Tsakos Energy Navigation Ltd (TEN) 2011 Q4 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 fourth-quarter and full-year 2011 financial results. We have with us Mr. Nikolas Tsakos, President and Chief Executive Officer; Mr. Paul Durham, Chief Financial Officer; and Mr. George Saroglou, Chief Operating Officer of the Company.

At this time all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, Friday, March 16, 2012.

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

Thank you very much 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 fourth quarter and four-year 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 is 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 on the webcast.

Please note that the slides and webcast will also be available as an archive after the conference call. Also, the slides for 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 contain 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. Nikolas Tsakos, the President and Chief Executive Officer of Tsakos Energy Navigation. Mr. Tsakos, please go ahead, sir.

Thank you, Nick, and good morning and good afternoon to everybody. 2011 has been as you know a very difficult year for our industry, not only. TEN has been able to navigate and weather the storms in this difficult year with what I would say limited damage and is able to look forward for a much brighter future.

I think we took the right actions quickly. We cut off some of the lossmaking parts of our business, and we have prepared the Company for 2012 for a healthier I would say three to four quarters going forward.

We are seeing signs of light in the market, both -- mainly on the products but also on the crude. Seeing an appetite by our charterers, who have extended as reported 16 new charters. And we are in the process of extending a couple of more, which shows a firm appetite and firm commitment from the major oil companies that perhaps the worst is over and there is demand.

We believe 2012 is the last year of a big influx of new tonnage, and this self-inflicted pain that we have suffered in the last eight quarters will start being normalized. There are parts of our business like the LNG who are performing I would say very, very satisfactory and will be contributing to our bottom line; and we will see these results in our Company from the second quarter onwards.

So as painful as it is for me to report after 18 years our first year of nonprofit, I think this gives us the chance to believe that the worst hopefully is over and we are there to look to a much better performance going forward.

With this, I will ask our COO, Mr. Saroglou, to give us a brief description of the pain for 2011 and what has been done and will be done to go forward. And then our CFO will talk to us about the figures, the exact numbers, and we will be available for more comments and answering any of your questions. So with this, George.

Thank you, Nick. For those 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 3 on the online presentation.

Last year we operated in a week tanker market environment, maybe the worst tanker market since 1999. The encouraging thing is that this is not a demand-driven crisis. In fact, global oil demand is at record levels and stood at 89.2 million barrels per day in the fourth quarter of 2011, and it is expected to continue growing at about 1 million barrels per day in 2012.

It is a supply-driven, self-inflicted crisis by ship owners who overbuilt the fleet. The high oil and bunker price environment, which now approaches the 2008 record levels, puts further pressure on tanker economics.

Despite the overall market softness, we witnessed a strengthening in crude tanker rates during the fourth quarter, due to seasonal factors and due to the increase in global oil production to record high levels. LNG continues to be the sector in the energy complex that is enjoying favorable fundamentals, at least until the recent influx of newbuilding orders hit the market in late 2014.

In '10 we took full advantage of the rebound in the LNG market and had last year our LNG carrier Neo Energy operate at $40,000 per day for six months, which is a vessel's all-in breakeven level, before fixing it to a four-year charter that is at 2 times the vessel's all-in breakeven costs.

Despite the weak spot rate market demand, we continued to see strong demand for our vessels from our clients. From the beginning of 2011 until today, we have been able to charter and re-charter 22 vessels out of the 50 vessels the Company owns on time charters, with period employment lasting from 1 year to 15 years.

A combination of fixed-rate charters and charters with profit-sharing will generate a minimum $1.1 billion in minimum revenues from the above fixtures. 19 out of these 22 fixtures are producing for TEN as we speak.

The new rate for our LNG Neo Energy will come into effect in about a week; and the two DP2 shuttle tankers will begin producing when delivered to TEN during the first quarter and second quarter of 2013.

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

Thanks to this strategy we have outperformed the various spot market indexes as reported by international ship brokers. For example, according to English brokers ICAP Shipping the 2011 spot market average for VLCCs had a TCE daily rate of $12,528. In TEN, our TCE for the year was $18,375. That is 47% better over the spot rate.

The same broker house reported Suezmaxes at $11,415 per day. In TEN, we had $23,209 for the year. That is double the spot rate for Suezmaxes.

