Tsakos Energy Navigation Ltd (TEN) 2011 Q3 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Tsakos Energy Navigation conference call on the third-quarter 2011 financial results.

We have with us Mr. John Stavropoulos, Chairman; Mr. Nikolas Tsakos, President and CEO; Mr. Paul Durham, Chief Financial Officer; and Mr. George Saroglou, Chief Operating Officer of the Company. (Operator Instructions). I must advise you that this conference is being recorded today, Friday, November 18, 2011.

And now I pass the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relations Advisor of Tsakos Energy Navigation. Please go ahead, sir.

Thank you very much, operator, and good morning to all of our participants. This is Nicolas Bornozis of Capital Link, Investor Relations Advisor to Tsakos Energy Navigation.

The Company released its financial results for the third quarter of 2011. The press release has been distributed publicly and you should have a copy of it by now. If you do not have a copy, please call us at 212-661-7566, or e-mail us at TEN@CapitalLink.com and we will e-mail a copy to you.

Parallel to today's conference call, there's also a live audio and slide webcast, which can be accessed through the Company's website at the front page at www.TENN.gr.

The conference call will follow the presentation slides, so we urge you to access the presentation and webcast. Please note that the slides and webcast will also be available as an archive after the conference call. Also, the slides of the webcast presentation are user controlled, so you can click on the proper button on your own to move to the next or to the previous slide.

At this time, I would like to read the Safe Harbor statement. This conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1955 (sic). 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 disclosed in TEN's filings with the Securities and Exchange Commission.

Ladies and gentlemen, at this point I would like to turn the call over to Mr. John Stavropoulos, the Chairman of Tsakos Energy Navigation. Mr. Stavropoulos, please go ahead, sir.

Thank you very much, Nikolas. Good morning, everyone.

The problems of sovereign debt; high unemployment, particularly among youth; near paralysis of the interbank market; collapse of housing markets; high and rising oil prices; this is but a partial list of the ailments in the world economy.

Much closer to home, low and stagnant charter rates and a continuing overhang of ships' capacity have been punishing to the tanker industry, both in terms of profitability and particularly in market valuations. Near-term relief is unlikely.

Nevertheless, I am encouraged about the medium- and longer-term prospects for TEN. A thoughtful employment strategy involving increasing use of longer-term charters will enhance the cash flow of the operation for many future years to come. Meantime, the solid cash position provides the basis for a selective expansion as opportunities emerge. I believe these characteristics set TEN apart from many others in the tanker industry.

In view of these factors, I leave it to others, you analysts and others, to explain the market's valuation of $6 per share against a book value of $21 per share, of which $5 is cash. I can only say I'm highly confident of the navigation skills of our CEO and his management team and remain very optimistic about my personal investment in shares of TEN. Thank you.

George, may we have your report?

Thank you, Mr. Chairman. It's my pleasure to speak with all of you today and provide you with the details of the operations of another quarter and the nine months of the year.

For those of you who are connected to the Internet and our website, there is an online slide presentation whose format we will follow during the call. Please go to page three of the online presentation.

The third quarter, as being traditionally the lowest demand quarter for energy transportation in any given year, continued to be challenging, with rates for crude tankers further weakening from the low levels we've seen during the second quarter.

Except for seasonality and the inflow of newbuilding tonnage in a weak market, the decision by the International Energy Agency to release 60 million barrels of oil from government stockpiles, with 30 million of those barrels released in the United States of America, and the lack of Libyan cargoes due to the civil war in Libya put further downward pressure on tanker demand and tanker rates.

The global economy and the financial markets continue to face headwinds with the European sovereign debt crisis, which, if prolonged, is feared to hurt other big economies, like the United States of America, where, surprisingly, GDP grew at 2.5% in the third quarter, and China, and thereby hurting world trade.

The International Monetary Fund in its latest report has lowered its projection for global GDP growth in 2011 and 2012 by 0.3% and 0.5%, respectively, to 4% for both years. This is still a healthy number, despite the growth disparity between advanced and developing economies.

Global oil demand, according to the International Energy Agency, is expected to be 89.2 million barrels per day in 2011, an increase of almost 1 million barrels per day year over year, and 90.5 million barrels per day in 2012, a 1.3 million barrels increase from 2011. The growth in oil demand is expected to continue as OPEC predicts oil demand to be around 93 million barrels per day by 2015, a 7% increase from the 2010 level.

OECD stocks are coming down, with September forward demand cover to 57.9 days from 58.6 days in August. We are also into the seasonally-strong demand period for energy transportation, the fourth quarter, and heading towards the first quarter of next year. We are already seeing an improvement in the spot rates, starting from the larger crude carriers, and if bunker prices were not at their very high levels of 2008, up 35% over the nine-month period from 2010, we would have already seen even more improvement in spot tanker earnings.

So if the European debt turmoil calms, and confidence and stability is restored back in the global financial system, this will be very positive for global trade and for shipping.

LNG, of course, continues to be the only sector in the energy complex that is certain to continue enjoying favorable fundamentals, at least until the recent influx of newbuilding orders hits the market in late 2013 and in 2014 and we have a strong trade market with rates quadrupling from the bottom of the summer of 2010 when rates were around $20,000 per day.

