time charter, and, even those are minimum rates, we're still comfortably ahead on market rate.

Total vessel operating costs increased to $32.8 million from $22.7 million in quarter one 2007, partly due to the extra vessels but also because of the increase in daily average cost per vessel, which increased from $7,292 to $8,969. Much of this increase is for the reasons discussed at our quarter four conference call; that is, the impact of the weakening dollar by 14% over the year, which especially affects the cost of our euro-paid vessel officers, and the wage rises resulting from the tightening availability of skilled crew. While our technical managers have proved very successful in finding and retaining competent crew, we are clearly obliged to assure such crew is remunerated at competitive levels. With respect to the euro impact, there are now forecasts that the euro/dollar rate may fall by as much as 20% over the next 12 months, and we pray this comes true to bring some respite to our euro costs.

Another important factor is that, at each dry docking, it is also convenient to undertake other routine repairs and maintenance, the costs of which we expense immediately. Such costs, which include a significant labor content and costly parts, often from non-dollar sources, have also increased considerably and have impacted operating expenses accordingly. In this context, in quarter two, we should complete the dry docking of the Inca, Marathon, and Victory III.

G&A expenses were up by $180,000 in quarter one 2008 due to extra audit-related fees associated with the implementation of Sarbanes-Oxley 404 requirements. Our 2007 annual report was our first which included an auditor's report as to the effectiveness of our internal controls, and I'm pleased to say that it was a clean attestation in this respect. Work related to ensure this status is, of course, a continuous exercise, but we would expect to see some future reduction in fees.

Management fees increased to $2.9 million from $2.2 million due both to the increase in the size of the fleet and also to an increase in the fee rate.

Depreciation increased to $20.2 million in quarter one from $18.1 million in quarter one 2007 due to the increase in the fleet. From January 1, 2008, we are calculating depreciation using a residual value of $300 per lightweight ton instead of the previous $180. This is because of the substantial increase in scrap prices in recent years, recently hitting as much as $650 per ton. This results in approximately $1 million less depreciation per quarter.

Total finance costs for the quarter amounted to $23.8 million compared to $15.5 million in quarter one 2007. Although there was some reduction in loan interest rates, the increase was partly due to average outstanding loans rising from $1.2 billion to just under $1.4 billion over the past year. More importantly, there were further significant noncash negative valuations on non-hedging interest rate swaps to the extent of $6.6 million, hurting our earnings per share by $0.16. We have terminated certain of these non-hedging swaps, and we are looking to eliminate them entirely. In the meantime, however, these valuations have turned so far in quarter two, and, unless the situation changes again before June 13, they're likely to result in a positive change for quarter two.

During quarter one, our net debt rose by only $13 million to just over $1.4 billion, bringing our net debt to capital ratio to 56.4% at quarter end. Taking into account vessels' values, our leverage is 40%.

The six new design Aframaxes under construction have a total contract value of $360 million, of which $290 million remains to be paid - $100 million in the rest of 2008 and $150 million in 2009 and $40 million in 2010. Of this, $250 million is forecast to be covered by debt, although this may be reduced, depending on cash availability nearer the delivery date. In addition, in the fourth quarter of 2008, we shall reacquire the two chartered-in Suezmaxes for $47.5 million each, for which, in all probability, we shall utilize available cash and existing facilities.

And, finally, as already mentioned, we have paid over $12 million since the start of the year in the buyback of 392,000 shares and nearly $34 million in a $0.90 dividend to the shareholders.

And this concludes my comments, and I'll pass the call back to Niko.

Paul, thank you very much for your good news. I just want to remind everybody we have our slide presentation, which you can refer to for easy reference in case you have any more questions. With that, we would like to open the floor for any questions from the participants. Thank you.

Thank you. (OPERATOR INSTRUCTIONS). Jonathan Chappell of JPMorgan. Please go ahead.

Paul, can you remind us how much is remaining on the share buyback authorization?

We have about $11 million remaining.

