Tsakos Energy Navigation Ltd (TEN) 2009 Q1 法說會逐字稿

Good morning. My name is Simitra and I will be your conference operator today. At this time I would like to welcome everyone to the Tsakos Energy Navigation first quarter 2009 earnings conference call.

(Operator Instructions)

Thank you. Mr. Tom, you may begin your conference.

Good day and thank you all for joining us on Tsakos Energy Navigation's First Quarter 2009 Earnings Conference Call. By now you should have received a copy of the earnings release. If you have not, please contact Sarah Freeman of CJP Communications at 212-279-3115, extension 244, and she will e-mail you a copy of the release.

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 informational presentation only and will not directly reflect the flow of management's comments on the call this morning. As a reminder, this call is also being webcast. To access the webcast, please refer to the press release for the web address, which will direct you to the registration page.

At this time, I would like to read the Safe Harbor statement. This conference call and the accompanying slide presentation contain certain forward-looking statements within the meaning of the Safe Harbor provision of the Privacy 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 filings with the Securities and Exchange Commission. Thank you.

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

Yes, thank you, Tom, and good morning and good afternoon to all of you. Thank you for being on our call today. Once again, we're very proud to continue our profitable streak since the Company's inception back in 1993. We are placing the Company in a position as we've done in the past to be able to take advantage of opportunities that might arise in a challenging environment as we are facing right now. And at the same time, with our sharpening policy to continue our profitability which, knock on wood, we hope to continue for a very long time and grow further.

We have here with us today, other than myself, our COO, Mr. Saroglou, who is going to give us a detailed analysis of how the last quarter and the recent events are -- have played for the Company, our CFO, Mr. Paul Durham, who will get us into the numbers. And together with the other officers of the Company, we will be here to answer all of your question -- Mr. Jadro, Mr. Kosmatos, Mr. [Bornomicel], we all want to welcome you on this call. I will let Mr. Saroglou, George, to give us an overview of what has happened in the last quarter, what has happened since then and your view of the company's view of the market so far and we will be available for questions. Thank you, George.

Thank you, Nik. It's my pleasure to speak with all of you today to provide you with the details of another [accomplished] and gratifying quarter, the Company's 62nd consecutive growth (inaudible) quarter since inception in 1993. TEN operated a fleet of 46 tankers during the first quarter in comparison with 43 during the same period last year.

The operating environment for shipping since September 2008 has been challenging. The global financial crisis, which was caused by events (inaudible) to shipping seemed to take its toll on all shipping sectors except tankers during the second half of last year. 2008, which started with a very strong first half, ended up being one of the best years ever for tanker utilization and profitability. However, the strongest quarters for freight rates were the second and third quarters instead of the typical first and fourth.

We started 2009 exactly where we left 2008, with a good quarter for both tanker utilization and profitability, however spot charter rates were trending lower as we were coming closer to the end of March. Fixing the global economy is not over yet, however there are signs that we are near the bottom or at the bottom with a much-anticipated and needed stabilization of the global economy and the global financial system around the corner.

The operating highlights of the first quarter were -- first of all, we operated a fleet of 46 tankers at 98.5% capacity versus 43 tankers at 98.3% capacity in the prior year's first quarter. We extended for one more year the employment of our Suezmax tanker, Triathlon, to a US East Coast-based refinery. This was the last of three one-year extensions Tsakos charters held as option. The ten-year charter altogether is expected to terminate in January of 2014.

A time charter equivalent rate is based on a fixed minimum base and a 50-50 profit sharing over and above [renewals]. We continue to operate a corporate fleet through a combination of spot charters -- eight tankers, contract of affreightments -- two tankers, and period charters with fixed rate -- ten tankers, and period charters with fixed rate with profit sharing and min-max arrangements -- 26 tankers.

Please turn to slide six of the online presentation to see the current employment details. As we speak, we have 11 tankers trading in the spot market, two tankers in contract of affreightments, ten tankers in period charter with fixed rates, nine on time charter and one bareboat, two vessels in pooling arrangements and 21 tankers in period charters with profit-sharing arrangements and min-max.