In Aframaxes the rate was $7,712 per day. In TEN, the result was $13,517. That is 75% better.

In Panamax LR1s the report was $2,374 per day. We produced $1,545 per day. That is 534% higher.

And in MRs the market was at $11,360; and we did $13,493 per day, which is 19% better.

As conventional spot rate rates reached trough levels in 2011, we continued to see opportunities in higher-margin businesses like in the offshore and shuttle tanker market and in LNG, as the DP2 Suezmax shuttle tanker transaction and the LNG re-charter demonstrate. We are now beginning to see opportunities to invest in conventional tankers.

Newbuilding conventional tanker activity in 2011 was almost to a standstill, with a current order book in terms of deadweight tons at 17% of the current fleet, the lowest percentage level since 2003. Let's hope owners will exercise discipline and will not rush to sign more speculative orders when the market improves.

Being public since 1993, we have been through troughs and peaks before and have taken advantage of market opportunities, starting with a fleet of 4 tankers and growing to 50 vessels at present. Overall we continue to operate a young, modern, diversified fleet, providing our clients with quality service. We maintain client relationships that have been built and developed over a long period of time by both TEN and the Tsakos Group.

We have an employment strategy for the fleet that emphasizes generating sustainable cash flow which provides a strong balance sheet, profitable operation, and the ability to finance growth and, of course, maintain dividend distributions. We have a prudent fleet renewal strategy to not only maintain a young and growing fleet, but also we provide through this sale and purchase activity a rich source of capital gains, which generated profits of over $280 million since 2002.

We have maintained a very high fleet operating rate, currently at 97.1% for 2011. Over the five-year period since 2007 the annual fleet utilization rate has been at least 97%, if not higher.

We must recognize the contributions of TCM, Tsakos Columbia ShipManagement, to purchasing proficiencies as cost control and operating efficiencies are on top of ours and TCM's agendas. We maintain a strong balance sheet and cash reserves of approximately $182 million at the end of the year, in order to take advantage of market opportunities in both conventional tankers and higher-margin sectors of the energy spectrum like the LNG and the shuttle tankers.

We maintain strong banking relationships that guarantee access to bank shipping finance. Since September of 2008 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 which are on 15-year time charters to a very bankable first-class government company. We have financed prior to delivery of the first one and are closing financing the second one, again at competitive rates.

If we move to the next slide we see some financial highlights, but Paul is going to give us more details. Now there -- just two things that we need to highlight here is the sale of the two Aframax tankers Opal Queen and Vergina II, with $5 million capital gains and the release of $18.2 million in the free cash of the Company.

Moving on to the next slide we see the fleet. This is a very modern and versatile fleet, split between crude and product tankers, which we have ordered and built before newbuilding prices start to rise to record levels. As you see here, we have the 23 crude carriers going from VLCC down to the Aframax size; and 26 product tankers from Aframax down to the Handysize; and of course the one LNG.

And of course we have built, with the exception of the two older VLCCs, the fleet to South Korean and Japanese shipyards to high specification standards. 21 out of the 50 vessels have ice-class status. The fleet of course is 100% double-hulled, versus 93% in terms of number of vessels for the world tanker fleet, and has an average age of 7 years, which compares to 8.5 years for the world tanker fleet.

Moving on, the next slide shows the employment strategy. We have a mix of spot charters, pool, and period charters with fixed-rate and period charters with profit-sharing arrangements. We currently have 13 tankers operating in the spot market; six vessels in pooling arrangements; and 31 tankers in period charters with fixed rates and profit-sharing arrangements.

The Company's time charter policy has this bias towards the time charter with a profit-sharing arrangement, and has been the main reason for the Company's ability to successfully navigate through various market cycles in the last 19 years. If we put a dollar value, we will see that as of today we have fixed 64% of the available 2012 fleet operating days, and 50% of the 2013 available fleet operating days.

If we assume only the minimum rate for the 31 tankers in the 50-vessel fleet, TEN has secured 1,133 months of forward coverage. That is a little over 3 years per vessel and $1.1 billion of minimum gross revenue.

The next slide illustrates the sale and purchase strategy, which is an integral part in our operation. Since the beginning of 2002, our listing in the New York Stock Exchange, we have been able to do a series of transactions that generated capital gains of approximately $280 million.

The next slide is a dividend distribution. We have been continuously paying dividends since 2002.

