Tsakos Energy Navigation Ltd (TEN) 2009 Q3 法說會逐字稿

Good morning. My name is Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tsakos Energy Navigation Q3 Earnings Conference Call. (Operator Instructions). Thank you.

Ms. Laura Kowalcyk, you may begin your conference.

Thank you. Good morning, and thank you for joining us for Tsakos Energy Navigation's third quarter 2009 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 sfreeman@cjpcom.com. She'll gladly 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 conference call is also being Webcast. To access the Webcast, please refer to the press release for details regarding the Webpage.

At this time, I'd 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 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 filings with the SEC. Thank you.

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

Good morning to everybody, and good afternoon to those of you on the European side. We are here announcing another profitable quarter; perhaps not as profitable as in the past. But we are glad that we have seen a difficult quarter in the third quarter turning up still profitable for Tsakos Energy. And we all hope that the worst behind us. And we are preparing for the worst but are always ready for the best also here.

Today here with us-- We are missing-- For good reasons, we are missing our Chairman, Mr. Stavropoulos, who is in Chicago in the United States, where he's from originally, welcoming his seventh grandchild. So it's a very productive period for our Chairman.

And here, together with myself, is our Chief Operating Officer, Mr. Saroglou, who's going to actually give you the details of what has happened in the last three months, the first nine months of the year, and what we've done since then; our CFO, Mr. Durham, who will give us an analysis of the numbers and explain to you how we have been able to substantially reduce our costs to remain profitable; and the rest of the TEN team to answer any of your questions.

Well, again, it is a pleasure for us to have another profitable quarter in what was a difficult third quarter market. We have seen things, and we can talk about this a bit later on-- We believe that things have bottomed out, and we are seeing a light at the end of the tunnel.

And, without taking more of the time from what has happened, George Saroglou will give you the details. Thank you.

It's my pleasure to speak with all of you today to provide you with the details of another profitable quarter, the Company's 64th consecutive profitable quarter since inception in 1993. We have operated a fleet of 47 tankers during the third quarter.

We continue to operate in a challenging environment for shipping because of the global economic crisis, which materially affected normal oil demand, global trade, and consumer spending. Most experts believe that we've gone through the worst of this unprecedented crisis, but it's still early to assess the length and scale of the expected recovery of the global economic system. For 2010, both the International Monetary Fund and the International Energy Agency forecast growth again for the global economy and the global oil demand, ending the negative oil demand trend of 2008 and 2009.

Let's look at the highlights of the third quarter, which typically is a softer quarter for energy demand and energy transportation.

We operated a fleet of 47 tankers versus 44 tankers in the prior-year third quarter. The fleet operated at 95.7% capacity versus 96.2% in the prior-year quarter. The utilization rate is above current industry levels and improved the time spent to bring forward during this shorter quarter, the third quarter, the special survey of five tankers that otherwise were scheduled to pass their special survey in 2010.

We took delivery of the fifth and sixth DNA Aframax tankers in the Princess series, Ise Princess and Asahi Princess, which the Company built at the Sumitomo shipyard in Japan. Both vessels were chartered (inaudible) on short-term repositioning time charters.

We entered the newbuilding market by placing orders for two Suezmax tankers at the Sungdong shipyard in South Korea for delivery in the third quarter 2011. These orders were placed at a significant discount to the high price of newbuildings Suezmax tankers established in 2008 and will serve as replacement (inaudible) to the Company's 2002-built Suezmax tankers that have been sold or the Company intends to sell in the near future.

Chartered and rechartered during the first quarter seven tankers and, through the year, two more, so nine tankers in total, in a variety of fixed-time charters and time charters with minimum base rate and profit sharing. The duration of these charters is up to three years.

Continued the cost-containment program on the expense side of the business and registered a 12% reduction in the daily average per ship vessel operating expenses, as Paul will explain.

Continued to preserve a strong cash position during a shorter third quarter and year. The Company expects to close the year with a cash balance of $300 million.