We paid on April 30, 2009, a dividend of $0.85 per share for a total dividend payment for fiscal 2008 of $1.75 per share, which represents a 1.5% increase over the dividend paid for fiscal 2007 of $1.725 per share. Continued our share repurchase program with an automatic 10b5-1 plan, which was initiated in the beginning of 2008. We repurchased 231,100 shares during the first quarter at an average calling cost of $16.65 per share. In deadweight tons, TEN operates 4.9 million deadweight tons with an average age of 6.3 years versus 9.8 years being the average of the world tanker fleet.

Please turn to slides three and four in the online presentation for a look at TEN's fleet details. In the sale and purchase front since last September we have seen a limited number of transactions which can hardly make the overall market as representative and legal. The sea [brokering] communities in general are reluctant to give valuations, realizing that we are going through unprecedented times and the lack, or better said, significant reduction of ship finance capacity, together with a wide [beat up] gap in the price of tankers as for potential buys and sellers, resulted in lack of significant transaction activities which makes it hard to value tankers and to generate and conclude any significant volume of transactions.

In this environment we continue to be sellers of our older 1990-built tankers, but also buyers of modern [tankers] in order to maintain fleet mobility and cater to the needs of the Company's clients. Our current newbuilding program is coming closer to its completion. We have four more DNA tankers -- Aframax DNA tankers to take deliveries, two in the third quarter of 2009, one on July 17, the other on September 15, and two vessels in 2010, one in January 2010 and the last one May 7, 2010.

Slide eight gives details of our newbuilding program including the CapEx. Please note that we have already adequate final proposals for all remaining four vessel deliveries, four remaining vessels at competitive price options that TEN agreed to, before the newbuilding market started to take off. We are always looking for vessel opportunities in both newbuilding front and the secondhand market and also available consolidating opportunities.

The current financial environment represents opportunities for further growth. So far these opportunities that have come across our desk are closer to pre-crisis price levels. We might need a couple of quarters of short-term spot tanker rates before we can see asset prices follow the spot freight market levels. In TEN, we are not in a rush. We have a fleet of 46 tankers, soon to be 48, to operate. We continue, even in this market, to build our cash reserves. We have a strong balance sheet, strong banking relationships, which altogether we believe position the Company well to take advantage of any opportunities that we are presented quickly and without the need to access the equity markets.

On the commercial front, our profit-sharing arrangements in the majority of our time charters allow the companies to participate in the spot market, in spot market rallies, but also protects the Company's cash flow generation and profitability, especially in weaker freight rate environments. We have witnessed that in the past during periods of weak freight markets and, of course, our first quarter financials benefited from the Company's fleet employment time charter policy.

In slide seven, you can see that as of March 31, 2009, we had 66% of the remaining available 2009 fleet operating days and 45% of 2010 available fleet operating days with currently 33 vessels with fixed time charter rates, time charter with profit sharing, contract of affreightments with min-max and in pooling arrangements. Out of an operating fleet of 48 tankers and assuming only the minimum rate, TEN has secured 598 months of full work employment or 1.6 years per vessels and $472 million in minimum gross revenue until the end of the vessels' respective charters.

The Company's charters are reliable, first-class counterparties. For a list of their names, please turn to page five of the online presentation. The Company had one vessel with special survey obligation in 2009 versus 11 in 2010. The number in 2010 includes nine 2005-built tankers that have their first special survey anniversary in 2010. Taking advantage of the current spot rate conditions and the period's employment expiration of some of these vessels, management decided to realign the dry docking and special survey schedule and bring them forward in 2009. In total, at least five of the 11 vessels, which initially were scheduled -- which had scheduled repairs in 2010, we performed them in 2009, creating a more balanced repair schedule between 2009 and 2010, while maintaining flexibility to take advantage of an expected improved rate environment in 2010.

Looking at the general market, despite the problems of the global economy, the tanker market enjoyed a banner year in 2008. In the first quarter of 2009, rates for both spot and period charters were healthy, however, they were trending lower with each passing month. Overall, the freight environment of the first quarter has been profitable for almost all tanker owners and especially those with assets that have been acquired at prices below the late asset price rally of 2007, 2008.

All this took place while the world is in a severe recession, inflicted by a massive financial crisis and an acute loss of confidence. Global oil demand keeps getting downgraded by the International Energy Agency each month as a result of the global recession in both developed and developing economies and now stands at 83.2 million barrels per day or 2.6 million per day below the 2008 demand figures, which was a 3% contraction.

