Tsakos Energy Navigation Ltd (TEN) 2008 Q2 法說會逐字稿

Good morning. My name is Pam and I will be your conference operator today. At this time I would like to welcome everyone to the Tsakos Energy Navigation second-quarter 2008 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 of Investor Relations. Ma'am, you may begin your conference.

Good morning, everyone. Thanks for joining us for Tsakos Energy Navigation's second-quarter 2008 earnings conference call. By now you should have received a copy of the earnings press release; if you have not, please contact [Sarah Freeman] of CJP Communications at 212-279-3115 extension 244. She'll be happy to e-mail a copy of the release to you.

Again this quarter TEN is providing a supplemental slide presentation with free employment and financial data which can be accessed on the front page of 1010 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 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. Now I'd like to turn the call over to Mr. Nikolas Tsakos, President and CEO of Tsakos Energy Navigation.

Thank you, Laura, and good morning to everybody. Good afternoon to those on this side of the Atlantic. It's a great pleasure to have you here on our 59th quarter of our earnings announcement, and 59 profitable quarters that is.

I would like to introduce our Chairman, Mr. Stavropoulos; our COO, Mr. Saroglou; our CFO, Mr. Durham and myself who, together with the rest of the team, we are ready to give you a quick presentation of this quarter's performance which has been another exceptional quarter that the market has helped the Company which is very well positioned to have a very good performance with a very good fleet.

And with this I will ask our Chairman to give us his thoughts and we will be available after Mr. Stavropoulos talks to us about what has happened and focuses on the three months. And then some also highlights of what has happened since the beginning of the year. And our CFO, Mr. Durham, will talk about the figures and we will be all available to answer any of your questions. Thank you very much and Mr. Chairman?

Thank you very much, Niko, and good morning or good afternoon, everyone. We certainly are living in very interesting times. The strong smell of inflation fire is in the air virtually around the globe. At the same time growth has halted in many of the largest economic places. Oil prices have developed varying degrees of demand destruction.

Despite all of this the tanker industry has been experiencing a very robust growth because of the strong thirst for energy in the Pacific basin and India. At the same time the much expected buildup of supply and market imbalances in our industry has not developed because of significant retirements through conversions and strapping.

The immediate and longer-term challenge of the shipping industry, and particularly tanker operators, is intelligent and control of expenses. Increased demand and stagnant or shrinking numbers of highly skilled seafarers will be a constant pressure point; therefore operators must look to other areas for efficiencies to moderate these pressures.

TEN over the years has managed to be among the most efficient in its group of peers. The need for diligence in performance by management in this sector will be paramount in the years ahead.

Nikolas, I want to congratulate you and your team for exceptional results in the first half of 2008. Please come back for a curtain call after the second half.

Chairman, thank you very much and I think it's good that we have positioned the Company to be able to sustain even times of uncertainty in the world economies. And I think that's I would say the reason that our company has been profitable for all of its [15] years in existence. And we would like to thank mainly our seafarers who do a great job and the team here who is able to monitor and strategize correctly. So George, Mr. Saroglou, can you please tell us how this last six months have gone?

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 commercially gratifying quarter, the best second quarter we've had so far since the Company's inception in 1993. Following the delivery of the two Panamax new building tankers and the completion of the sale of the 1999 build aframax tanker Olympia all first-quarter '08 events TEN operated a fleet of 44 tankers during the second quarter in comparison with 43 in the same period last year.

The tanker market continues to fare very well with the average second-quarter rate for crude and product tankers for both spot and build employment at higher levels than the average first-quarter levels and the level seen at the beginning of the year. Typically in the second quarter of this year we expect a gradual slowdown in demand for oil transportation as we are heading toward the summer months, a time of traditionally slow demand and softer freight rates.

We witnessed quite the opposite this year during the second quarter. And to this date with one third of the third quarter gone, the freight market continues to remain at levels accustomed for the first or fourth quarter of any given year.

The highlight for the second year for the operation of the fleet of 44 tankers at 97.4% capacity with 31 tankers participating through a combination of spot and market-related profit sharing arrangements in the good spot market we are enjoying. Free tankers trade 100% in the spot market and 28 are fixed on time charters with profit sharing arrangements where TEN and its charters share equally the benefits of the spot market rise.