Short-term time charters, like for one year, have been recently reported to have been concluded at around $115,000 per day. In TEN, we took full advantage of the rebound in the LNG market and fixed our vessel Neo Energy forward for four years from early 2012 at a rate that is double the vessel's all-in breakeven cost, with the all-in breakeven cost being approximately $40,000 per day.

In TEN, we keep monitoring market opportunities for both newbuildings and secondhand vessels with employment coverage. Despite the weak spot-rate market demand, we continue to see strong demand for our vessels from our clients. In the last nine months, we have been able to charter 19 vessels on time charters with period employment from one to 15 years. A combination of fixed-rate charters and charters with profit-sharing will generate a little over $1 billion in minimum revenues from the above 19 features.

As we speak, 16 out of these 19 features are producing for TEN, and we have three, with one being the LNG Neo Energy that will come into effect from February 2012 and the two DP2 shuttle tankers which will begin producing when delivered to TEN during the fourth quarter of 2012 and third quarter of 2013.

Our tank charter strategy has helped the Company navigate safely through the troughs of previous market downturns and has given TEN the ability to maintain a strong balance sheet, sustainable dividend distributions, and enough liquidity for further growth.

This commercial strategy has so far helped us outperform the various spot market indexes as reported by international shipbrokers. For example, according to English brokers ICAP Shipping, the year-to-date average as of September 30, 2011, for VLCC is 12,000 -- all the routes -- taking into consideration all the routes they report, is $12,339 per day [PC -- PC] rate, and in TEN we have achieved a rate of $19,278 in these nine months. So that is 55% better than the rate.

In suezmaxes, the ICAP reports the market as being $10,037 per day, while we have in the same nine-month period achieved $23,727. That is 136% above the ICAP reported index.

On aframaxes, the report says $7,551, [whereas] $13,451 that we have in TEN, which is 78% better.

In Panamaxes, the index reports $3,204 per day, and in TEN, we report $15,351 per day, which is five times better than what the index reads. But in a March ICAP report, $11,324, and in TEN, we did in these nine months $12,477, a 10% improvement over the reported index.

As conventional spot freight rates are recent trough levels, we continue to seek opportunities in higher-margin business, like the shuttle tankers and the LNG. If the weak market is prolonged well into 2012, we should expect to finally see opportunities to invest in conventional tankers as the recent activity in 10-year-old VLCCs indicates.

Newbuilding conventional tanker activity in 2011 is almost to a standstill, with a current order book in terms of deadweight tons at 20% of the current fleet, the lowest percentage level since 2003. Let's hope that owners will exercise discipline and will not rush to sign more speculative order when the market improves.

Being public since 1993, we have been through troughs and peaks before and we have taken advantage of market opportunities, starting with a fleet of four tankers, growing it to 50 vessels at present.

We have always maintained a corporate strategy that focuses around the following elements -- a young, modern, diversified fleet providing its clients with quality service. We are very much client relationship-centric and we have nourished these client relationships that we have built and developed over a long period of time, both ourselves and the Tsakos Group.

We have an employment strategy that emphasizes generating sustainable cash flow that provides a strong balance sheet, profitable operations, and the ability to finance growth and maintain paying dividends.

We have a proven fleet renewal strategy to not only maintain a young and growing fleet, but also to provide a rich source of capital gains, which, since our listing in the New York Stock Exchange, have generated profits of over $280 million.

We have maintained a very high fleet operating rate, currently at 98% for the nine months of 2011. Over the five-year period since 2007, the annual fleet utilization rate has been at least 97%, if not higher. We have maintained a very high retention rate of [matters] and senior ratings, which contributes to operating efficiencies.

The deployment also of sister vessels contributes to crew familiarity, operating skills, and savings. The contributions of Tsakos Columbia ShipManagement to purchasing proficiencies has to be noted as cost control and operating efficiencies are on the top of TEN's and Tsakos Columbia ShipManagement's agenda.

We have a very high and improving safety record. We maintain a strong balance sheet and cash reserves of approximately $240 million at the end of September 2011 to take advantage of market opportunities in both conventional tankers and in higher-margin sectors of the energy spectrum, like, for example, the LNG and in shuttle tankers.

We maintain a strong banking relationship that guarantee access to bank shipping finance. Since September of 2008, when the crisis started, we have acquired 12 tankers in the fleet and have financed them by raising approximately $500 million of bank debt at very competitive terms, despite the overall environment.

As our newbuilding program stands now, we only have two DP2 shuttle tankers to finance, which are on 15-year time charters to a very bankable, first-class, government company.

Although we are still a year before that expected delivery, we started discussions with our bankers for the funding of these two vessels and we expect to have the funding fixed at equally competitive terms prior of the vessels' delivery.

Going back to the highlights for the quarter and the nine months 2011, as we speak and following the sale and delivery of Opal Queen and Vergina II, we have a pro forma fleet of 50 tankers with 48 in operation and two suezmax/DP2 shuttle tankers under construction with expected delivery in the fourth quarter of 2012 and third quarter of 2013.