Because of the (inaudible) special survey schedule of 2009 with, initially, only one vessel and the softer market during both the second and the difficult, shorter quarter, we accelerated the special survey anniversary of six tankers, five in the third quarter, whose schedule (inaudible) in 2010 and created a more balanced special survey schedule for both 2009 and 2010, when, in 2010, we expect rates to be much higher.

Continued to balance employment strategy of the corporate fleet. If you turn to slide 6 of the online presentation, you will see the current employment details. We have 12 tankers trading in the spot market, 2 tankers in contracts of afreightment, 6 vessels in pooling arrangements, and 28 tankers in period charters with fixed-rate and profit-sharing arrangements.

We paid on October 29 the first semiannual dividend for fiscal 2009 of $0.30 per share.

Recently, in the beginning of the fourth quarter, TEN agreed to the sale of the 2002-built Suezmax tanker, Pentathlon , to an independent third-party owner with the option to acquire the sister Suezmax for the same price. Any capital gain from these sales will be recorded in the actual quarter of delivery. The first vessel, Pentathlon, is expected to be delivered to the new owner in mid-November. Should the buyers exercise their option, the delivery of the second vessel will occur during the first quarter of 2010.

In deadweight terms, TEN operated during the quarter 5.1 million deadweight tonnes with an average age of 6.6 years versus 9.4 years, the average of the whole tanker fleet.

Please turn to slide 3 and 4 in the online presentation for a look at the TEN fleet details. In the sale and purchase front, we see lately more transactions, but still the number is small and can hardly make the overall market represented even (inaudible). The ship brokering community continues to be reluctant with vessel valuations, and ship finance capacity continues to be restricted and available to few, bigger, and bank-selected clients. Vessel values are down but not enough for those market participants with capacity to grow in today's environment to make any move. Sellers of potentially distressed assets, shipyards or private owners, with no pre-delivery finance are not stressed enough yet.

We took delivery in July and September of Ise Princess and Asahi Princess, the fifth and sixth Sumitomo DNA Aframax tankers in a late-series order we initiated back in 2004. We also announced orders for two more Suezmax newbuilding tankers for delivery during the third quarter of 2011. Following these orders, our newbuilding order book stands at four tankers. The two DNA Aframax tankers will be delivered at the end of March 2010 and in early July 2010.

Slide 8 gives you details of our newbuilding program, including the CapEx. We think it's early to fix the finance arrangements for the 2010 deliveries. But, from discussions we've had with our banks, we are confident that we will continue raising debt at attractive terms. Let's not forget that we have built the core of the fleet with competitive-priced orders and options before the newbuilding market took off.

On the commercial front, let's look at slides 6 and 7. As of today, we have fixed 60% of the available 2010 fleet operating days and 40% of 2011 available fleet operating days with currently 56 vessels with fixed-time charters and time charters with profit sharing, contracts of afreightment, vessels in pooling arrangements. Out of a total operating fleet of 48 tankers and assuming only the minimum rates, TEN has a good 469 months of forward employment, or 1.4 years per vessel and $325 million in minimum gross revenues until the end of their expected charters. The Company's charters are reliable, first-class counterparts. For a list of their names, please turn the page on the online presentation.

On the general markets, the global economy is stabilizing, helped by unprecedented macroeconomic and financial policies (inaudible). And it's encouraging to see the upward revision of the GDP figures for 2009 and 2010. The International Monetary Fund in their formal revision indicated the global economy will contract by 1.1% in 2009 versus the previous prediction of 1.4% in July, while 2010 will expand by 3.1%, up from 2.5% in July, which is 0.6% higher than the agency's July estimate and 1.2% higher than their April '09 estimate. Emerging and developing economies in Asia, and, primarily, China and India, will lead the way. On the same page, the International Energy Agency in their October assessment expects global oil demand in 2010 to rebound by 1.7%, or close to 1.5 million barrels, to 86.1 million barrels per day, again led by the emerging and developing economies of the world.