Extended for two more years the employment of aframax product tankers, Proteas and Propontis, at similar terms with Neste Oil and strategically in an agreement with them decided to free the third sister vessel, Promitheas, in order to take full advantage of spot market opportunities. Following the delivery of Olympia to her new owners in early February TEN had no aframax tankers to service existing client COAs. The two-year Neste Oil extensions are starting from July '08 for Proteas and October of '08 for Propontis, but from a sales center in the spot market upon completion of her original charter in the first half of July.

Our LNG tanker, Neo Energy, which enjoys an excellent technical and operating reputation in the market, completed in early July her first phase of employment to a major energy concern and is currently repositioning while management is discussing the vestal's next employment, a two- to four-year time charter extension. We paid on April 30, 2008 a dividend of $0.90 per share for a total dividend distribution for fiscal 2007 of $1.73 which represents a 25.5% increase over the dividend paid for fiscal '06 of $1.38.

We continued our share repurchase program acquiring and canceling during the second quarter 126,800 shares at an average all-in price of $31.33. No vessel additions or disposals to report during the second quarter. In deadweight terms TEN operates 4 million deadweight tons with an average age of 5.5 years, less than half the industry's average 10.7 years.

On the sale and purchase front, which is an integral part of our operation, we keep looking for opportunities to both invest in modern tonnage and divest from the old tonnage of the fleet, especially the three older tankers we currently operate which were built during 1990 to 1991 in order to maintain fleet modality.

Our new building program continues; we expect to take delivery of six more tankers through 2010 including two DNA-aframax tankers in the fourth quarter of this year, one and October 21st, and the other one November 15th; three tankers in 2009, also [mid-term mobility] in the aframax tankers and one in 2010. The last of the eight sister ships we have contracted and built at Sumitomo.

Let's not forget that during the second half of the fourth quarter, most probably at year end, we will reacquire the two 2002 built suezmax tankers, Cape Baker and Cape Balboa, from a German [KG] system. Then we'll repurchase these tankers at the pre-agreed price which is at least 50% below the vessels' current market value.

With the existing new building program we have the Company's guaranteed fleet renewal and growth over the next few years. We're always looking for vessel opportunities in the new building front, in the secondhand market and as available consolidating opportunities. 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.

We will keep, however, the same discipline, prudence and investment criteria when evaluating individual new building opportunities or fleet acquisitions with no deviation from our corporate philosophy that helped us build the Company since 1993.

On the commercial front our profit sharing arrangement in the majority of our time charters allows the Company to participate in the current healthy spot trade market. As of today we have fixed 87% of the available second-half fleet operating days of 2008 and 70% of 2009. With currently 38 vessels with fixed time charters, time charters with profit sharing and COAs with mid-marks out of an operating fleet of 44 tankers, and assuming only the minimum rates, TEN has secured 846 months of forward employment or 22.3 months per vessel and around $620 million in minimum gross revenues until the end of 2009.

Demand for tankers seems to be getting stronger since December of '07 and, even as we enter the seasonally slow third-quarter, rates are kept at winter levels. Of course we expect a softening in August, but the ongoing indications point out to a stronger fourth quarter.

The second quarter was the best quarter for the earnings of tankers that anybody can remember going back to 1970. Strong Asian demand for crude oil sourced from longer distances, West Africa and particularly Angola, was the biggest supplier of crude oil to China surpassing Saudi Arabia, Iran, Oman and Russia for the first time. Stockpiles of hundred thousand barrels per day in the second quarter that were below the five-year average of 900 barrels per day for the main (inaudible) countries, the usual geopolitical risk and supply disruption fears increased OPEC production.

In June 2008 OPEC production was 1.8 million barrels per day higher than the like figure of June '07, increase discrimination against single hull takers and limited year to date tanker fleet growth are the reasons behind the strong spot rate environment we are enjoying since the fourth quarter -- since the middle of the fourth quarter of 2007.

Oil majors, (inaudible) companies and commodity traders continued to time charter quality tonnage for long periods at healthy rates well above the 2007 averages. This continuing trend is a healthy sign of a balanced market. In fact, in this environment many owners are reluctant to commit their vessels and time charters and this is good long-term for the period rate markets.

We recently announced that our two Sumitomo built fourth-quarter deliveries, Maria Princess and Nikkon Princess, have been chartered on repositioning voyages ex shipyard for up to three months at very healthy rates which is a testimony of the charter's expectations for rates going forward. Both vessels will steam westward and will reposition in the typical trading area which will be either the Atlantic basin to join the two sister vessels already trading there or the Mediterranean to service existing clients in the US.