The fleet is 100% double-hull versus 93% for the global tanker fleet in terms of number of vessels. And following the sale of this -- of our other tanker Vergina, the average age of the fleet has been further reduced from seven years to 6.8 years, which compares to 8.5 years for the world tanker fleet.

Fleet utilization, as we said -- as we reported, was very high at 98%.

Moving on to the next slide, some financial highlights that Paul will give more details. As we see here, we have reported voyage revenues of $294 million and have a net loss for the nine months of $32.9 million.

The thing that we need to focus, of course, in this market environment as we operate in it, is the fact that we have been able to contain and manage the cost side of the business by taking advantage of the bank power and synergies of the newly-established Tsakos Columbia ShipManagement. We registered a 1% reduction in the daily average OpEx of the fleet between the nine-months 2011 and the nine-months 2010, despite a weaker U.S. dollar, down 7% against the euro.

Let's move on to the next slide, our modern and versatile fleet, as you see here, is split between crude and product tankers, which we have ordered and built before newbuilding prices started to rise to record levels.

We have 23 crude carriers from VLCC down to aframax size, 26 product tankers from aframax size down to handysize, and one LNG. Except for two VLCCs, the fleet was built in South Korean and Japanese shipyards to high-specification standards.

21 of the 50 vessels have ice-class status, and we are one of the largest ice-class operators in the world, and we are hopeful that, as we are entering the winter months, our vessels with the ice-class capabilities will start earning attractive ice-class premiums.

Let's move on to slide number six. We continue to balance employment strategy of the corporate fleet through a mix of for-charter COAs, pools, and period charters with fixed rates and period charters with profit-sharing arrangements.

We currently have 14 tankers trading in the spot market, six vessels in pooling arrangements, and 28 tankers in period charters with fixed rates and profit-sharing arrangements. The Company's time-charter policies, with a bias towards time charter with profit sharing, has been the main reason for the Company's ability to successfully navigate through market cycles in the last 18 years.

The 19 new charters that we concluded during 2011 with an average charter life of approximately five years provides further visibility and stability to future cash flow generation, profitability, and dividend distribution.

The next slide, slide number seven, puts a dollar value to the current fleet employment profile. As of today, we have fixed 57% of the available 2012 fleet operating days and 42% of the 2013 fleet operating days. Assuming only the minimum rate for the 28 tankers in the 48-vessel fleet we currently operate, TEN has secured 775 months of forward employment, or 1.4 years and $552 million in minimum gross revenues.

The next slide illustrates the fact that the sale and purchase of tankers is an integral part of our operation, and -- as we demonstrate year after year with a series of transactions. The last transactions that we have done this year is the sale of the Opal Queen in March and Vergina II in June, which produced a capital gain of $5 million and released $18.2 million cash reserves.

Now of course, since 2002 we have generated $280 million from these capital gains, which we reinvested in the renewal of the fleet by ordering, as we said, the majority of our newbuilding tankers before newbuilding values started to rise. This way, we manage to grow the size of the fleet and always maintain its modernity.

Slide number nine shows our dividend distribution since we listed the Company on the New York Stock Exchange. Our next dividend distribution of $0.15 per share is payable on November 30. Since the New York Stock Exchange listing, the Company has paid in total $9.08 in cash dividends.

That concludes the operational part of our presentation. Paul will walk you through the financial highlights of the last nine months.

Thank you, George. A summary of selected financial data is included in the press release. And now, I'll add a few words about the third quarter and the nine months.

Revenue for the quarter after voyage expenses and commissions was $56 million, compared to $69 million in Quarter Three 2010, the fall due to the fair trade markets affecting crude and product carriers. For the nine-month periods, net revenue was $192 million, compared to $234 million. TEN incurred a net loss of $24 million in Quarter Three and $32.9 million for the nine months.

The main loss-makers in the quarter were the two older VLCCs and most of the aframaxes, which all traded in a very difficult spot market with extensive bunkers and costly repositioning. The LNG carrier also suffered a loss despite the significant rate hike during the quarter, due to the high swap interest related to the vessels there.

However, after drydock in February, the new charter rate will be $80,500 for four years, and in August the swap expires and the daily all-in breakeven rate falls to $30,000, translating to an $18 million profit annually.

The average rounded daily TC per vessel for Quarter Three was $14,000, compared to $18,300 in the previous year's Quarter Three. For the nine months, $16,100 was achieved, compared to $20,400.

Total OpEx for the quarter increased by $2 million, due to an increase in average fleet size by two vessels, and to modestly higher insurance costs and a weaker dollar impacting crude costs. The daily average OpEx for the vessels increased slightly over the previous Quarter Three.

For the nine months, average daily OpEx per vessel fell by just over 1% to $7,663 and, as George has said, despite a 7% fall in the dollar against the euro.

G&A expenses fell $100,000 in Quarter Three 2010. Combining OpEx, G&A, and management fees, daily expenditure per vessel did not increase over the year and remains at a very competitive level.

Finance costs were $15.5 million, up $900,000 from Quarter Three 2010, mainly due to a negative non-cash valuation movement of bunker swaps, partly offset by higher cash receipts on these swaps. From the nine-month period, there was a 23% drop due to positive interest rate swap valuation movements, and cash receipts on bunker swaps amounted to nearly $5 million.