The improvement in the global economic confidence is reflected in gains in stock markets around the world as well as in commodity prices. Oil is trading again over $80. And, as we said before, this has more positive than negative implications - negative in the sense of an expensive oil price environment to strengthen the global economical recovery or make this recovery very (inaudible) and create imbalances between developed and developing economies that might not be (inaudible) - positive in the sense that oil, at these levels, the world will start investing again in exploration and production projects that guarantee additional future oil production capacity.

Another positive for the tanker market is that, at these levels, producing countries produce more oil. OPEC's latest compliance level is around 60%, from 83% in March. And, hence, demand for tankers will increase. Vessel conversion projects like FPSOs and FSOs at this type level are coming back to life. And that's another positive (inaudible) level for the supply of tankers in addition to the 2008 phase-out deadline.

Storage also continues to play a role in the utilization of the tanker fleet. Since the summer months, we've witnessed a shift from crude to [product] storage. Crude floating storage levels are currently estimated around 55 million barrels, from 100 million barrels, the peak in April of '09. Product floating storage, particularly (inaudible) oil, are estimated today at 97 million barrels, up from 30 million barrels in April and 60 million to 65 million from end August. Around 150 vessels, or close to 3% of the current fleet of 5,246 tankers of over 10,000 deadweight tonnes, are used worldwide for storage. Despite a softer spot market as we went through the seasonally weak third quarter, we continued to see big transferors, oil majors, and global companies to have an appetite to fix tankers forward. Our recent (inaudible) demonstrate that. We have a good time charter portfolio, which we have the intention to increase further going forward.

On the corporate front, the Company continued to grow and to operate profitably for the 64th consecutive quarter.

Slide 11 shows our dividend distribution since 2002 and gives an update on our buyback program. Since we listed the Company on the New York Stock Exchange, we paid $7.88 in cash dividends, including the latest October '09 distribution. On a split-adjusted basis, in March 2002, we listed TEN on the New York Stock Exchange at $7.50. Investors who got the Company at the March IPO levels have their initial investments fully repaid. Since the listing, we paid back approximately $300 million in the form of dividends and, since 2005, repurchased stock worth $82.6 million.

In the meantime, all of us in TEN will continue focusing in the day-to-day operation of the fleet, in keeping vessels employed at full utilization as possible, in managing cost pressures and controlling these costs, and in navigating the Company safely through these challenging times. We are confident in the Company's strengths, in its financial power, strategy, personnel, and in TEN's ability to grow in difficult times, and the Company's track record demonstrated since 1993.

Without further ado, I would like to turn the call over to Paul Durham for a review of the

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

TEN earned net income of $2.1 million in the quarter, compared to $41 million in quarter three 2008. There were no record sales in either quarter three. Revenue for the quarter was $106 million, compared to $159 million in quarter three 2008.

With the exception of the VLCCs, which were at fixed minimum rate in both third quarters, and the LNG carrier, which was between charters last year, all the categories spotted declines. This decline was less felt by the smaller product carriers, which, for the most part, fortunately, continue to earn at least minimum charter rates. This quarter three, the Suezmax, Aframax, and larger product tankers were impacted by certain vessels coming off time charter into a depressed spot market, although period employment (inaudible), as George has described.

In contrast, therefore, to the record quarter three revenue earned last year, the average daily fleet fee per vessel for quarter three 2009 was $21,100, compared to $33,700 in the previous-year quarter.

Total operating expenses in quarter three were similar in both years, amounting to $34.4 million, compared to $34.9 million in last year's quarter three, despite the three extra vessels in the fleet. The daily average operating cost per vessel actually fell by 12%, from $9,243 to $8,121 in quarter three 2009. Apart from continuous efforts to contain costs by the technical managers, this decrease was due partly to the fact that most of the vessels dry docked this year were younger vessels with little extra repairs required. Also, the dollar was stronger in quarter three 2009 compared to 2008, and this had a positive impact on (inaudible).

Overhead expenses per vessel per day also fell, by 17%, from $1,284 to $1,066 due to reduced amortization of (inaudible) and due to our efforts to keep G&A costs down in all categories.