Okay. Your first quarter cash balance was exceptionally high. And I understand you had the purchase options coming up later this year, and you still have a pretty significant capital expenditure program, although it seems that most of it can be covered by debt. How are you looking at the returns right now? I guess this is for Nik. How are you looking at the returns right now in the market for both new build and second-hand tonnage? Do you envision expanding your new build program-- or your expansion plans beyond the six ships that are out there right now? And I ask this every quarter, but how do you weigh that against share buybacks, given your strong cash balance and the stock's valuation?

Well, I think we are always having a balancing policy. Our aim is to grow the Company. We are looking at opportunities mainly created from cancellations that have started in the dry bulk and container section. And we're seeing more closer [to us available] of new buildings, and we're in discussion with major oil companies for those. So you might see us expand our newbuilding program with ships. But, again, we have this significant [floor] that will give us a good return on our equity (inaudible). We will have an upside, depending on the market. We're looking at fleet and (inaudible) probabilities. And, at the same time, we want to have share buyback and dividend policy in order to enhance the shareholders' value. So it is-- We are a growth company, and we're balancing all these possibilities that we see out there.

Do you prefer new buildings over second-hand ships, either because the returns are better for new builds or just because you're still modernizing your fleet and keeping a very young fleet?

Well, I think, although we will not exclude second-hand ships, we're either looking at new buildings or order sales for the reasons that you mentioned.

And most of your fleet has been built at very high-end South Korean yards. These cancellations that you mentioned in the dry bulk and the container ship space, are those at the top-end yards, or are those mostly at maybe newer yards that don't have the experience in building ships?

Without wanting to sound negative for any yards, it is that we are only discussing with the yards that we already have built ships or [are] top-tier yards in the Far East right now. If we were to be looking at several levels of shipyards, well, the possibilities would be much more numerous than there are on the top-tier yards.

And then a last question. The LNG carrier, on a short-term voyage-- It seems that there is continuous delays in the liquefaction infrastructure that's going up and a lot of new ships being delivered. It's putting a lot of pressure on rates. What's your plan as you see it right now for the LNG carrier, whether it's rechartering longer term or maybe rechartering on a shorter-term contract or selling the vessel altogether?

Well, we have, as you know, chartered the ship out for one year, which the ship is opening up in August. And we already-- The ship has created a very good name operationally. It has been approved-- Perhaps it's one of the few independent-owned LNG ships. As you know, this is a small market that has been approved of the operation into Japan. So we have an offer for anywhere between three and seven years on the table which we are discussing. Our aim is not to be a one-LNG owner, so we're looking at possibilities, of course, in chartering the ship out longer but also, perhaps, longer term making a capital gain on that ship and then ordering ships for 2012 to 2015 that we believe the market would be more ready for this technology of vessels.

Okay. Thank you very much, Nik.

Thank you. (OPERATOR INSTRUCTIONS). Your next question is coming from Greg Lewis of Credit Suisse. Please go ahead.

You mentioned you're getting opportunities to pick up potential new buildings, resales. What sort of timeframe is that? Is that more of a 2009 event, or is it beyond 2009?

What we're seeing now is the last period-- the last part of '09. That's the most recent resales and, then, 2010.

Okay. Great. And you sort of touched on it briefly during the call. You talk about time charter rates for the Aframaxes and Suezmaxes, and it looks like those have sort of stayed flat versus last year, even though, clearly, rates in the spot market are on fire. Is that more a function of, just simply, there haven't been any of these three-year charters fixed, or is there simply not demand for three-year charters at this point?

From what we see in our market, there's a big demand for a long period of charters. Exxon is out there in the market. Chevron is out there in the market. Valero's out in the market. You are seeing a significant resistance, which is positive, from the oils. I think we had cases where someone like a big South American company went out in the market, and they just received two offers for a period employment because the market was-- People are expecting-- What we are seeing today in the dry cargo market, which is a different, of course, market, is that the time charter rates are much closer to the spot rates. And what we are seeing in the tanker market is that the time charter rates are still lagging significantly to the spot rates. So owners are resisting. They're making enough money as it is, so they are resisting in chartering ships at what is offered today at [bigger] rates. So we expect-- It's a wait-and-see game. We expect that the next long-term employment will be at significantly higher levels than the last ones.

Great. And then, just moving on to the Baker and the Balboa, what time period do you expect to take delivery of those vessels into the fleet?