The design of all this aids Sumitomo built DNA-aframax tankers is unique in their ability to move cargo parcels in ports with LOA restrictions like in the US Gulf and the Caribbean, Venezuela and West Africa is making them very desirable among our charters and clients.

Shipping keeps going stronger, however the financial markets are not keeping pace. The global economy is caught between slowing demand in many advanced nations and rising inflation in both emerging and developing economies. Global growth is expected to decelerate considerably in the second half of 2008 before gradually recovering in 2009. Financial market conditions remain challenging and fragile amid concerns about losses in the context of a slowing world economy.

We have seen systematic downward revisions in the 2008 global oil demand from the international energy aid (inaudible), but overall it's positive forecasted growth for the next two years with an average growth of 900,000 barrels per day. Let's not forget that the additional 1.8 million barrels that OPEC is pumping over last year's production level is very much desirable, needed and needed by clients both here and west of the [AG].

Despite the expected slowdown in the developed economies, the global economy will still grow in 2008. However the set of risks and challenges that must be addressed and contained remains the same since last August. Running down the list we will see the falling dollar; increases in personnel expenses; insurance premiums; high bunker and lubricant prices; prices in risk premiums; costs associated with implementation of environmental policies and international credit market tightening; the scarcity of qualified personnel across our industry from skilled office personnel to seafarers to skilled personnel in shipbuilding and the ship repair industry; the list of risks and challenges is still unchecked.

In TEN everyday we deal with these challenges and when we can we try to turn them into opportunities. The Company continues its impressive growth in profitability for the 59th consecutive quarter. Our dividend policy continues full speed ahead raising the distribution every year since the cash dividend payout was introduced in 2002. Since inception we paid back $230 million in the form of dividends and repurchased stocks worth approximately $58 million.

TEN outperformed the major US indexes during 2007 and is continuing to do so year to date 2008. Our share price trades at a discount to our NAV in line with almost all growth public tanker companies in the peer group. We still have a long way to go. Our ongoing remaining new building program guarantees the fleet expansion. We're also looking for growth opportunities in all energy transportation-related asset classes and at the same time we continue on a daily basis to monitor the challenges and risks of the environment in which we operate and run the business we've built together since 1993.

In October we will celebrate our 15-year anniversary. But for now we're in the middle of the summer, a hot summer in every respect. So let's try to enjoy the Olympics that are opening in one week from today and the good tanker market we are in. Without further ado I'd 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 I will say a few words more on the significant items occurring in quarter two and the half year.

TEN earned net income of $69.2 million in quarter two 2008 compared to $37.5 million in quarter two 2007, an increase of 85%. There were no vessel sales in either order two. This was our highest ever quarterly net income excluding capital gains. Diluted earnings per share were $1.82 on 38 million weighted average shares compared to $0.98 on 38.3 million average shares for quarter two last year.

For the six month period net income was $134.3 million which included a gain of $34.6 million on the sale of the Olympia in quarter one compared to $81 million last year which included a capital gain of $6.4 million, an increase in net income of 66% or, excluding capital gains, an increase of 34%.

Total revenue for the quarter increased by 30% to over $171 million compared to $132 million in quarter two 2007, the highest quarterly revenue that we have ever achieved, a reflection mainly of the tremendous crude transportation market in the quarter. The average number of vessels increased from 42.3 vessels in last year's quarter two to 44 vessels in quarter two 2008. Fleet utilization was approximately the same as last year at 97.4%. Days off hire this quarter two related to the Inca, 20 days; Victory III, 47 days; and Marathon, 37 days. The vessels are undergoing their respective surveys in dry dock.

During the quarter, even though 93% of the fleet was employed on fixed or recurring employment, 71% of our operating days were employed on charters subject to market rates, that is on time charter with profit share, on spot or contractor [refreightment]. Average charter rates for the VLCCs, suezmaxes and the aframaxes were significantly higher in the quarter than the second quarter 2007. All of the extra $40 million revenue earned over last year's second quarter was earned by these vessels.

The market for the smaller product carriers remained relatively soft, the vessels mostly achieving their minimum time charter rates which fortunately were still comfortably ahead of average market rates. The average daily TCE per vessel for quarter two 2008 was approximately $39,500 compared to $30,000 in the previous year's quarter. For the six months $35,400 was achieved compared to $30,800 last year.