This shows the latest distribution, which we have paid on Valentine's Day, which was $0.16 per share. And since the New York Stock Exchange listing we have paid in total $9.23 in cash dividends, which compares very favorably with the IPO price, which split-adjusted was at $7.50.

That concludes the operating report. Paul?

Thank you, George. A summary of selected financial data is included in the press release, and now I would like to add a few words about the fourth quarter and the year 2011. 2011 after quarter 1 was as difficult as we had expected, with little of the respite in quarter 4 that we had hoped for.

Gross revenue in 2011 was $395 million, against $408 million in 2010, a modest fall. However we had more vessels on spot, and bunker prices increased by about 30%. So revenue after voyage expenses was $268 million against $322 million in 2010.

In quarter 4 gross revenue was $101 million compared to $95 million in quarter 4 2010, while revenue after deducting voyage expenses was $66 million compared to $77 million in quarter 4 2010. Average rounded daily TCE, time-charter equivalent, per vessel was $15,750 for quarter 4, compared to $18,300 in quarter 4 of 2010. For the year 2011 the average TCE was $16,050 compared to $19,800 in 2010.

By quarter 4, the VLs having already incurred heavy losses, it was clear that future viable trading or alternative use for La Madrina and La Prudencia was unlikely, so we activated a program to sell them. These vessels are now accounted for as held-for-sale in current assets, with related expected debt prepayments transferred to short-term liabilities. Given that the most likely scenario for these vessels is disposal at below net book value, at prices in line with current values, an impairment charge was incurred for both vessels totaling together $39.4 million.

The disposal of these vessels will at least stop the cash outflow and losses related to these vessels. In 2011 some 42% of our loss, without counting the impairment, was due to these vessels. Otherwise, apart from these two vessels only seven other vessels out of 48 in quarter 4 did not generate positive EBITDA, and by amounts considerably less than the VLCCs.

Operating income in 2011, including the capital gains of $5 million but excluding the impairment charge, was $1.7 million. The net loss for 2011, excluding the impairment charges, was $50.1 million compared to a net income of $22.8 million in 2010, again excluding the then impairment charge of $3.1 million last year.

Total vessel operating expenses in quarter 4 were $32.2 million compared to $31 million in the previous quarter 4. The daily average operating expenses per vessel were also slightly higher. However for the year, despite an increase in operating expenses due to two extra vessels in the fleet, operating expenses per vessel per day fell to $7,606 from $7,647, even with a 5% weakening of the dollar.

G&A expenditure in 2011 and in quarter 4 increased over 2010 mainly due to one-off expenditure relating to the new XBRL reporting system and costs incurred on various projects. Such overhead expenses were set off by a reduction in stock compensation expense and the absence, regrettably, of a management incentive award for 2011.

Finance costs for 2011 totaled $54 million against $62 million in 2010. The fall relates to positive valuation movements on non-hedging interest rate swaps and $6 million cash received on bunker swaps.

In both years some $35 million was paid on interest rate swaps. Many of these will expire later this year; and although we will continue to hedge interest, we expect total payments to fall appreciably from December.

In 2011 we drew down $97 million in new loans on the delivery of two new Suezmaxes and we repaid $143 million in total, bringing outstanding loans at the year-end to $1.52 billion. Since then we have also drawn $28 million that was available on a facility.

We have two Suezmax DP2 shuttle tankers under construction. We paid $37 million in 2011. We expect all remaining yard installments to be covered by debt, $55 million in 2012 and $94 million on delivery early next year. We have agreed debt for the first, and have received similarly attractive offers from banks for the other.

This concludes my comments, and now I will hand the call back to Nikolas.

Thank you, Paul. Well, thank you very much. I think this is an overview of 2011 and also where 2012 seems to be going. And taking this opportunity, we would like to ask if there are any questions or any points we could clarify for the performance of the Company. So the floor is yours. Thank you.

(Operator Instructions) Natasha Boyden, Cantor Fitzgerald.

Thank you, operator. Good afternoon, gentlemen. I wanted to just turn to the LNG sector right now. You have obviously been pretty vocal about your intent to possibly grow in that area. At this point are you considering newbuilds or secondhand ships?

And if you are considering secondhand ships, is there even an S&P market for them?

Then lastly, what do you estimate the price of a newbuild LNG ship similar to the Neo Energy to be?