Total finance costs in the quarter were $16 million, down from the $17.2 million in quarter three 2008, despite an increase in average loans outstanding. This was due to lower interest rates; our all-in debt costs falling from 4.9% to 4%, which, compared to quarter three 2008, resulted in nearly $4 million less in loan interest, offset by nearly $2 million extra swap interest payables, and an increase in negative valuations of non-hedging swaps by $1 million. Bunker swap cash gains, however, contributed $700,000.

During quarter three, we drew down on two new loans totaling $76 million relating to the delivery of the two new Aframaxes from Sumitomo. We made repayment of $21 million. At the end of quarter three, therefore, we had outstanding loans of $1.51 billion, bringing our net debt to capital ratio to 58%.

Following the dividend payment, CapEx spending, and debt service requirements so far in quarter four, our cash holdings are currently $250 million, soon to be enhanced by the nearly $52 million proceeds on the sale of the Pentathlon. Newbuilding installments in 2010 on the four vessels under construction will amount to $134 million, and $87 million will be required for the two remaining Suezmaxes in 2011. And, just to reiterate what George has said, we have not yet arranged finance for next year's two Aframaxes or for the two Suezmax deliveries in 2011. But we are confident from our current discussions with banks of raising the required finance at attractive terms similar, if not better, to those achieved for this year's deliveries.

And this concludes my comments, and now I'll hand the call back to Nikolas.

Thank you, Paul. Well, as we said, it has been quite a busy quarter and a very busy nine months. The Company's main objective has been, as George said, to keep our utilization to a very high level and, I think, although we took the decision to bring forward and spend the time and money now rather than later, where, hopefully, everybody believes that the market will be much more positive. We brought six special surveys within that year, and now we have one more coming this next week. And I think next year will be a much easier period, and now utilization still remains close to 96%. So I think this has to do with our (inaudible) policy and, of course, our operating policy that has given us a chance to come up with a positive result. And hopefully the fourth quarter and the following quarters we will exceed the expectations in a better market environment.

And we would like to open the floor for anybody that would like to ask any questions.

(Operator Instructions). Gregory Lewis, Credit Suisse.

Could you walk us through your decision to sell the one Suezmax and sort of provide a little bit more color on the option for the second one and then your decision to go out and get those newbuildings? And you talked about a discounted price. Could you sort of give us some guidance in what that price is?

Yes. Again, we have signed a confidentiality agreement until the deliveries of the ships. And what we tend to do in order not to breach any of this, we do not make press announcements with the full detail until the ships are delivered because you never know. The ships are floating, and we want them to be delivered to their new lucky owners and then come out with details.

It has been our strategy for a very long period of time. We did this last year. We sold three of our-- actually four the year before-- four of our first-generation, very-- that have served us very well in (inaudible) newbuildings and replaced them with a new design of-- upgraded design of Aframax, the DNA design. But, if you look back at our accounts, they were very profitable transactions. And we are doing the same with our Suezmaxes.

As George mentioned, we have been likely to stay away from the newbuilding environment of the last couple of years price-wise. Because of our close relationships with the yards, we have built-- almost our entire fleet is newbuilding. We have taken a lot of options. So, even ships that we are taking delivery this year and the following year are based on contracts that we originally signed with options back in 2004. So this gives us the flexibility even in what we believe to be a depressed market today to get significant capital gains from our old, or older-- I mean, we should not, I guess, be very spoiled because a 2002 vessel is not (inaudible) average age of the ship. But the older vessels of ours-- I think we are looking-- Those ships have been--

If we look back at the Pentathlon-- the ship was built in 2002-- sold almost immediately with a significant capital gain to a German KG. We bareboat the ship back. We employed the ship very profitably against the five-year charter to Petrobras in Brazil that gave us significant-- I mean, the IRR returns of this deal are mind-boggling. I think, if I remember, Paul, they up in three-digit percent rather than the two. We took an option at the time to repurchase the ship last October, which we did. And she's still chartered with Petrobras, and we actually sold this vessel-- or we're selling this vessel out over the significant, again, capital gains. It's a very-- It's a cycling that has been completed for two very good ships. And we wish the new owners good luck. And, at the same time, we are replacing these seven-year-old ships with newbuildings that are at-- much lower than the peaks of the market.