The oil price contango continues at lower levels and although the area storage from late 2008 and early 2009 may have fallen by as much as 50% from mid-February to end of March, the latest market figures indicate that it continues and we have currently over 75 million barrels of oil stored in tankers on short-term, 30 to 60 day storage targets.

The oil price, which hit $60 per barrel last week for the first time in six months, was more due to sentiment, but the global economy seems to be bottoming and the rally in the global capital markets with the USA leading the way since the current year-to-date lows established of March 8 rather than evidence of higher consumption. OpEx [group] production drove a seven-month downtrend in April, with compliance to the 4.2 million barrels cut at 78% versus 83% in March. That's approximately 920,000 barrels per day of more crude oil into the global system.

(Inaudible) supply is down to 50.3 million barrels a day, down from 50.6 million barrels per day in 2008. However, global oil stocks are high and currently the OECD stocks are over 62.4 days, eight days above one year ago levels. In the period market, big charters, oil majors and government companies continue to have another tie to fixed tankers forwards. In TEN, during the first quarter of '09, we announced the last of one-year extension of our Suezmax tanker Triathlon to the same charter with whom we have been for the last -- chartered for the last seven years. There is, however, uncertainty about the markets due to direction, and, for this reason, most time charters under discussion are for around 12 to 24 month periods since neither the owners nor the charters want to commit themselves for longer periods until they have a more clear view about the direction of the freight market.

Going forward and assuming that the 2009 tanker order book will be delivered with maybe 10% to maximum 15% deferral in 2010, the freight market will be influenced by, first of all the compliance -- the further compliance of the OPEC cuts, as crude oil around $60 is a comfortable price level for most, if not all OPEC producers. It will be interesting to see the compliance level of OPEC in the months to follow as the world enters the typical weakest quarters for oil demand in the Northern Hemisphere.

The quality of the existing tanker order book for the years 2010 to 2012. We said in March that according to market-to-market analysts and shipbrokers, over 60% of the existing order book has not secured post-delivery finance. Nobody can say with certainty, even today, how many of these orders will stay and will not materialize. Shipyards and owners of newbuilding models with no secured finance are in a Mexican standoff and it will be interesting to see -- to wait and see who will blink first.

The 2010 phaseout of single hull tankers. Approximately 17% of the world tanker fleet is of single hull design. We have seen lately an increase in the scrapping activity and expect more to come as we move towards 2010, especially if the soft spot rate environment continues in the next quarter and there is good availability of modern double hull tankers for charter (inaudible).

How quickly government, bankers and policymakers will manage to stabilize and restore the faith in the global economic system and turn around the general gloom sentiment that is upon all of us for the last almost year. Well, the G20 meeting in London in early April seems to have been the catalyst the world was waiting for. Although nobody can speak with certainty today, there are voices -- analysts, economists, investors -- who are saying for the first time that the global economic crisis seems to be bottoming. We didn't hear these voices back in March of 2009. We hope they're right.

The International Monetary Fund in their (inaudible) world economic outlook expects the global economy to recover gradually in 2010 and grow by 1.9% after contracting by 1.3% in 2009. That's a slight revision because initially the contraction was thought to be 1.4%, provided, of course, that the global financial sector is [fueled] and the various infrastructure projects announced by the governments with fiscal room to move take place. This IMF forecast of a gradual improvement in 2010, if indeed sustained in the agency's future 2009 report, is positive.

The US driving season is around the corner and so is the hurricane season in the Atlantic US Gulf area. Currently, US gasoline stocks are down 1.9% from previous years and up 2.2% versus the previous five-year average. This is not a big cushion. In the past five years, US gasoline demand and gasoline stocks have been leading indicators for oil demand in the US and the catalyst for global oil price rates.

Of course, with so much [crude] around in storage and US refinery rates down by a million barrels per day from the five-year average, we need consistent good demand numbers for gasoline, maybe a little over 9.3 million barrels, which is a five-year average versus 8.9 million barrels, the current demand numbers for last week, before we see a rise in refinery rates which could take crude stocks down sooner than people predict. But for this to be sustained, you need to have consumers that are confident about the financials today and tomorrow before they can start taking advantage of lower gasoline prices.