Thank you. Well, I think as we speak today it (inaudible), but the number of LNGs is still quite a small number of vessels. There are about 330 vessels in the market.

Quite a few of them as you know are of the older Moss type, which is a type with the three bubbles -- the bubbly type as we call them. And then in the last 10 years or less we have the new design of membrane. So the secondhand market is not really a very attractive market, because the quality of the vessels or the modernity of the vessels is not in.

Technology is changing also in this sector. When we ordered our vessel back in 2004, there was not a single tri-fuel -- or the concept of tri-fuel vessels (inaudible) did not exist. And the majority of the ships in the water today are actually turbine vessels.

So technology has a lot to do with it. So I think we are looking or we will be looking very soon in completing our newbuilding orders of new vessels of the new tri-fuel technology.

And as our COO mentioned, where the bunkering costs are today, I think tri-fuel gives you a big flexibility. You can use the burn-off. You can do the -- you can use, in case you have to, diesel or fuel oil. So I think it will be newbuildings.

Okay. Would you -- obviously with a newbuild would you consider entering into a newbuild contract without having a long-term contract on the vessel from a charterer? Or would you go in on spec?

Well, I think we would not order four newbuildings on spec. But I think there is significant appetite out there.

I think Natasha you know this, that for operators with a track record like us -- I mean we have been very blessed and happy and lucky with the Neo Energy. She is undergoing right now her first vessel survey in Malaysia; and our team is on board and I will be visiting the vessels soon also. It is one of the few membrane vessels that has not any leakage problems, so we are very proud with the quality and the performance of that ship.

So I think that the business is there. It is a matter of how many vessels. We would not bet the house on it, but I think our Company has the expertise to be able to order newbuildings without having to wait for a simultaneous contract signing because you leave quite some -- a big amount of dollars on the table.

But I believe that for sure, from the time of our order to the time of the delivery the vessels will be delivered on long employments.

Okay. Just what do you estimate the price to be of a newbuild LNG ship right now? Is that around $200 million, or is it higher than that now?

Well, depending on how many extras you want to put to it -- yes. I mean we are trying to keep it as close to $200 million as possible. The yards are trying to increase it above the $200 million. It is an interesting play with a lot of negotiations.

Sure. Then given the state of the European banks right now and their disinclination to possibly lend, particularly to the shipping sector, do you think that they would be amenable to this kind of project? Or do you think you have a lot of convincing to do?

Well, as you know we are not very convincing characters; so I hope it will be the former. I have to say for businesses like this, for companies like ourselves that do not have the load and the luggage of exaggerated orders in 2007, '08, '09 -- as you know we have right now two more newbuildings, which are shuttle vessels which have been financed already, and so that will be an additional ship.

So I think yes, we have found that there is appetite for good quality names; and it is not always from Europe. I think one of our last ships was from the exotic part of Oceania. It was financed by an Oceanian continent bank.

We are looking. There is appetite, but it is not always to the traditional sources. So we don't believe that there will be an issue. And as I said, for a logical order of vessels, not for a huge order.

Okay, great. If I could just switch gears completely, and this will be my last question, can you talk about, Nick, possibly a little bit about how you see the Iranian situation affecting the tanker market over the near term?

By that I mean have you seen any change in trade pattern as a result? Are any charterers bringing cargoes forward in order to avoid any potential shutdown of the Straits? Can you just give us your view on what is going on there?

Well, I think as we speak there is a lot of changes imposing. It's happening already. We have -- the Iranian waters are an expensive insurance place to navigate right now. A lot of insurers do not give you any cover for that.

I think the sanctions -- and it is not only Iran, we have Syria on the other side -- are creating uneasiness. We are seeing a lot of -- in that way.

You have noticed in the last fortnight there has been a good increase on the rates of the VLs because there is a rumor that quite some vessels have been storing around that part of the world, storing oil. So it will have I think a positive -- this nervousness has a positive effect on the market.

We are seeing the Mediterranean market also as a result of the Syrian situation hitting the 30,000 target this week. So that is a change from where we were a couple of weeks ago. So I think this nervousness has a positive effect right now on the market.

Okay, great. Thank you very much.

Robert MacKenzie, FBR Capital Markets.