Okay. But should we assume that they were kind of at market rates? In other words, when these ships were sold, were they marketed? Was there multiple interest? Or was this sort of like an off-the-market transaction where there was maybe just one owner looking at it?

We do not market our ships because of-- It is a very sensitive situation for people to market ships because the clients usually do not like to see a Company marketing its ships. But we have a reputation of people who operate ships well, and we have, I think, the same reputation for having good quality-- having built good, quality ships. And I think then clients come up to us. I mean, we get almost weekly demands also for our Aframaxes. And it is a significant part of our strategy, as we've mentioned many times, is this continuous [profitable] replacement of our first-generation vessels and replacing them with a second-generation. I think many people can't say this. But I think we've been doing this for the last 16 years, and we'll be likely to do it profitably in every single case. I think Paul will be more than happy to give you all the details of the IRR of how these figures turn out--

Okay. And, lastly--

-- after we make the announcement, which will be, I think, in about a week's time.

Okay. Thank you. And, lastly, there was a 10- or 11-year-old Aframax sold earlier this week. Would Tsakos consider looking at vessels that old? Or is that sort of just beyond the age limit of vessels you're looking to add to your fleet?

We are trying very much to maintain or actually reduce, in this case, the average age of our fleet, which is very underweighted. I think that we might look at those ships for specific contracts that we have and businesses that might require a ship like this. But we should never say never. But we are looking at anything between a five-year-old and a newbuild. I think this is the first genre on our radar screen.

Okay. Thank you very much.

Jon Chappell, JPMorgan.

Paul, a question about your liquidity. You mentioned you're going to have roughly $300 million of cash at the end of the year. But as you think about the newbuild commitments and operating cash flow for next year, what would you say is kind of your free cash liquidity for any opportunities that may present themselves as asset prices kind of continue to fall?

Even taking into account the CapEx requirements, much of the CapEx requirements for the two Aframaxes will be covered by debt anyway, as I mentioned. We don't see any problem in raising debt. We're looking at, as I said, $134 million next year, of which approximately $50 million relates-- I beg your pardon. $100 million altogether relates to the Aframaxes, and much of that will be covered by debt. So we feel pretty easy as far as the CapEx requirements are concerned.

Operational requirements, obviously, we hope will be covered by the operations themselves. We have operation cash flow. So, all in all, I think, of that $300 million that we kick off for the beginning of the year and, if buyers take up a second option, we might be looking at $350 million in total, I think we're pretty comfortable for next year.

And, of course, when we talked about selling these Suezmaxes to be replaced by the future Suezmaxes, we're not necessarily talking about a direct, back-to-back transaction, now mind. We are building up our treasure chest in order to take advantage of opportunities as they arise. And we're kind of hoping that those opportunities will arise in 2010. So that money we are raising now on the Suezmaxes more likely, hopefully, will go in those opportunities.

I think, on a conservative basis, it's $750 million, talking about debt and equity. And I think if we see opportunities that we cannot resist, I think then we can put this up to $1 billion, which means close to 70% financed. But, being more conservative, it's about 55% to 60% financed. So that would be-- which will remain for the foreseeable future, for the next couple of years.

Okay. That's helpful. And, then, I don't know if you answered as part of Greg's question, but when does the third party have to exercise the option for the second Suezmax?

I think next week.

So they have to exercise--

I think it will be announced early next week.

Okay. Good.

We are almost certain that we have a sale of two sister vessels that were both of them part of this KG transaction which we did and as we've done in the past with the Olympia. And it ended up being a very successful transaction for all the parties. And the ships are, of course, very well maintained, good, quality ships; both of them, almost since inception, chartered to the same client, Petrobras in Brazil. And we are replacing those ships with our other Aframaxes-- sorry-- other Suezmaxes, which means now we fortunately or unfortunately do not have any Suezmaxes on the spot market.