China's oil demand. China's average crude oil imports saw the [first quarter of yearly growth] this year. China imported 3.9 million barrels per day of crude in April, up 13.6% from a year earlier, according to a report on May 12, for the general administration of CapEx. This is the second best crude import month since the four million barrels of March 2008 when Beijing was preparing for the Olympics.

Since the beginning of 2009, however, the fourth month statistics, crude oil imports are down 4.5%. Before the April numbers, they were down by almost 7%. However, refined oil also -- refined oil product imports in April were also up 2.6% from a year earlier and full inventories by China's two top oil firms fell 15% in April versus March and sales rose more than 5% in the same period.

Although China doesn't publish official inventory data and imported levels can vary, for the first month in April, the Chinese oil demand inventories and sale of refined products seems to be moving in the right direction. It remains to be seen if this is a fluke or an indication that China is starting to come back and its economy grows again at higher-than-initially expected rates. Everybody eagerly anticipates -- awaits the second quarter '09 finance GDP to be announced in July to see the status of the world's largest country in terms of population.

The Company continued its impressive growth and profitability for the 62nd consecutive quarter. Slide 11 shows our dividend distribution since 2002 and gives an update on our buyback program. As you can see, we paid a dividend of $0.85 per share on April 30th and $1.75 for fiscal '08 versus $1.725 per share for fiscal '07. This represents a modest 1.5% increase during times when [cash is thin]. The Company has raised the distribution every year since the cash dividend payout was introduced in 2002. Since inception, we paid approximately $285 million in the form of dividends and repurchased stock was a little over $82 million since 2005.

In the meantime, all of us in TEN will continue focusing on the day-to-day operation of the fleet, in keeping vessels employed at full utilization if possible, in managing spot pressure, controlling costs and in navigating the company safely through these challenging times. We are confident in the Company's strength, financial power, strategy, personnel, intense ability to grow in difficult times, as the Company's track record since 1993 indicates. If our growth expectations turn to reality, which we think they will, the period in 2009, 2010 could serve as a springboard to [tend] the next growth phase. Without further ado, I would like to turn the call over to Paul Durham for a review of the finances. Paul?

Thank you, George. 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 (inaudible) you with more on the significant items occurring in quarter one. TEN achieved net income of $24.5 million in quarter one with no capital gains, while in quarter one 2008, the equivalent figure -- that is net income without capital gains, was $30.5 million or $65.1 million with capital gains of $34.6 million.

Diluted earnings per share were $0.66, directly comparable with the $0.80 in quarter one 2008 without capital gains or $1.70 with the gains. Total revenue was $126.3 million from nearly $137 million in quarter one 2008. The relatively modest decrease in the light of the world economic crisis, was of course, due to the softer freight market compared to the previous year. This was offset by an increase in the average size of the fleet by three vessels to 46 in total and an increase in vessel utilization to 98.5% of available days compared to 98.3% in the previous quarter one. Loss days this first quarter primarily related to repairs on the Opal Queen and some off-hire on the Victory III.

During the quarter, 73% of our fleet was subject to market rates even though 86% of our fleet, in terms of operating days, was employed on fixed or recurring employment. The average daily TCU rate achieved per vessel was $27,500 compared to the previous first quarter of $31,400. Rates in the crude tanker categories fell compared to last year, while in the product categories, rates were the same or slightly lower. Fortunately, our fixed minimum rates on those vessels are providing a better income than they would have achieved on the open market.

Total vessel operating costs increased to nearly $38 million from about $33 million in quarter one 2008, partly due to the extra vessels, but also because of the increase in daily average costs per vessel, which increased from $8,969 to $9,355, although this was actually lower than the average 2008 daily average cost and lower than the quarter four average daily cost.

Much of the increase was due to higher insurance premiums and repair costs, but in general, cost increases were mitigated by the impact of a strengthening dollar by 13% over last year, which especially affected the cost of our euro-paid vessel officers, so crew costs were actually down from last year.

G&A expenses were up by $500,000 in quarter one 2009, due to extra professional fees and promotional and office costs. But overall, overhead costs, which include management fees and stock compensation costs, were down to $1,155 per vessel per day compared to $1,338 per day in the previous quarter one, due to a significant reduction in stock compensation costs.