Good afternoon, gentlemen. I guess my first question is kind of a strategic one, building on what Natasha was just asking, interest in the LNG market and newbuilds. How would you guys think about the most likely way you would look to finance any potential incremental decisions such as that?

Well, I think as I said right now on the LNG, that is a very good point. If we are looking on the individual vessel orders I think with the progress payments and bank finance by the time -- I mean we have financed our shuttle tankers at 80% finance in a very difficult market, which meant that the Company had to make 20% payments for those two ships.

We expect and we see from the appetite of -- [there's a parallel] in LNG carriers, by the time that they will be delivered will have a similar financing terms. So on a ship-to-ship basis I think we are looking at traditional equity from our balance sheet.

As I think George mentioned we are in the process of selling two of our older VLCCs, that will give us at least $50 million -- for at least $50 million.

To order two LNGs -- and I am talking as an example, based on Natasha's price target, you will need to put a down payment of $40 million in the next quarter, sort of thing. So I think the Company has the balance sheet to achieve this and in the meantime of course the employment.

So I think if we are looking at sporadic purchases of vessels it will be done as we have done so far. If we are looking at larger acquisitions, if opportunities for larger acquisitions on the LNG and offshore sector -- I mean shuttle tankers -- occurs, then I think we will be looking at more strategic alliances.

Got it. Thank you. Then coming back to your earlier market commentary about how uncertain the tanker market remains this year, do you guys think you might be interested in issuing some equity to shore up the balance sheet in that kind of strategic environment? Or are you comfortable where you are right now?

Well, if we look -- if we find I think as I said the big opportunities we might look at other alternative ways to finance. It doesn't have to be equity. There could be other ways -- through a strategic alliance.

In the back of our minds these, and I think we have this as a long-term plan, to expand the LNGs plus shuttles, offshore segment, into a significant number of six, seven vessels. The idea there perhaps would not be to raise equity at these levels for TEN, but to use the backbone of these vessels and raise equity where TEN would be the majority shareholder in another vehicle.

Whereas we would be able to raise equity and add more than 100% of the net asset value, because today in TEN we are still, even in today's market, at a significant discount. So I think if we do the equity, which we do not exclude, it most probably will not be within the existing structure -- unless by the end of this phone call today you have put the Company at $15, so then I think we can discuss again.

Fair enough. Thank you. And just a housekeeping question for you, Paul, if I may. What kind of guidance can you give us on how those swaps will affect interest expense in the next couple quarters?

The next couple of quarters we are not going to see any dramatic change. The swaps start expiring from summer onwards. So unfortunately for the first half and possibly much of the second half, we are going to see a similar kind of number this year.

So it is really from next year we will see that kind of number we were talking about, $35 million, slashed in half at least.

Got it. Okay, thanks very much.

Fotis Giannakoulis, Morgan Stanley.

Yes, good morning, gentlemen. I would like to ask you about the current state of the crude tanker market. We have seen the rates the last few days spiking. Brokers are reporting rates above $35,000 per day.

What has driven this spike? Is this something that can be sustainable? Does this have to do with some repositioning of vessels?

And what is your view about the market for April?

Well, as you know -- and good afternoon from Greece. As you know, this market keeps on surprising us negatively and positively. I mean we were all -- we have been negatively surprised and we have all -- we have experiencing one of the coldest seasons at least in Europe, North and South Europe; and we have not been able to enjoy a single day of ice trading premium.

So that is -- in the meantime as spring is kicking in we see the market moving. We see a lot of business from the Persian Gulf, in the Persian Gulf area for our vessels.

We think also -- we think that a lot of the refineries in India and in China, which we have been discussing in previous quarter phone calls I think, are coming online and are taking crude. So I think it is a combination of the nervousness because of the sanctions in Syria and Iran, and it is an increase of demand for crude from India and China right now.

We have seen that up to February the Caribbean market on the Aframaxes was the star. And all of a sudden you have to do something about it. Please spend a little bit more gasoline; drive around Rockefeller Plaza.

Because the Caribbean market right now has dropped. And we have seen the Mediterranean, because of the nervousness, becoming much higher. So it is an unpredictable market.

The way for us to keep some sort of predictability in our rates is what we do with, as George said, fixing ships with either long-term or long-term with profit-sharings. And we have done -- we announced today an Aframax we have done for one year with one of the major oil companies, starting a new relationship, with a breakeven minimum rate and then a 50/50 profit share.