In Quarter Three, newly-built suezmax Dimitris P joined our fleet with a final payment of nearly $15 million, but receiving $49 million in new debt. It entered immediate employment as well above breakeven.

Net debt to capital was 57%. Leverage remains at comfortable levels, and consequently, we had no problems with our loan covenants. We paid in October a second installment of $9.2 million each on the two shuttle tankers under construction, leaving capital commitments of $101 million for 2012 and $46 million in 2013. We are finalizing discussions with banks regarding financing for the shuttles. We do not anticipate paying any further amounts out of our own cash for these vessels.

Most of our vessels did generate positive EBITDA in Quarter Three, and our total liquid assets, plus the available facility, are today still close to $240 million, leaving us still in a very strong financial position.

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

Thank you, Paul, George.

Well, I think that's -- as is evident, the third quarter of 2011, I think, has been so far -- the market performed the worst in our 18-year history and I think, as George made it clear, although it was a devastating market for the Company well positioned like TEN, we were able to substantially outperform the market in every route that we participate, which is a combination of our stated strategy on long-term employment and a lot of profit-sharing.

But of course, this is not a comfortable situation where most of the routes that we are participating, regardless of our, of course, long-term employments on the spot market, in some cases, are below the operating expenses. And I think the worry we have, and this is not so much for our Company which, knock on wood, can sustain a couple of years or more of a market like this and take advantage of opportunities, but it has to do with the state and the safety of our business.

I mean, we are looking at owners, first-class names and newcomers left and right, but we are worried they might have to start cutting corners in running a tight ship, and I think this is again something that will create incidents, pollution events, and will bring a bad name to this industry which has spent so much effort and money to re-create itself to make 99.9% safe by the double-hull designs and the modernized fleet.

So I think this is the reason that we as an industry are worried about these levels because we know that people cannot run VLCCs at minus $2,000 a day or they cannot run aframaxes at -- or plus $2,000 a day for more than two, three, four quarters, and we are worried. We have seen statistically the biggest events and pollutions have always happened at times of a very poor market. I think this is a general comment of where we are today.

Our record is not to leave a stone unturned in economizing our expenses, finding the right charter for our ships, spending time with our clients, and enhancing even further our advantage to the spot market, as we have. But of course, again, in general we are not in a situation that makes us happy to see our industry in this disintegrating level.

The positive thing, and I think George touched on it, is that this is something that we have inflicted on ourselves. I don't know if this is positive or not, but at least back in the 1980s, and most of you are very young to remember, we had a similar crisis which lasted from 1981 to 1986, so that was five long years, and in many cases, it was as severe or more severe. At that time, it was a demand driven. The world came to a standstill. You had the Latin American crisis. You had interest rates close to 20%, and the world was different. There was no demand.

Even in today's energy preservation and good ways, we see that we're getting positive signs. I think the U.S. consumption is up again, you know, touching the 20 million barrels after a very long time. We're seeing a sign of having an 16% increase and more refineries being built there. So we are surpassing by far the peak market of 2008, where I think we had 86 million barrels on demand, and we're going to be above 90 million barrels right now, and we are facing one of the biggest recessions in the [time here] market, and again it's because of the oversupply.

Looking forward, of course, we are seeing a lot of tonnage finally. As George said, no one is [benefits]. No one is crazy enough to build ships, and I hope we can keep it this way, although the Chinese yards and the yards are trying to convince people to start ordering again. I hope our memory's a bit longer than that.

At the same time, we are looking at record scrap levels right now, which is again encouraging, and we're seeing older ships. I mean, we decided ourselves double-hull vessel, very good-quality vessel, but built in 1991. We decided that it was time to recycle that vessel, and I think more and more owners will be doing this, and I think this will be a positive sign.

So I think next year might be -- the first six months might be challenging, but the order book is drying up and I think this is what's holding the market. If this coincides with a better psychology here in Europe, and I hope we will not have to pay you in drachmas, your dividend, but in euros or dollars, and I think the same in the rest of the world, I think we are going to see a significantly better market.

Looking at -- in every single category, 2012 we still have 55 aframaxes, which, as we believe, about 40 will be put in the market as newbuilding orders. And I think the aframax level where we are quite heavily invested has the lowest percentage of newbuildings in the fleet, but at the same time has had so far the most -- most of the vessels being scrapped. We had 13 -- 13 aframaxes were scrapped this year so far, and we're looking at a record of close to 7 million deadweight tons of scrapping. So I think this is where we stand.

I think things will look better than they sound, looking forward, again, because the demand is there and slow steaming can help us a lot, and also a lot of older vessels and VLCCs are going into the FSO businesses. We had our 15 vessels so far this year, VLs, taken out of the market into conversions, adding to another 30 the previous years. So I think this is a general environment.

We are -- the positive thing is to -- knock on wood -- we are maintaining our strong cash position, where for most of our ships are above positive EBITDA, so we're not burning cash and we're waiting for the market to get better. If it doesn't, then we will, I think, look at very exciting, again, buying opportunities. We are one of the very few companies with such a large newbuilding program, but we've stayed and we have avoided building expensively. And we have stayed out of this market, just taking some options and ships against the specific business. We have not done anything, I would say, opportunistic since 2005, 2006.