Right. And that's a good lead-in to my next question. As we checked your fleet list on the Website, it does look like they're-- Even though there's no Suezmaxes, there are a few more ships that are market exposed as we enter 2010. What's your thought process about the charter environment right now? Obviously, time charter rates are down but not as down as much as the spot are. You probably don't want to lock in too far ahead or too long term with time charter rates where they are right now. So do you think that as we enter 2010 you may be a little bit more spot exposed and kind of wait until the charter market improves?

Well, as I said, our policy and, again, of course, these changes to be made-- close to 70%-- 70% to 30% on a time charter basis, and that's where about we are. All our VLCCs are on long-term time charters based on-- most of them on a minimum and then profit sharing with the client. All our Suezmaxes now are also time chartered going forward. And I think we have, our of our ten currently operating Aframaxes, six on the sport market, and the remaining four are on-- Actually, including our product, then we have twelve Aframaxes. We have six on the spot and six on contracts or time charter.

So that means that we have a good exposure if the market upturn-- I mean we've seen the Mediterranean market moving now positively, which hopefully will give us a good-- much better fourth quarter.

And the remaining of our fleet-- Almost all of the remaining of our fleet is actually on time charter or pooling arrangements, so our exposure is not as big.

What is encouraging, and I think I mentioned this in our press release, is we are seeing all the major oil companies with a huge appetite. We could today fix all our fleet on three- to five-year employment. And we are looking at many opportunities where we'll have a typical minimum rate and then a profit share.

I don't think today we are here to fix on a fixed-rate any of our ships. All our DNA ships we have proved a very big, I would say, technical success because this is a new design of Aframax based on a Panamax length overall. So it's a very flexible ship, mainly for the Caribbean. People would like to charter them for two, three, four, or five years, but we are only doing (inaudible) minimum and a profit share because you don't have to go far only-- Even if you look at the futures market, you will see that people expect a better market next year.

Are the major oil companies in general looking for more time charter coverage? Could it be a function of they're trying to take advantage of the down market and lock in their transportation costs at a lower level?

Exactly. Yes.

Or is it a function of your new vessels and the capabilities that they provide?

Well, I think it has to do-- Most major oil companies, of course, would like to deal with quality players, so I think that's why they're coming to people-- to us and (inaudible). But, at the same time, it is not a negative side. When you see all of the major oil companies, and when I say all of them, I mean Exxon's out there, Shell's out there, BP's out there, Chevron is out there, Petrobras is out there-- all of them-- to take ships for three to five years.

So I don't think-- We are not in a situation as the container market, where you cannot find anybody to even talk about (inaudible). It's the opposite. We're seeing a lot of-- It has to do a lot-- They want to get lower-cost ships. But, as long as we have a profit share, I think that's fine with us. We are therefore full utilization and get (inaudible) money and partner up with the major end users.

Okay. One last quick one for Paul as well. There's been a lot of talk about the acceleration of the dry docks. It sounded like there were five in the third quarter and one left for the fourth quarter. What does the schedule look like now for 2010? How many ships are we talking about?

We're looking at seven vessels; one more vessel for 2009 and seven special surveys, which will require a dry docking, in 2010. Quite a few intermediate surveys, but they're all on new vessels and therefore do not require a dry docking. So seven dry dockings next year for sure.

Do you happen to have offhand-- I know it's a little bit early before the 2010 budgets-- but the off-hire days associated with that as well as the capital costs?

Well, we've got a mix of vessels. We've got a couple of the older ones, the Hesnes and Victory, which could be quite expensive, given that it should be their last-ever special survey.

But we are negotiating those ships in storage business in FPSO, so I don't think the way that-- We are looking for (inaudible). We might not have to do the special survey on those ships.

We're looking at a couple of Suezmaxes which might be-- Again, these are the first special surveys, so, hopefully, not much more than $1 million or $1.5 million, maybe, each on those, with about 20 days off. We're looking at two handysizes-- or handymaxes, rather; again, about $1 million each, possibly less.

Hopefully less.