So on that and some fixed business we are in the process of negotiating a couple of our product tankers at healthier rates for long year periods, three to five years. We might be announcing something in the next fortnight on this. So there is appetite; and we are trying to balance this unpredictability of the market with long period employments.

I would like to help on that, but most of us here in New York we do not drive cars. But I would like to ask you; we saw also that the Suezmax out of West Africa at some point they surpassed VLCC rates. Given all this uncertainty about supply in Iran and Syria, and you mentioned that you see a lot of demand from the East, from India and China, have you seen any changes in the patterns? Have you seen India and China importing more West African oil? Anything different in the flows of crude?

I think this is a very good point, because I mean as we speak -- the most, the healthiest market I would say also on the VLs is the West Africa-Far East trade, which surprisingly has moved to above $50,000 a day. So yes; you are correct. There are contracts being signed in expectation of the sanctions, and the nervousness in the Mediterranean and in the Persian Gulf. And West Africa has the resources and the capacity to exploit this.

Right now the highest market is the market of West Africa-East by quite a big difference from the other markets. I mean just to put it in perspective for the audience who are not very familiar with the day to day, as you know the United States has been also and remains a significant importer of Middle Eastern crude.

For one VLCC today to bring oil to the LOOP, to the Houston area, we are being paid a negative $2,000 a day. The same vessel to go from West Africa instead of Ras Tanura, which is of course in the Arabian Straits, from West Africa to the East as I said we are getting above $50,000. So you can see that West Africa this period is getting predominance.

Okay. I want to jump a little bit to another topic. At your previous call you mentioned potential growth plans in the FPSO sector. You also mentioned of course right now about the additional shuttle tankers; but I want to ask about the FPSOs.

Are these discussions or the projects that you were looking at still in the pipeline or still in your growth plans? Or this is something that you have already abandoned?

You have a good memory. That is good. Yes, the reason we were discussing with you -- and we are always looking, first of all, in the offshore market and our niche markets, which are contributing right now more to the bottom line than the normal -- that are normal business.

In our last call we had sold our vessel La Madrina, too, together with another, with Teekay, another public company. And we have put it in a package for a project that finally unfortunately did not -- was not fruitful. So that would be our first move in that side of the business.

I do not think you will see TEN as we speak today going and ordering a $0.5 billion FPSO vessel. But because we have a good number of our older ships which are for sale, we are almost on a daily basis in discussion with companies and oil companies that could use them in a project like this. And we would be happy to participate in a joint venture by using our assets.

So I think on that, don't expect to see any significant expenditure coming from us on this project. But we are very open to use our assets and learn out of this process from our business. So as you said very correctly, that was what we had participated.

I think shuttle tankers most probably we will be buying a couple more similar to the ones we did within 2012, when the contracts come for bidding.

I would like also to follow up on Rob's question and also something that George mentioned earlier. It seems that you believe that the crude tanker market can offer a potential opportunities for growth given the decline in asset prices.

I would like the stand on how you think of funneling this growth, given the fact that you mentioned about the shuttle tankers -- of course shuttle tankers potentially they can get high levels of debt because of their contracts. But you also mentioned LNG newbuildings and crude tanker acquisitions.

Right now you pay probably the highest dividend, among the highest dividends in the tanker sector. Would you consider to give up the dividend for the growth, given the steep decline in asset values? Or this is something that you wouldn't like to do that?

Our dividend is sacred. So I mean, I do not know; if our dividend is extremely high we might have to do something about it. But of course our quarterly dividend is sacred, and that it is why it has been given on specific days. I think as George said we have it Valentine's Day, Memorial Day, Labor Day, and Thanksgiving. So this is very specifically it is paid on these (inaudible).

The dividend will be maintained. If we see fantastic opportunities the Board might decide to reduce it a little bit in line with what everybody else is paying. But I think it is an important factor.

We have been public since 1993. We have always been paying a dividend. So I think this is why it is very important.

And we are also the major shareholders, and we [see] pari passu with all the shareholders in this. So one thing, as long as we can maintain the dividend we will.

But I think as I said earlier is -- that for big projects we might be looking to raise equity or some sort of financing, not as TEN. But by adding four shuttle tankers and three LNGs and whatever other long-term employment vessels we feel comfortable with a product like this TEN can raise a significant -- your team is a big investment banker team. And hopefully they can help us also with giving us ideas as a separate body, care about the Company, that will take care of the growth of these businesses.