So this is the situation of the industry and where we stand as a Company, and we would like to open the floor if you have any questions. Thank you.

(Operator Instructions). Greg Lewis, Credit Suisse.

Thank you and good afternoon. You know, I guess my first question is operationally looking at the fleet, if we were to just sort of focus on the aframax crude fleet, if we're looking at the data kit, I guess you have four of your aframaxes -- spot aframaxes in the Caribbean market, and then you have another two in the cross Med. How do you think about positioning some of those vessels that are maybe in the Caribbean, especially when you think about maybe the potential for the ice-class trade to sort of kick in, I guess, either late this year or early next year? Is that something where we could see some of those -- see some repositioning to maybe put those vessels in a better position to earn premiums?

Well, this is a very good -- and you are spying on us. I think you have on your GPS. You are following our ships.

But we are, right now, the football system, three, three, three, which means we have three of our ships, they are correctly positioned. One of our vessels back to the Mediterranean, so it enjoys the last months' strong, very strong market. So we have three of our aframaxes are up waiting for the ice, and these are the product carriers, the big -- our big aframaxes, the product carriers. Three of them are currently in the Med and three right now are in the -- and three are in the [carriage], and then we have -- our other aframaxes are on long-term employment in the Far East and Africa, et cetera.

So yes, I think we did this -- the joy of the $30,000 and $35,000 and $40,000 did not last as long in October and not even November, but I think we will see, on average, that our performance will be better than the third quarter because of the blip -- the one-month blip we had so far because all the delays in the Bosphorus here in the Med.

The Caribbean market, we are seeing some signs of life. It's barely breathing, but it's better. Nothing -- we expect to have quite a significant decision on the ice-class, so yes, we are doing this and we are trying to take advantage of this position.

Okay, great. And then, just, I guess, shifting gears a little bit and try to get a feel for -- clearly, you have those two VLCCs that are, I guess, are going in the drydocking the middle, last next year, but before we talk about those, can you give a little bit of color on the VLCC that was, I guess, American Eagle tanker sold this week to -- I guess Maersk picked it up. Just in thinking about that price, I think that was anywhere between 5% to 10% lower where sort of stated asset prices were. Was this vessel sort of actively bid on? Was Maersk sort of the only bidder for this asset? In other words, is this the potential floor or is there maybe a little bit more downside in asset prices to come?

Well, as I said, and I think Paul made it clear, I think for us the biggest negative in this quarter were the repositioning of our two VLs coming after a very long employment with a [private term] charter for the last seven years, and of course to bring the ships again, make them approved. This is something else we have to do is make them approved to get the intermarket has been an issue, and what we are looking now, of course, is we're looking to put them into conversions at [the so] projects, and we are participating in some right now, and storage business.

So what we're trying to do in the first quarter -- for the first quarter that these two try and break even with those ships by storage and wait for the market hopefully to become better, or conversions.

On the values of 5-year-old or 10-year-old VLCCs, I have to say this is the first time that they are looking attractive. I mean, they are, what, about $10 million to $12 million above scrap, and there are -- this is one of the segments that we might be looking after we take care of our two ladies to renew our fleet with vessels between five and 10 years old. I think, as we said, we are reaching an interesting level.

Okay, guys, thank you very much for the time. Have a good weekend.

Natasha Boyden, Cantor Fitzgerald.

Good morning, everybody. Hi. You know, you guys have talked a lot about the progress that you've made so far in cost savings and vessel OpEx, but I'm just curious to see if there's any more savings to be had or is the current level a good run rate going forward?

Well, I think there is always better, but Paul, I think, will give you the --

You know, when we talk about cost savings, we're talking about the benefits of economies of scale, like where we get price reductions on our purchases, and we're talking about logistical efficiencies.

What we're not talking about is cost cutting. We could resort to cost cutting, decimate our crews, but we're not going to do that. That's not part of our policy and that has to be made quite clear. We're only talking about economies of scale.

And you're right. There is a limit to economies of scale. You can add a lot more vessels to your fleet, but the amount of discounts that you're going to get, you're going to get diminishing returns per individual vessel.

So there is scope for reducing costs, but I just want to get that message across that one shouldn't think that we're going to take actions which would jeopardize the safety and quality of our operations. It's in reducing prices; it's in getting logistical efficiencies.

Okay, great, thank you. I just want to shift over to the LNG carrier. I mean, obviously, you have a really great rate on that ship now, going forward. And I think in the past you've talked about growth within the LNG sector as a real possibility. Could you talk about what your plans are for the LNG's carrier and the sector, and whether or not you would consider expanding that sector?

Yes, this is Nik again. Clearly, we were an early bird in this one, but we ordered a ship in 2004 and took it over in 2007, and of course, all the experience we have gained from that, we will not leave it unused. Our aim is to grow significantly in this sector. So we hope that within the next -- the first quarter, we will be able to announce further transactions from the LNG side.