Also during quarter two, two VLCCs and two Panamaxes had their six-month profit sharing averages determined and therefore quarter two benefited from extra revenue which was generated in prior quarters. Total operating expenses in quarter two amounted to $37 million compared to $26.1 million in last year's quarter two due to the increase in the size of the fleet and to higher costs.

The daily average operating cost per vessel increased from $7,266 to $9,898 in quarter two 2008. Half of this increase, as discussed in our previous call, was due to crew costs as a result of material salary increases and the impact of the weakening dollar, down 16% since last year against the euro. Much of the remainder of the increase relates to expenses incurred on vessels that underwent dry docking, of which there were three in the quarter, during which we undertook extensive repair and maintenance work.

We expensed this work as well as other costs more associated with the dry docking where it is more prudent to write off rather than to defer the expense. Such expenses include significant labor content and costly raw materials and parts often from nondollar sources.

Depreciation in the quarter was $21 million, up from $20 million -- $20.5 million in quarter two 2007 due to the increase in the fleet. However, the depreciation charge has benefited from a $1.7 million reduction each quarter since last year end following the revision in [strap] value used in calculating depreciation.

G&A expenses for the quarter were about the same as the second quarter of 2007 at $1.1 million and vessel management fees rose from $2.5 million to $3 million due to the extra vessels and to fee increases. A further non-cash $1.7 million was amortized relating to be issued stock grant. Total finance costs for the quarter amounted to $10.9 million compared to $14.8 million in quarter two 2007.

As the average loans outstanding for both second quarters was exactly the same at $1.4 billion, and both quarters enjoyed a $3.2 million positive change in non-hedging swap valuations, the decrease in finance cost is almost entirely due to the fall in interest rates by nearly 2% over the year. There were no additions to debt during quarter two, repayments amounted to nearly $11 million, bringing total debt to $1.39 billion at the quarter end, our net debt to capital ratio to 53.6% and our leverage based on vessel values to 37%.

We have six aframax being built on which $90 million will be paid on delivery in quarter four of two of these vessels. Financing has been arranged but it has yet to be decided how much will be drawn down. On the final four vessels $108 million will be paid in 2009 and $85 million in 2010. In addition, the two suezmaxes currently on charter back will be repurchased in quarter four at $47.5 million each. Loan offers received for all these vessels are under consideration. And this concludes my comments and now I'll hand the call back to Niko.

Thank you, Paul. For your good news and with this opportunity we would like to open the floor up for any questions that you would like to ask us. Thank you very much.

Thank you. (OPERATOR INSTRUCTIONS) Jon Chappell, JPMorgan.

Thank you. Good afternoon, everybody. I found a paragraph in the press release and some comments that George made pretty interesting regarding all these opportunities you are looking at both in sale and purchase and mergers and acquisitions. If you could tell us from what you have seen so far, did the returns look better, in your opinion, for new buildings or first secondhand tonnage at this time?

Also, George made a comment that you wouldn't have to access the debt or the equity markets to fund growth. What is your current liquidity status at this point?

Well, I think Paul is more determined but with together -- together with our undrawn lines it's in excess of $0.5 billion that liquidity, and of course and double that. So this gives us a comfortably within acquisition range of $1.5 billion if we wanted to move past -- having to raise any additional I would say equity from the markets.

On your question on new builds versus secondhand ships, I think to-date we are in the situation where secondhand ships, because of their prompt delivery. So anything which is five years or younger is actually more expensive than a new build that has an 18-month delivery schedule. Because of the quality of tonnage we have, the relationships with the yards that we have, and the relationships with our charters, I think we are -- we would be mainly considering looking at new building opportunities rather than just going out and buying vessels from the secondhand market unless it will feel a course.

Are you seeing yards come to you because of your strong capitalization with maybe people pulling out of the yards because they can't get the credit and some opportunities presenting themselves that way?

Yes, I think -- we are seeing this on a daily basis, starting from, I would say, grass filled yards in China, two major and well-known shipyards in Korea and Japan. We have not yet, I would say, tested the waters of building in China, because of the relationship we have with our Korean and Japanese yards.