Total finance costs for the quarter amounted to $15.1 million compared to $23.8 million in quarter one 2008. Although average outstanding loans increased by $100 million since the prior quarter one, our all-in interest rate fell. Fortunately, also in the first quarter, we enjoyed a $1.2 million positive swing in the valuations of our non-hedging interest rate swap, which we believe will be the trend this year as signs of eventual economic recovery lead to possible rises in long-term interest rates.

In addition, we entered into bunker hedging swaps in mid-March and two weeks later the mark-to-market valuation put these at $800,000, which as they also do not meet hedging criteria, are accounted for as a gain on a financial instrument and set against financial costs. During quarter one, our net debt fell by $21 million to just under $1.5 billion, bringing our net debt to capital ratio to 56% at the quarter end.

$194 million remains to be paid on our four new design Aframaxes under construction, $109 million to be paid in 2009, mostly relating to the delivery of the two vessels next quarter and $85 million in the first half of 2010. To part finance the first delivery this July, we have just agreed new debt of $39 million to the bank at which we believe favorable terms in the current climate. We are currently reviewing a proposal for finance for the second delivery in September for a similar amount and similar terms.

And as mentioned, we have just paid nearly [$40 billion] since the start of the year in the buyback of nearly 240,000 shares and $31.4 million in an $0.85 dividend to shareholders. That leaves us currently with about $310 million in cash. And although our cash flow forecast now takes account of our decision to bring forward dry dockings into 2009, we still expect to end the year with a strong cash-rich balance sheet. And this concludes my comments. Now I'll hand the call back to Nikolas.

Paul, thank you very much, both you and George. And I take this opportunity to open up the floor for any questions that there might be. So please let us hear and we can help you with answering any of your questions.

(Operator Instructions) Your first question comes from the line of Natasha Boyden.

Thank you, operator. Good morning, gentlemen.

Hi, Natasha.

Hi. Thanks for that very thorough presentation. I know you talked about the credit market improving a little bit, but we've certainly seen a lot of companies walking away from newbuild orders and having trouble financing them. What are you seeing in terms of resale opportunities and are any of the shipyards actually coming to you and trying to sell, perhaps, or trying to get you to look at opportunities that perhaps other companies have walked away from? And then secondly, in terms of asset values, they've certainly come down. With the rates being where they are, do you believe asset rate values still have room to fall from current levels?

[Good afternoon], Natasha. Hi.

Hi.

Well, I just came back, literally, from a trip from the [Philippines], Japan and the surrounding newbuilding areas. What we're seeing is we are seeing the, I would say, cancellations in the Korean and Chinese yards. I'm talking on the tanker side, but in the market in general, and fewer so far in Japan. And of course, having the reputation of the company that we have built, our future, almost everything that sits in our fleet has been built by ourselves. It is obvious that the yards that that I have visited, they all had some sort of a tanker there to be presented to us before it was cancelled or instead of it being cancelled. So yes, there is -- a lot of owners have actually -- and many public companies, as you know, have decided, for better or for worse, their decision to sacrifice their deposit and perhaps pay an additional penalty in order to cancel ships. So the yards have some sort of leeway, having deducted these costs from the asset value to come up with the lower costs to owners like ourselves.

On your second question, I mean, we -- I know people have short memories, but we are a company that has built our future since the crisis of 1997, during Asia crisis, and we have seen our average cost on our Aframax newbuilding program is somewhere in the mid-40s. It's the -- in the low 50s for our Suezmaxes. So I do not look at it as a [plain] situation and we're talking about five or six years ago going there to see similar values if the prolonged crisis is going to last. However, if we see a turnaround of the world economy and cancellations going forward, I think we can be pleasantly surprised for stability of newbuilding prices.

Okay. Great. That was helpful. Thank you. And then just a question more in terms of -- as more of a micro-question. How do you think about balancing your share repurchases versus the leveraging in this environment? I think you've said before that you are comfortable with where your level of leverage is right now, but would you consider ramping up your share purchase program or would you rather preserve capital in this environment?

I think our good shareholders have answered this question for us for the near future because, as you have noticed in the last, I would say, six weeks, our sale price has had a significant move.