Okay, great, thank you. And then, just one last question. Nik, regarding the dividend, clearly the tanker market has been extremely depressed and continues to be fairly weak. As such, do you consider it a possibility that you might reduce or even cut the dividend in order to conserve capital, such as some of your peers have been doing?

As I said, we have been paying dividends since -- for the last 18 years, okay? We're not Wal-Mart or GE, to say that we would not stop our dividend, but our aim is to maintain our dividend.

I think we have a significant -- as I said, what makes me at least feel comfortable, if we are down -- if we are now at the bottom, is even at this stage, our Company has positive EBITDA and cash to maintain a significant dividend. I think -- I cannot -- I mean, the Board would have to decide, but I do not see right now signs that will make us take drastic move in cutting or abolishing the dividend.

Chairman? (Multiple speakers). I have got my boss here with me.

I totally agree with Nik's comments. Obviously, financial strength is -- it is among our very highest priorities, and we won't compromise on that. That will be maintained.

But having said that, the employment strategies, the operating efficiencies suggest to us that the dividend, at least in the foreseeable future, is in good hands.

Michael Pak, Clarkson Capital Markets.

Good afternoon, gentlemen. I wanted to dig in a little bit more on the third-quarter topline, in particular the repositioning of the Vs and the aframax spot market. Can you kind of talk through in terms of when you reposition the Vs, were they -- are they now in a position where you want them to be and can you talk a little bit about the impact in the quarter? That would be very helpful.

Yes. I think -- as you know, in this -- in the tanker market, which is not the easiest market to participate, after long inspections, after -- sorry, after long charters, the ships come out on the spot market. They have to go through again all the inspections and approvals that they might not have needed because our ships were in contract for newspaper companies in the Far East and Korea. So they had the approvals for the local use.

And as I think everybody knows, it takes more than a quarter to be able to get all the approvals you need to be able to run your ships pari passu with the other vessels in the market. So we're -- I think we have reached or we're very close to reaching this arrangement.

Now what does it mean is that you might have to wait a bit longer to find a cargo because then you have a Catch-22 situation, which usually happens in a bad market, and the charters are bit more flexible in a good market, but you're in a Catch-22 situation, which means that you cannot charter your ship without an inspection, and then you cannot get the inspection if a ship does not have a cargo, so it's a strange process. But I think you start doing some voyages that will allow you to inspect them, I think we're close. Europe, we're close to arriving to that right now.

Okay, so you're still in the process of obtaining approvals, I take it?

Well, our ships have always the minimum approvals, but as I said, we try to have all the major approvals. Yes, I think we might need a couple of approvals more, which means that the ship will operate, but we will not have the spectrum of businesses open to us that we would have if we had all the approvals.

So we have to go after a special Chinese, a special Indian business that is a short business that will give us time to get some approvals, et cetera.

Okay. So you expect breakeven on these vessels, call it, over the next six months?

No, I -- excuse me, I didn't hear you.

So, as you are limited by the type of employment that you can obtain on these vessels, are you -- do you expect to break even on these ships, call it, during this quarter or in Q1?

I think it depends on the market and I think all you have to look is where the markets are today. I think we will be ready to take full advantage of our ships, and as I said also, in storage business by the first quarter.

Okay, great. Just one -- a couple follow-ups here. On the aframax side, would you -- considering that third quarter was a seasonally-weak quarter and it's also one of the worst quarters in, sort of, 18-year history, did you contemplate idling any of these ships instead of taking a negative spot earnings voyage, if you will? Was that ever considered, or what are sort of the pros and cons? If you can kind of explain, that would be great.

That's a very good point, and I think it is a industry point, for sure. We have -- we never take a negative voyage or a voyage that does not cover our operating expenses. The risk to move 80,000 tons in ice conditions or around the world and not even to make your operating expenses are much more than than idling a ship.

So I think, yes, we would wait to get the rate that at least covers, to say, the minimum of our operating expenses. And if -- the more owners that would do this, the better the state of the market would've been, but I mean, you know that we have desperate owners and, you know, [there are no] -- around the place for their own reasons. I'm not criticizing them. For cash flow or for reasons, they will need to get a voyage, and they do it.

So I think the more that the market gets less fragmented, the less the weaker players leave the tanker market. I mean, I think the better it is going to be for the remaining ones, and for also the slow steaming, which is good for the environment, first of all. It has a huge advantage, not only to the environment, but also to the bottom line. I think if the VLCCs [complete] the slow steam, and when I say slow steam, between 8 knots and 10 knots, instead of 14 knots -- instead of 12 knots to 14 knots, I think you turn a negative result to a significantly positive one.

Great. I appreciate your time, guys.

Fotis Giannakoulis, Morgan Stanley.

Yes, hello, and thank you. I want to ask you a little bit about -- you mentioned in the previous quarter about your goals to expand not only on the LNG segment, but also on the offshore segment. There are some discussions or rumors in the market that you might be looking some of this type of projects. Is there some that you can discuss at this point, if there are any opportunities or if you are looking any specific opportunities?

Hi. Well, yes, this is very correct. On the LNG, as I said, we are looking at specific opportunities that hopefully we'll be able to announce early 2012.