We expect them to be third and fourth quarter of this year.

And then, lastly, Paul, this is probably a question that's for you. What component of net voyage revenues was contributed to profit sharing?

Which revenue?

The number which revenue was contributed to profit sharing.

Profit share. If you're taking approximately 55% of the total fleet was on profit share, we're looking at about 20% of all revenue related to profit share. And that mostly comes from the crude carriers. And, as I said, unfortunately, the product carriers have only seen a [spot] market - a small one. As far as the VLCCs are concerned, we were able to take a little bit more on profit share than we took last year. If you remember, they're on a six-month profit sharing. Their rate is $28,500, minimum, plus everything up to $40,000 and then profit share beyond that. So, last year, we in quarter one could only take $28,500. What we did this year-- We calculated that, on the VLCCs, because they earned so well in the month of December and the first quarter, that even in the last two months, if they earned absolutely zero, they'd have still achieved a minimum of $40,000. So the VLCCs we took $40,000 in account for quarter one.

Okay. Great. That's all for me. Thank you very much.

Thank you. (OPERATOR INSTRUCTIONS). Your next question is coming from [Bill Fraser] of Green Hill Capital. Please go ahead.

Congratulations, gentlemen, on a fine quarter. A follow-up question on the profit sharing on the VLCCs. You said something about six months. So the profit sharing is settled after a six-month time period? Is that correct?

The next determination date is at June 1. So we're talking about from December 1 to June 1, those six months. So, on June 1, they'll look at the averages that we've attained over the past six months and work out a new average. And accounting rules say that you cannot take into account any profit share until actual determination date. So, therefore, in such circumstances, if the determination date is after a period end, during the period in question, you can only take the minimum.

But in the first quarter, you took $40,000 because, even if there was zero, you would achieve $40,000.

Exactly. In the first quarter, we took $40,000 because we assumed that April and May we'll get zero. So, if we took the total that we've earned in the first four months and spread it over six months, what will we get? And we got far in excess of $40,000. But, because we couldn't pinpoint exactly what the profit share would be, we could only take the $40,000. But that was obviously a lot better than the $28,500 that we took last year in quarter one.

Okay. Now the carrying cost in all the tankers is about $2 billion. What's the current market value of that? In your annual report, you used to talk about (inaudible) million dollars.

The total market value of the whole fleet?

Right versus the carrying cost. The carrying cost is around $2 billion. There's obviously a hidden value there on the balance sheet (inaudible).

Our total current market value of the fleet is just over $3 billion. Taking that into account, our net asset value per share, including the potential profit on our six new buildings, would be about $66 per share.

Very good. That's the number I was looking for. Now, as far as-- You have-- Your portfolio is pretty much one-stop shopping across the crude and the clean market. Would you ever consider expanding into the dry bulk segment?

I guess the way I would answer that is that never is a very long time. Up to this date, we wanted to stay a pure play in the tanker industry. But you should never rule out further diversification moves. We certainly don't have any in mind at present.

Exactly what our Chairman said is very correct. Don't forget the name of the Company. It's Tsakos Energy Navigation, and, of course, oil is not the only source of energy. We've got gas, as you know. Coal is quite the popular energy method in the United States. But nothing's planned right now.

Okay. That's all I have for now. Thank you, and keep up the great work.

Thank you. There appear to be no further questions. At this time, I would like to turn the floor back over to Mr. Tsakos for any closing remarks. Sir, you may give your final remarks.

Well, thank you very much for listening to our call. Hopefully, our second quarter results will be as good or even better. Again, as the Chairman said, we want to remind you that we are hosting our general annual meeting on Wednesday, June 4, in Greece. This is quite an exciting week for our shipping people and not only-- it's the largest-- Posidonia is the largest shipping exhibition, and some people call it the largest drinking exhibition. We hope people will stay sober until we give our presentation. And we would like to have as many of you here to participate and see the operation (inaudible) and find a bit more about Tsakos Energy Navigation.

Thank you, Niko. I want to extend that invitation, and we look forward to seeing you. Bring some good weather with you.

Thank you. This concludes today's Tsakos Energy Navigation's first quarter earnings conference call. You may now disconnect.