Yes, it has.

But still way under what we consider to be our net asset value. But a much healthier price right now. So at these levels, the company would rather preserve cash. If our sale price drops, then it makes sense in terms about going buying out ships at full price, to buy ships at today's value, and even at the depressed --. But I think cash preservation for us is also very important.

Right. And I think -- Paul, where did you say your current level of leverage was right now?

In terms of net debt to capital, it's about 56%.

Okay. And then if you did see a deal that you really thought was worthwhile pursuing, where would you be comfortable pushing that leverage up to?

Well, I think, Natasha, we have never gone above 70% even when we were very busy building. Don't forget, we're down to the last four of our newbuildings, all of them ordered through options at prices that, even in today's depressed environment, seem very attractive. So we are at the last, I would say, four vessels out of 53 that's a newbuilding program. And even at the times that we were in the middle of this program, we never went above 66% to 70%. So we would never consider going above that anyway.

Okay, great. Well, that's very helpful. Thank you very much, gentlemen.

Thank you.

The next question comes from the line of Daniel Burke.

Daniel Burke with Clarkson, Johnson Rice. Good afternoon, guys.

Hi.

Question on the earlier comments on the wide bid-ask spread that continues to exist for vessels. You all are buyers of modern sellers of 1990s tonnage. I was just curious if you could expand the discussion -- and maybe differentiate, with regard to the 1990s type tonnage, are the spreads there on the bid-ask side as wide as those for the true modern tonnage?

Well, I think, as you know, our company is -- has a fleet of -- full of double-double ships and only three of our vessels are still built in the 1990s. And these are the Victory, Hesnes and Vergina, together, of course, with our VLCCs that are long-term time charters. And I believe that six in the -- good ships built in the '90s find, I would say, find a second home, mainly in special projects like FPSO developments and all sorts of other support activities. And in that case, where there is a contract and there is a need for a big project like this, the cost of the vessel is a minute percentage of the whole infrastructure that has to go through for such a big deal. So we find buyers for those ships that are not for normal trading, much quicker in the acting and also less price sensitive than competitors of ours that will use the vessels in the market.

I see. Thank you. And then as a follow-up, just a more specific question. Has there been any change in your activity levels with Lyondel or I guess now Houston Refining as some of that bankruptcy activity has advanced?

Well, as I said, we are long-term service -- long-term service industry in our business, so we monitor all our clients very closely. And I have to say that it seems we have -- all of us felt worried when one of our clients went into Chapter 11. But since the -- since the court is taking care of the procedures, I would say the payments are even quicker than they used to be and they were always prompt. And also the demerit settlement that usually takes 60 to 90 days in a normal shipping trade have been more accurate because the whole finance process is being run by the court.

So I would say -- and I think George mentioned it -- that unlike other segments of shipping, the players in this market are very strong shipping -- it's still a small percentage of the whole, the cost of shipping of the whole business and they're performing very well with no delays.

Great. That's good news. I'm glad to hear that. Maybe one last question for Paul. Paul, could you help me better understand the bunker swaps that you mentioned earlier in your overview of the financials for the quarter?

Yes, it's a very simple instrument. What we've done is effectively bought on paper 1,000 tons per month over three years at given prices for those years. And then compare them at the end of each month with the actual market price. So it's as simple as that. And there is a mark-to-market done every month by which we are obliged, as they are non-hedging instruments, to take through our income statement. At the end of each month, as each 1,000 ton matures, as it were, we will receive a cash settlement from that. So for instance, at the end of April, I believe, we received $33,000.

And was that just an opportunistic transaction or are you specifically hedging against some forward exposure?

Well, our objective is clearly to hedge forward. But accounting rules are very, very strict and you have to be more and more dedicating your paper purchases on the quantities you're actually consuming. So we took a more general view which takes us away, therefore, from strict [high] hedging criteria and it is effectively speculative, though that is not our motivation for doing this.

Okay. Great. Thanks for the answers.

Thank you.

(Operator Instructions) Your next question comes from the line of Gregory Lewis.

Yes, thank you and good afternoon. Could you talk a little bit about charter rates and the resiliency of the Suezmax market versus the VLCC and the Aframax market? Like sort of what's driving that and if that's a trend that you expect to persist throughout the rest of the year?