We're looking at vessels and we're looking at companies, also, that have -- that will start jumpers further and create a mass of a larger fleet than we will do with newbuildings, without excluding the newbuildings, of course. [Our ten], because we do not want to go back to the days where we used to talk about the drillships et cetera, et cetera.

The only offshore projects, and it's a very good question you made, to clarify, are projects that have to do with our existing vessels. And, yes, you are correct. We are competing with our VLCCs in two FSO projects -- FPSO projects, but we are not planning to acquire drillships or anchor-handling units or tugboats in the offshore, but we will use our assets into projects like this.

And since you talk about the LNG acquisitions, I would assume that these will be transactions with assets with long-term employment or they can be with something more on the short-term side?

I think we will want to have a portfolio that will have an average of at least five years employment.

And I've seen -- I've noticed that since the financial crisis, you have sold -- proven right now very successfully, something like eight older tankers. Is this a trend that you think that it will continue, keep reducing your tanker fleet or particularly your crude tanker fleet, and does this differentiate between crude tankers and product tankers?

We have disposed the fleet because of the new ships that are coming in. I think is actually -- it is not decreasing in size, but you're correct to say that because of the, I would say, low levels of entry that we have with the majority of our ships, even in today's market, as we did with the Vergina and as we did with the Opal Queen. During the crisis, we were able to sell ships with -- our older, let's say, aframaxes or, call it, 2001 aframax [old], it becomes a bit, you know -- but, for us, it was our own aframax at the time.

So yes, we will be looking to replace the fleet when -- and always, we have not sold a ship with any losses. We only do it with capital gains because we do not need to sell ships. We do it during (inaudible) fleet.

Thank you. Paul earlier mentioned that the DP2 suezmaxes -- I think it was either Paul or the Chairman -- are fully funded or you are very close to get financing. Is this something that we should expect during this year? If I remember well, it was mentioned that there's not going to be any additional equity requirement for these two ships.

Yes, I think -- I mean, if [lefterras] allowed us to not to pay commitment fees, we would finance them already, but right now we are paying -- I think we will have them -- in January, they will be fully financed. We're just trying to save the commitment fees. We have already significant offers from all our -- all the banks, and, yes, we will not -- we do not expect to have to make any more down payments on this.

Thank you. My last question is a little bit about the market. We have seen that the VLCC market particularly has started moving higher the last two, three weeks. Rates, they have reached close to $20,000. Can you please give us a little bit your view with your eyes, where is this demand coming from? What are the voyages that you see out there, and if you also see any interesting changes in the trading partners for product tankers, given that the spread between WTI and Brent has started being reducing?

Yes, I think we are seeing a seasonal betterment of the market. Of course, $20,000 covers operating expenses and significant other expenses. So I think it is welcome, so I think it's seasonal. It is a lot -- a lot of demand is for this.

I mean, we see the VLs taking cargoes, either fewer [going] from the west to the east, either crude oil from the [pakkan] gulf to the -- so there is a big appetite. I mean, I think I mentioned before we have 16% increase of imports from China year to year. I mean, we are talking of China slowing down its GDP, but what is happening, perhaps slowing of the GDP, but of course, more and more people are able to afford a car, a motorcycle, or two oil-demanding vehicles. So I think, yes, we're seeing from that.

I think we're seeing the WTI, at this stage, might have to do with the -- also with the local pipelines is becoming much closer now to Brent. But I think Brent right now is becoming more like the main pricing of oil and WTI is more local, and the products again in the -- are working very competitively also in the Caribbean, but also in the Indian Ocean.

So have you seen because of the Brent becoming more similarly competitive of WTI, or at least the gap is shrinking, more imports of crude from the U.S.?

Yes, we are seeing this and we are seeing also, as we mentioned before, a huge -- or a much bigger demand [to do it]. We had the month with the largest spot fixers on the clean side, also, which I think this is a good sign.

And these are going (inaudible) obviously a U.S. distiller exports or still gasoline imports?

No, no, imports, imports.

Thank you very much, gentlemen.

[Megan Repine], FBR Capital Markets.

Hi, guys. I'm filling in for Rob MacKenzie today. Most of my questions have been asked, but I did want to touch on the share repurchase program. I guess I was a little surprised that you didn't buy back any shares this quarter, given where your share price is. So, I was wondering if you could provide any color around your strategy for executing that going forward?

I think our strategy, and we've mentioned before, is to, after we discuss with all our shareholders, our shareholders would rather be rewarded in dividends rather with a share buyback.

We respect this. For us, it's, in a sense, the same thing, but we have to respect our shareholders, that they believe it's more important to pay the faithful shareholders that stick with you, rather than by people who want to leave your company very cheaply. So I think this is what we're seeking right now. Chairman?

No, I think that is right on the mark. The share buyback program might be triggered by a significant asset sale, but there's not one immediately on the horizon. But that might be the triggering moment.

Joseph Sheer, S.L. Investment Advisors.

Yes, good afternoon, George, Nikolas, and Paul. Congratulations on a relatively good quarter, considering the hard state of the market.

Most of my questions have also been answered, but to just follow up with regard to the share repurchase program, I note that in fact you did repurchase 71,000 shares during the quarter, which was roughly 8% or 9% of what [Panniotos] Tsakos had bought in the open market during that period, according to the recently-filed 13-D.