Our next to six deliveries are in the equivalent of the new Rolls-Royce of shipyards, which is the Sumitomo Yard in Tokyo Bay, which has produced the 6 PMA design, aframax is for us. So this is our next -- but we are looking at opportunities coming from [Quendai], coming from Sungdong, coming from, as I said, Chinese yards. This is -- we are looking at all of them seriously.

Sungdong is a yard that we have been very happy, the Korean yard (inaudible) it reminds us very much of the [Quendai] of the '80s. It's a yard that has been built. We have already built two of our product carriers there. (inaudible) is very happy with their performance so far, so that is another yard we are looking.

But I think most probably we will be building ships, because of the encouragement we will be getting from our clients to build those ships with a long-term market related employment.

Great. Paul, I recall that in the first quarter you did receive some of the profit-sharing on the Vs and the Panamaxes, at least I think I recall that, because the rates had been so strong that you were able to book -- or say that you had reached a certain level with certainty and that give you some first quarter profit-sharing. Given the strength of the 3Q to-date rates, should we expect to see some profit-sharing on the two Vs and Panamaxes in the third quarter or will that all fall in the fourth quarter?

It's a bit too early to say. Based on just July, I would have said there is a possibility. Now that we are seeing some softening possibly in the VLs and then I will reserve judgment on that. So for the time being, we are just going to assume it's going to be the minimum, minimum of 28,500 on the VLs.

Okay. Then finally, I am quite familiar with the dividend policy, but just some clarification. For the upcoming October declaration, what period of earnings -- what quarters should we be looking at to help determine the 25% to 50% to get to the expected dividend?

This is John. The board will be basically looking at the results that have been reported to-date. That is for the first six months of the year. Obviously, they will want to have some thoughts about what the second half is likely to produce. We will have some pretty good information by that time, because we will have had another three months under our belts.

Obviously, illiquidity is another consideration, but you have heard that at the moment we are cash-rich so we don't see any constraints in that regard. We look forward with optimism.

So it will be 25% to 50% of the first six months or the first six months plus your expectations for the last six months?

Expectations.

All right.

In other words, what we expect for the year will be the driver.

Okay. Thank you, Nick, Paul, and John.

Natasha Boyden, Cantor Fitzgerald.

Thank you. Good morning, gentlemen.

Hello, Natasha, nice to talk to you again.

Absolutely. Just wanted to ask, the Promitheas has entered the spot market and then the Maria Princess and the Nikkon will enter the spot market after their short-term charters. Nick, is this giving sort of a change in your strategy?

Are you going to be looking to play more on the pure spot market, given the strength in the market as more of your vessels, your new builds are delivered or more of your ships come off their long-term contracts? Or was this just an opportunistic movement on your part?

Well, we have built the company based on relationships with oil companies, mainly. So it is really very hard to keep our ships on the spot market for very long because of these relationships and the arrangements we have where we have -- we have secured the return that we expect to have with shareholders value as a minimum rate plus all our obligations and then sharing the profit above with our clients.

Our aim is -- of course, on the other hand, if you do not have a presence in the spot market, you do not meet new clients and new opportunities. So for us this is a balancing act, and we have the six DNAs coming, we have a huge interest to chart those ships. I mean, the rate -- the first 90-day rate was close to $50,000 a day or about, which I think is a very, very healthy rate.

And I'm only mentioning this because I saw some of the -- some in the press been talked to about $30,000. So it's not $30,000 it's $50,000 or perhaps a bit more of $50,000 a day, which is a very positive sign for the delivery of the ship at the yard. So as soon as the propeller wheels start moving she will be earning $50,000 a day.

Then in positioning the ship to their natural trading patterns, being aframaxes, which is either the Caribbean, because those are the short and fat aframaxes, which -- but they are actually very well designed. So certain fat is not bad for everything. Then we have the Mediterranean market, which is also, because of their capacity to load a large cargo through the (inaudible) so they are very popular also.

So I think you are very correct. We try to have a balancing act, but our strategy of being a relationship-oriented tanker company will never become, and I am not criticizing, perhaps a very aggressive spot company like Frontline, we are more conservative at (inaudible), for better or for worse.

Okay, great. That is very helpful. Then just looking at your cash balance at the end of the quarter, obviously, it has increased dramatically. You know, can you give us an idea of what your preference is on just uses of cash there? Do you have a preference, first of all, to retire more shares or would you prefer to pay it out in a dividend? Or is paying down debt the first use of cash? Can you just give us an idea there of what the first preference is?