In fact, some of those handysizes that we've just done-- or handymaxes that we did in quarter three were remarkably-- relatively low cost. And they were in the States as well. So we were quite delighted with that.

Because of the weakness of the dollar-- it is really something that no one could imagine ten years ago. But it's cheaper to do our efforts on modern ships in the United States, and we're happy to do that because we are trading there, than China. In the past, we used to actually-- because we were ballasting the vessel to China in order to (inaudible). And now, because of the weakness of the dollar and the upgrading of some of the yards down south in Mobile, Alabama and Tampa, we have a good relationship, and naturally we're doing a lot of our surveys in the United States, which was something, ten years ago, people-- it sounded like a joke.

Finally, we're looking at the VLCC, La Prudencia, which-- that will be, presumably, over $2 million-- $2.5 million. And that will take, I should imagine, 30 days. And we're talking about repair work and not the actual voyage to get there. It depends where they are, of course, and that might add on 5, 10, or 15 days, wherever they are.

Okay. Very helpful. Thanks, Paul. And thanks a lot, Nik.

(Operator Instructions). Natasha Boyden, Cantor Fitzgerald.

I wanted to talk about the news that the IEA may be coming out with long-term oil demand estimates, potentially, later this week or-- this week and next week. Given that, as well as the order book, et cetera, you still mention that you think 2010 is going to be a better year. Can you just walk us through why you think that is on the face of increased foreign demand and a large order book?

Well, as I said, first of all, in the shipping business you have to be optimistic. It's something natural. No. On the demand side, I think we are seeing that there is a chance, if the figures come out right, that we are going to see demand for oil for 2010 very similar to 2008. I think people are talking about 2008 we had 86.3 million barrels. This year we were down to 84.5 million. People believe that we could be up to 86.1 million for next year. So, if we have the supply of what was an amazing year in 2008, I think that will be positive from the supply.

Of course, we have seen the decrease-- The recent decrease we have seen-- most of it comes from Japan (technical difficulty) you had an average of 5% or 4.5% reduction in demand. But, at the same time, we had the similar increase, 5.1% and 4% from China and India, respectively. So, if these statistics that are conservative are correct, we can go back to what was a good year from what we remember comparing this year to last year for the market.

At the same time, if you add on top of this an increase of tonne-miles because of movements-- I mean, we see that Venezuela is not the major exporter that used to be exporting to United States, but they actually go a little further-- much further, three times the distance, to bring more into China. So I think that's a good sign. We saw last week the best market we had was West Africa to China on the [VLs]. And a lot of our colleagues did business there.

So it is not a bleak picture. Now, I think this is how much we are looking on this demand side.

On the delivery, and I think you are much more an expert on this because you guys know every ship (inaudible) in the world, we have seen reductions-- a stoppage of newbuilding on the order book. We have seen postponements of deliveries.

And what we've seen, which has been-- I think we have seen the best so far year ever in scrapping for the last five years. So, if you look, there are about 980 vessels that are of the single design in all categories of 90 VLs, 40 Suezmaxes, 110 Aframaxes. And anything under that, Panamax and (inaudible) grow to 740. So you have close to 1,000-- 982 single ships that, in this depressed market, only 125 went for scrap only so far this year. And hopefully more of them will go as we speak forward.

Just to put it in perspective, we had this year 7 million tons of scrapping so far, and I'm talking on my statistics, I think, that are up until September. So this could go up to 8 million or 8.5 million tons. And the last year, we had-- what exceeded that was in 2002 and 2003 when we had close to 15 million because of the weak market there. So this is--

And we've seen a balance-- a balancing out the order book. If you add all the newbuildings of anything from a handysize up to VL, they're 1,000-- my last count, there were 1,008 ships on order. And so I think almost they wash up-- they wash each other's face. This weak market will make new-- single ships to move out of the market, as we see them moving. We're expecting 190 ships who came in the market this year. We're expecting 380 ships for 2010. Many of them will move into '11 and '12. So I think there is a balancing that makes us optimistic that we are not in a situation that a company like ours with a very modern fleet cannot handle.