And I don't know that the entire shareholder base is as keen on receiving a nearly 10% yield, which obviously the market is not rewarding the share price for in the least. It's basically showing a very low confidence in that yield being maintained. And I believe that repurchasing shares at this level would be very accretive in just about every respect I could see.

Moving on to a different topic, I noticed that operating expenses increased only very slightly relative to Q2 and G&A actually declined fairly handsomely. And I was wondering how much of that experience you would attribute to the relationship with Columbia ShipManagement. Thank you.

I think as far as operating expenses are concerned, much of it is due to -- going back to what I was saying earlier about achieving lower prices through greater purchasing power and implementation of new logical -- logistical, rather, efficiencies. Much of it, obviously, is due to TCM.

On the G&A side, that is due to us around the table just being a bit prudent in our expenditure on road shows, communications, and, God willing, auditors.

So the Columbia ShipManagement arrangement does not seem to be helping in any significant fashion?

Well, it's helped tremendously. Over the past 18 months, if you go back to where we were about 18 months ago, we have lopped off approximately $1,000 per day per vessel, and much of that is due to TCM.

Right, but what (multiple speakers)

Sorry?

I said what I'm getting at is whether that improvement has basically topped out and been maximized, or if it's reasonable to expect potentially some further improvements along those lines.

Clearly, we can't lop off $1,000 every 18 months. I think --

Obviously not.

-- we're hitting a point at where the effective returns we're getting on -- per ship are not going to be as great.

I think the biggest challenge now is making sure that costs don't go up, and there's a lot of factors which are pushing those up, like rising oil prices, which affects lubricants, a weakening dollar, which obviously affects our crew costs. So that's where our challenges lie in the future.

We might be seeing some respite as far as the dollar/euro is concerned over the next foreseeable future.

But we are, nevertheless, pushing TCM all the time and looking at the numbers that they come up, both in terms of forecasts and actuals, and challenging them on every single aspect of the operations.

And another important area where they are saving costs has been on the dry dockings because if you go back a couple of years, you see the kind of expenditures that we were having on drydocking, and it was quite considerable. I think one of the factors of this recession that we've seen is that the yards are desperate to get businesses. They're lowering prices, and TCM is in a very strong position to bring those prices down through their overall purchasing power, through the fact that they're effectively managing now, combined with our fleet and their own fleet, over 400 vessels. They can bring down the cost of those dry docks.

So I think that's going to continue. But to see substantial further decreases in our costs, yes, will be difficult.

If I may comment, from the outside looking in, as a member of the Board and not an executive of the Company, I give them very high marks for what they have achieved. Comparing oneself against oneself, it's a little difficult to continuously have improvement. But what I would invite you to do is to make a comparison between TEN's operating expenses and those of the peer group. I think you'll find that very enlightening.

That's precisely what I have done, and basically I was wondering whether it was likely or possible to see obviously not $1,000 -- at $1,000 rate, but whether we have hit the point of diminishing returns where there'll be unlikely to be any further improvement or whether some modest improvements are still likely to be garnered.

I think Paul summarized that when he said we can expect moderate improvement going forward, that the benefits of scale of a significant part of that has been realized.

Fair enough, and could you address my issue with regard to potential share repurchase?

I respect your view. We constantly are tossing these items in the air, trying to keep a balance. And I imagine that there are some shareholders who would have preferred a share buyback, but I think the heavy preponderance would have leaned toward maintaining the dividend, so we elected to follow that guidance.

I assume that you poll shareholders in some fashion to determine this?

They poll us. We receive calls from our investors indicating their appetites for how they'll be rewarded, and predominantly it has been in the direction of please try to maintain the dividend.

[Michael Baker], [Rockport Investment].

Good day, gentlemen. The tanker sector is going through a very rough time. We've witnessed bankruptcy filings by two public companies. At the same time, we see TEN to continue on a steady course, if you will, coupled with payment of quarterly dividends. What sets you apart from the other companies in the industry? And what can we expect from TEN going forward?

Thank you for that.

I think -- our Company has set 18 years ago a growth pattern. We have been able to also have a strategy of long-term employments. This is a ship owner representing the sponsor (inaudible) -- as a ship owner for many, many years and generations, so we are not here to stay for a couple of quarters or one cycle. We are here for the long run.

So, and as we say, we -- and it's very Greek -- we say that we're not a sprint runner, we're a marathon runner, and that's what we try to do. So in the good times, we save our cards. We make sales. We make long-term employments to last us through days like this with enough firing power also to take advantage of this market.

And I think we tried to stay on top of our ships to keep operating expenses as low as possible, and this is a way for living and that's the only way for a business. So this is, I would say, where we are different than some -- from some of the other groups that are just participating in the equity markets for a short period of time.

We're not alone. There are lots of very good names out there in the public and the private sector, and we all hope for the best for all the companies because if one of them makes a mistake or -- it brings the same to the whole industry.

(Operator Instructions).

I don't hear any further questions coming. I want to thank everyone for participating today. Your questions were very penetrating, and hopefully we responded in a way that met your needs. Thank you very much for joining us. Bye-bye.

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.