Well, the first preference is, of course, for us is to develop new opportunities and new business. So we are in very close discussions with major oil companies or end-users in building ships together with long-term contracts exceeding of 10 years, where we are going to, again, secure our bottom line, secure the return to our shareholders, and serve the upside. So this is still -- this is our priority, because we are a growth company looking forward.

On the other hand, our [share debt chip], it was reported in the press about, I guess, a couple of weeks ago that the backers, the family, and the management are key buyers of the [share] because it's much cheaper than buying actual steel. But of course, this creates -- reduces our liquidity. So we are, almost on a daily basis, talking about the company buying our shares.

In order to avoid the silent periods, which have made our program, of course, had to stop. Between press releases and announcements we have an ongoing program and I think George, who is actually the master of this program, will explain it in detail. It is a program where we buy, we are able to buy shares depending on where our shares are trading on a daily basis, regardless of our results announcements or not.

So I think this -- and that is why, if you looked in our press release, we are announcing on the practices of the shares that we have. So that is a very good investment. If you are not a growth company, I would say this is the best investment. But we are a growth company, and of course, I think we are repaying our debt.

We have repaid about $150 million of bank loans that are not in our balance sheet in order to save the low spreads that we are paying. Of course, our chairman's favorite word, which is dividend, is going to be there. So I think this is our strategy.

Okay, great. Then just lastly, I know you have mentioned that you are -- going forward you are going to keep, really try to keep a cap on cost increases. But I realize that that is not going to be -- you are not going to be able to keep costs from rising at all. Can you give an idea of what you think cost increases are likely to be on a year-over-year basis, regardless of the steps you try and take?

Well, I think a lot -- we have a very big effect on this having to do with our crew expenses and the dollar has a lot to do. I think if we could see a normalization of the dollar any where around [132 to 142] to the euro, that I think would give a significant, would soften our expenses significantly. Don't forget that we pay all our seafarers or officers are of European nationality, mainly Greek. So we had to pay them in euros.

Most of the -- where we are trading and we have to pay the port use are in euros, because it's in the Mediterranean area. A lot, or almost all of the engines in the world, the majority of the engines are German engines, so we have a lot of expenses in euros. That is an expense, so I wish we could say how much of that would be.

On the other hand, we are using, and I think, Paul, we did more in terms of this, and that is why you might have seen an increase in our operating expenses. We are actually doing special surveys and drydockings. We actually expense a lot of items that could have been considered expense of survey and drydocking items, in order to keep our balance sheet that is conservative and clean-cut. Paul, would you like to add something?

Yes, just an extension of that is that, yes, a lot of our costs have been associated with drydockings, of which we have had -- we are going to have seven this year. We have had four and we have got another three. But next year, we have a very, very light program of drydocking. In fact, I think we only have one with another possible one scheduled. Two maximum unless we try and pull some from 2009, which is -- 2010, which is going to be another heavy year.

2009 we are clearly light on drydocking, and that should ease up the pressure to some extent. And as Nick has said, the currency pundits are saying that the euro will devalue by some 20% against the dollar next year. That could be just the Copernicus theory of (technical difficulty) high has got to come down. But that has proved to be wrong, so.

Okay. Well, thank you very much, gentlemen.

Gregory Lewis, Credit Suisse.

Yes, thank you and good afternoon. Paul, I guess the first question is related to a follow-up on the drydockings. What quarters are those three drydockings expected to take place in?

We have got one, which will be totally in quarter three, and then another starting towards the end of quarter three, which will go into quarter, and then another one starting in quarter four.

Okay, great. Then also to follow-up, it looked like you bought a couple hundred thousand worth of shares back through the share buyback program. Could you tell us how many shares were actually bought back at the average price in Q2?

What did we buy? We bought back 126,000. 126,000 at $81 or something --

And $31.31. $31.31, it's on the press release in the bullets.

Okay, actually. Yes, I must be looking at the wrong thing. I didn't see that in there. Just shifting gears, you mentioned that the LNG vessel is being repositioned and went into repositioning at the end of July -- I mean at the beginning of this month. About how many -- how much utilization should we expect for that vessel in Q3? Or should we just -- is it potentially just not going to have any earnings in Q3?

In Q3, we expect to have -- a delivery of the ship could be -- it could be in West Africa where she is going to be delivered to (inaudible) -- not to (inaudible) to her new employment period, which is for two years plus options for another two, so four years. As well we are expecting the lag -- the lag time is between the 15th of September and the first of November.