Thank you. That was very helpful. Thank you. Just one more question, really, on, again, the S&P market and the activity. I'm just curious to whether or not you're being approached more by actual owners or if you're actually being approached by yards who are maybe trying to resell the slots.

Well, I think, again, so far on the tanker side, other than a couple of exceptions that we do not want to mention the names of some more Far Eastern owners that have close to 100 ships on order, so they're selling anything, it's mainly to actual owners. In some cases, when the owners have disappeared, the yards are approaching us. However, we have to say that, to be realistic, we've seen much more of this coming in container and dry ships than in tankers. It seems that because the tanker players are less fragmented-- We're still very fragmented but less fragmented than, at least, the dry cargo market. Whatever orders will be there has been done mainly by owners and oil companies rather than KGs, as is the case in the container market, where we expect, of course, to see more and more of those ships coming out.

So that actually is a nice lead-in. How distressed would you quantify the market as being? I mean, do you think there's--? Should rates continue where they are, or do you think it could get even more distressed? Or do you think it's pretty distressed right now? I'm just curious.

If we're talking about the actual spot market and the charter market, I hope that we have hit bottom this quarter.

Okay. And then, in terms of the S&P market?

Because there's always a six-month lag or approaching a six-month lag on the prices, I think that we might see this sometime after our good times in Posidonia. Don't forget it's the second week of June this year.

That's a great reminder. Okay. Great. Thank you very much.

Daniel Burke, Clarkson Johnson.

Most of my questions have been answered. I just had a couple of specific follow-ups. Nik, did you say you're looking at maybe some alternative uses for the Hesnes and the Victory? And, I guess, if that's the case, I was wondering how you're thinking about future investments in newbuilds or more modern tonnage in the Panamax class vis-a-vis the larger Aframax and Suezmax classes.

Yes. Again, this is-- We are looking-- Those ships have served us well for many years. However, although they're (inaudible) design, their age profile is something that is not compatible with the rest of our fleet. But those ships are actually built in Russia, and those are very solid ships. So there is an appetite for those ships because of their long lifespan comparing to FPSOs or FSOs. So, yes, we are approached by various oil companies or entities like (inaudible) that are looking to make those ships. And we are negotiating. And that's why I believe we might come to an arrangement before mid next year.

Already one of our ships, which is, again, an older (inaudible) ship, the Vergina, has been chartered on a long storage contract to be used as a storage unit in west Africa. And the vessel-- something like a floating pipeline. The vessel-- We actually did-- We made modification on here, and we have last week (inaudible) delivered-- new charters-- The vessel worked in Venezuela for five years. But, because of the issues with Venezuela, we decided to move here to a more [hostile] environment of west Africa. She's going to be there as a storage vessel.

Okay. Great. Thanks. And, then, another question. You mentioned the interest in term charters. Most of your activity there has been focused on the Suezmax sector lately; at least, it seems that way. Does that reflect the fact that customer interest is most intense in the Suezmax sector vis-a-vis, say, Aframax and product?

Well, I think that the-- As I mentioned earlier, there is interest for every segment of the market. However, the rate that the oil companies, who we deal mainly with, are more realistic on a minimum basis for a Suezmax rather than an Aframax. And the reason is that the Aframaxes are still fewer in the market. The major oil companies might look at wanting to have strategic time chartered vessels from strategic regions, and they're getting what I would say more attractive minimum rates with profit share for those ships than what they're offering for the Aframaxes. The Aframax is a market which is our core market, and we mentioned 50% of our vessels are on-- two on time charter and four on contract of afreightment. And the remaining we have in the spot market, expecting better and winter months coming.

I see. Thank you for the comments.

At this time, there are no further questions. I would like to turn the call back over to Mr. Nikolas Tsakos for any closing remarks.

Well, again, thank you for the questions and the attention. Thank you for being supportive to TEN. And we hope that we will continue during our expansion and profitable situation. And we're looking forward to a lot of calls in the United States and in Europe this winter, so this will help our market even more. Thank you very much.

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