Yes, thank you. I mean, as you know, we are -- and I think you can look into our fleet profile. We have a very diversified fleet between products and crude with a big concentration on Suezmax and Aframax vessels. I think what we are seeing today is the uncertainty into the market is helping, for the time being, the Suezmax market. I think, as you have seen, we have seen the price of oil almost increasing very significantly by $20 or something in the last eight weeks. And this -- it's not as high as people on the selling side would like it to be or not as low as the people who are buying it would like it to be.

So in terms of seeing big [bunches] of VLCCs, I mean, the two medium barrel ships, we are seeing business and crude has to be moved and that's why we are seeing that the Suezmax market, the one million barrels right now are much more popular than, let's say, the heavier two million barrel vessels. Don't forget, we are also seeing quite a big number of VLCCs in storage right now and, of course, this keeps them out of the market.

Okay. But -- okay, fine. And then, like, are you surprised because, I mean, it looks like the -- in the Med, the Suezmax market has been doing quite well. Is there something that's preventing Aframaxes from competing against Suezmaxes in the Med or is it just simply a question of size that is that sort of keeping Aframaxes out of that market?

Well, I think right now the Suezmax market is [biting] and taking more and more cargos from the Aframax market. The Aframax market is traditionally the workhorse or has been traditionally the workhorse of the tanker market on the crude side, mainly. We are seeing -- there has been a lot of talk and reality of enhancement of ports also in the Mediterranean where Suezmax is right now can become -- can be the Aframaxes of the past. And we are seeing that the Suezmaxes are taking more cargos from the Aframaxes as we speak because it makes economical sense for the charters using a bigger ship for a cost that not long ago would be the cost of a [Panama] (inaudible).

Okay. Great. And then just a real last quick question on the modeling. It looked like there was significant cost savings on the staff compensation expense this quarter. I think it was down pretty much, like almost 100% -- like 97% quarter over quarter or even a year-over-year basis. When we look out over the next three quarters, what's sort of a reasonable staff compensation expense that we should be thinking about? I mean --.

Talking about the compensation?

The grants, the grants. The grants compensation, the stock compensation expense, which was unusually low this quarter. That's because two-thirds of the grants were issued to non-employees and the valuation is based on the share price at the end of each quarter, has to be adjusted at the end of each quarter based on the share price. So as it happened on March 31, the share price was relatively low, a lot lower where it is compared to today. And therefore, the valuation was low. As it happened anyway, half of the total grants that were issued a couple years ago have now vested and are now shares and that just leaves half the grant to be vested in two years' time. Of course, they've already been half amortized over the past two years.

So we're looking at a lot less amortization. Obviously, as share price increases, the amount of amortization each month would increase. But let's assume that if we paid only $50,000, I think it was in quarter one -- that's right -- we would not expect share compensation expense to rise by more than $100,000, $150,000, $200,000. We were budgeting at about $200,000, $250,000 per -- sorry -- per quarter for the year. Sorry, does that help?

Yes. Thank you very much.

There are no further questions at this time. I would now like to turn the call over to Mr. Tsakos for closing remarks.

Yes, thank you. Well, again, we would like to thank all of our callers for participating in today's conference. We are living in a very challenging period in shipping. TEN has been -- actually, this is TEN's fourth cycle of -- that would have been through including the 1993, 1996-97 following the Asian financial crisis, 2001-2002 following 9/11, and the stop in commerce that that brought. And we're in number four right now. So TEN has a seasoned and hopefully experienced philosophy to be able to take advantage of another of the opportunities that will arise in this crisis. In the meantime, we're taking care of the one thing- that I think came out from George and Paul is that in today's low market, we're taking advantage of TEN -- the TEN special surveys in light of things that we have to do for 2010.

We're bringing a couple of them in 2009 in order to have our fleet ready for another five years of unstopped performance when the market returns to the levels that we expect it to turn. So we are looking at the future, challenging, but with a lot of opportunities, and don't forget that usually the second and the third quarter seasonally are not the best quarters for tanker companies. And we expect to take advantage of that as we go forward. We thank you very much to all of you.

This concludes today's conference call. You may now disconnect.