Okay, so utilization for the LNG vessel in Q3 will probably be around 50%?

Yes, that would be the maximum for that figure. The (inaudible) goes on a longer-term employment.

Okay, great. Then also I guess the Promitheas, the LR product accuracy, any thoughts about moving that into the crude trade to capitalize on a stronger crude market versus the product market?

That is a very good point, yes. I think this is the reason -- we were, as I think I was discussing before with Natasha, those three ships are or have been performing actual very tough and interesting highest trading for the last couple of years. That is why their performance for Neste Oil and their performance has by far surpassed the aframax index, because of them performing ice-class.

However, we felt that although Neste Oil was very on keeping the ship for another couple of years, we decided to take the ship and take advantage of the spot and the crude market. So currently she is performing on the crude side.

Okay, great. Then just one quick follow-up, you mention the two new buildings delivered later this year are going to be repositioned at a rate. But did you say that the rate that they are going to be repositioning at upon deliveries are going to be around $50,000?

Yes, sir.

Okay, fine. Then, Paul -- sorry to keep going -- just one last question regarding the interest expense. Backing into the number it looks like the all-in interest rate expense, excluding derivatives was around 4.1% in Q2, is that about right?

Exactly.

Okay, great. Thanks for me, and guys, have a great summer.

Ladies and gentlemen, the floor is still open for questions. (OPERATOR INSTRUCTIONS) Ole Slorer, Morgan Stanley.

Thank you. Hey, Nick, congratulations for the very solid quarter.

Thank you. Thank you very much.

I am glad that you guys still know the tricks. You mentioned something on Angola, which puzzled me a little bit. I think you highlighted. Can you repeat what you said, something about Angola sending incremental oil to the Far East compared to what was previously the trend or something along those lines?

Well, I think what George said was that -- I hope that's what George said, but about -- the Angolan exports to-date in the last year has driven a significant more toward miles, because if we looked -- we go a couple of years back, the total Angola, Nigeria, West Africa, the imports from China, from west Africa were something like 5% to 6% of their consumption. This has more than doubled this year, so this of course is creating more turmoil.

Okay, sorry. I thought that you were highlighting maybe something more recent. But that's fair, because it looks as of late the volumes might have dipped a little bit to the east relative to the near-term which puzzled me a little bit.

But second question, Nick, is what is your view--? You highlighted a few times on the call that the fact that Tsakos, or TNP, is the cheapest company among peers and you view the investment as very good. But in your view, why do you think the stock continues to trade at around 50%, 60% net asset value when Frontline, Nordic American Tankers, others consistently trade at a premium to net asset value?

I didn't say we are the cheapest. I mean, if you look at whatever analysis you want, you want to see that I would say the pure growth companies, and if you look at those, I would consider us growth companies because they are growing, is TK, OSG, and ourselves. I think we are -- we are all in the same boat. I think we are -- they are trading -- TK last time was trading at about 64%. We were at 68%, OSG was 71%.

So it seems that companies that are, I would say, more industrial companies with longer-term earnings visibility that might not be, of course, as exciting as Frontline or not, because they are more in the spot market is penalized. I think this is not fair, because all of these companies have -- they have very solid management. At least they (inaudible) with (inaudible) nothing about ourselves. They had very solid management, but they have different strategies and philosophies.

I think Frontline, they have a very good management and very good sponsorship but they are more spot oriented. TK have their own philosophy. So I think that growth companies have been penalized. So we do not only talk about ourselves, we talk about this peer group.

We actually had yesterday very interesting, for those who would be -- who would like to listen in, we had a conference call between those three companies that I mentioned -- TK, ourselves, and OSG -- touching on that issue. Natasha was very kind to moderate this, and a lot of interesting thoughts come out of that.

I'm sure if Natasha moderated it you were in very good hands. But what was your conclusion? That investors are stupid and that they value you wrongly or is it that the market is --?

I don't think -- investors are not stupid. They are much smarter than otherwise they would not be investors. I think it's tough in shipping to identify long-term investors. So that is why investors are not stupid, because they try to work in volatility. The investors, I would say, are more, I would say -- are more suitable for companies like ourselves, TK, and OSG are long-term investors.