So our existing cash and what hopefully we will be generating from sales and a better market will be used to purchase, as I say, vessels. We will not put any more orders because, as George said, I think the market has enough of new orders right now. That is why we are hurting.

But we will be looking to purchase vessels as we have always done at this low cycle. So I mean we have three beautiful but older VLCCs. I think at some stage within the next four quarters we will need to replace them. And if the market values continue to be as low as they are for five-year VLCCs, we might look at something like that.

But I think our strategic growth is on the more lease businesses.

Would you also consider potential a sale and leaseback, so that will be able to release equity to fund future growth?

I think this sounds as an efficient way of financing growth. Yes, yes.

Okay, gentlemen, thank you very much for your time and your opportunity.

Michael Pak, Clarkson Capital.

Good afternoon, guys. Just a couple of quick questions; we are at the end of the call here. I was wanting to understand the process of the VLCCs, how you thought about putting them up for sale. Did you pursue any opportunities to convert these Vs? I would've thought that that would have been a viable option there. If you can comment on your thought process.

That is a very good point. I think the vessel La Madrina was a vessel which we had sold last year to a joint venture between ourselves and Teekay, and she spent significant one month in being analyzed an upgraded for an FSO project, which unfortunately we did not win this.

So yes, I think these ships, because our VLs are -- the majority of our VLs or the two of our VLs are built in Europe, in Denmark, I think this must have been the last vessels built in Europe in the mid '90s. So they are very heavy ships.

They have been built by Moller in the Moller Yard. So because of their huge light weight and capacity they are very attractive. As we speak today the one ship is in Hong Kong being inspected for this type of project; and the other vessel is trading as we speak right now.

Yes, very correctly this is something we are looking. And since you work for Clarkson's and you are a very big brokerage house, any good ideas will help.

Very good, yes, we will forward those to you, Nick. On the ice-class vessels you had mentioned that you are not realizing any premiums. Is that more of a function of the fleet supply-demand dynamics? Or is there anything else behind there?

You mentioned that this is the heart of the winter season here. I was hoping you can give us some more color behind that.

We have been very surprised to see that there was no real ice for ice-class formation this year. I mean we had -- it seems that in Scandinavia they had a milder winter than we had down in the Mediterranean surprisingly and Central Europe. Whereas we were hoping that we will get a significant ice period, there has not been one. So it is not so much because of the too many ships; it is because of too little ice.

I appreciate that. One last question, accounting in nature. Can you help us understand the realized versus unrealized on your swaps on a quarterly basis, what kind of run rate we should think of?

As far as the unrealized, that is very difficult; sometimes valuations change the day before the quarter ends. It can go in any direction.

Having said that, these swaps are gradually approaching expiry. So they will be -- the valuation movements will be less, and there are more likely to be positive movements as well.

On the actual cash payments, given that interest rates are pretty fixed these days, it is pretty certain that for the rest of this year it would also be around $30 million. And you can split that up almost straight-line.

We do give some indication of expectations in our website in the data kit. That needs updating, but you will find some guidance there.

Thanks for your time, guys. I appreciate it.

Thank you. As there are no further questions we now pass the floor back for closing remarks to Mr. Tsakos. Please go ahead, sir.

Thank you very much for all the interesting questions. I hope we have been able to answer them semi-intelligently.

As I think we said 2011 thank God is behind us. We took the measures to correct what we saw that could be wrong for the Company, and hopefully it will be correcting itself as we go forward. I think the market seems to be waking up.

We are continuing the same policy as we have done for the last 20 years, which is keep the propellers moving. We are very proud of our utilization. We have in excess of 95%, close to 97% utilization. For today's market I think this is very substantial, and this is the policy we have been following.

So although we have been to say the least not happy to announce our first nonprofit years in 18 years, we believe this could be the beginning of a new growth period for a Company that does not have luggage and it's looking into the future with optimism. With this in mind we want to thank you all.

And our team is going to be as of Monday in New York and they will be very happy to see whoever of you who would like to have a meeting with them and take it further. Thank you very much.

With many thanks to all our speakers today that does conclude our conference. Thank you for participating. You may now all disconnect.