I mean look at our record in the last five years. We have compounded growth of our share price and our profitability of 35%. But then we might have companies that might have something like 100% in one year, because this is the spot market, etc., etc. So it's a different, I think we have to educate and look for longer-term investors, rather than the volatility investors who would like to make better returns in a shorter period of time. Chairman, do you have anything --?

The only comment I would add to the discussion, Niko, is that we would very much welcome the contribution from investment analyst to help us educate the investment public to take their understanding of our industry to a new and higher level. I think we have dynamics and characteristics of the industry that have not been totally appreciated. And your help will be most welcome.

But don't you think that maybe it's the managements of the companies that need education rather than investors, if you have a highly transit shareholder base that continues to seem to value the company at 50%/60% of net asset value, which is no a problem if it's objective for a family and companies that keep buying back shares. But it's a problem if you ever want to expand by using your equity, because --?

It's a very good point that you are making. But don't forget that the management of the companies, we try to educate ourselves day-in and day-out, of course we run a very profitable business.

Nick, I know you have a very good education, so no problem about that.

It's only because we went to the same school, that's why. But no, but I said our aim is to make sure that we do not lose the opportunities that happen in the shipping market. And of course, I hope our performance -- our financial performance and our sales performance in the last period of time is, shows that -- and I am not talking on about TEN, I am talking about all of the peer group -- she is running around -- running hopefully a tight ship. So we spend the majority of our time doing this.

Investors spend most of their time trying to identify good opportunities. So I think it's more -- that is why it's more for the investor to be educated, which is his job to invest. Our job is to invest in ships. Hopefully, I hope, we do a good job investing in good and quality ships.

But I think as the chairman said, I think we had a very good start yesterday. We are going to do this hopefully on a six monthly basis and perhaps you would like to -- be the moderator next time, because you will help us in the right direction to educate this -- (multiple speakers)

You might not wish for that, Nick. But how about quarterly instead of -- what is the rationale for this half-year endeavor. You are the only company that does it and you don't seem to get -- you do a very good job in running your company. There is absolutely no doubt about it. Results speak for themselves. But don't you think that if you were to introduce a quarterly dividend and a somewhat more aggressive policy, you would get a more efficient stock price?

We are discussing the quarterly business. The quarterly -- we are reporting quarterly, which [isn't] important so far, but we are discussing the quarterly dividend. If this is the answer to get -- because I think TK -- TK is paying out quarterly, no?

TK and OSG, I think, are quarterly.

But it has not helped them. They are -- (multiple speakers)

Yes, but TK and OSG pay out about 50% and 60% of cash flow. That doesn't really matter. You have front-line, NAT, and Diana, for example, on the dry side, paying 100%. And there is a very clear correlation between price and net asset value, irrespective of returns on assets.

Well, and as I said, we are a growth company so we are going to -- if we pay 100% of our (inaudible) -- (multiple speakers)

Nordic American has grown from four tankers to 14 tankers in a few years and a phenomenal return. Are you saying they are not a growth company?

Well, I think we have grown from four tankers to 45. We are more of a growth --

You beat them there, Nick. Okay, thank you very much.

There are no further questions. I would like to now turn the floor back over to Mr. Nicolas Tsakos for any closing remarks.

Well, gentlemen -- and ladies -- ladies and gentlemen, thank you very much for taking the time to follow our quarter's results. We are looking forward for another exciting quarter end for the end of the year. It seems that looking forward, I think, one of the statements that we would like to make about our market.

We do not expect sitting around this table, I think none of my colleagues expect, that our market will have (inaudible) of $200,000 a day, continuously or aframaxes at the 110 and so as much as a 220,000. But what we are seeing, because of the demand that we are seeing around for oil and products of oil, we believe that the market is well balanced. We are looking with excitement at 2009.

We expect that a lot of the single hull ships, or most of them, after [the base] build will be taken out of the market. So about 20% of today's -- 20% of today's supply will be out of the market. So we are looking for a nether couple of years of a healthy market and looking forward. So thank you very much for your support. Mr. Chairman, would you like to have the last wise words?

My only comment, Niko, is that your Board of Directors is extremely proud of what you and your management team have achieved. We are looking forward to your continued success.

Thank you very much. A very good summer to you all, and see you very soon. Thank you.

Thank you. This concludes today's Tsakos Energy Navigation second quarter 2008 earnings conference call. You may now disconnect your lines and have a pleasant day.