Tsakos Energy Navigation Ltd (TEN) 2012 Q3 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to Tsakos Energy Navigation conference call on the third-quarter 2012 financial results. We have with us Mr. John Stavropoulos, Chairman; Mr. Nikolas Tsakos, President and CEO; Mister Paul Durham, Chief Financial Officer; and Mister 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, Wednesday, November 21, 2012.

And now I pass the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relations advisor to 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. Please be reminded that the Company released its financial results for the third quarter and nine months ended September 30, 2012, this morning. The press release has been distributed publicly, and you should have received a copy of it by now. Should you not have a copy, please call us at 212-661-7566, or e-mail us at TEN@CapitalLink.com and we will e-mail it to you.

Please note that 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 and webcast.

Please note that the slides and webcast will also be available as an archive after the conference call. Also please note that the slides of the webcast presentation are user-controlled, so by clicking on the proper button you can move to the next or to the previous slide on your own.

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. Nikolas Tsakos, President and Chief Executive Officer of Tsakos Energy Navigation. In introducing Mr. Tsakos, please allow me to state that TEN's results have continued to withstand the volatility and turmoil that has been affecting the industry. Your results clearly demonstrate your ability to navigate safely in the current market environment.

And with this statement, Mr. Tsakos, please let me turn the call over to you.

Nicholas, thank you, and good morning to everybody. It's nice to present to you our third-quarter results, which although are not as profitable as we have been used to promoting for the last 19 years, it seems that perhaps we might be turning a corner. And we hope, from the feeling we get in the market, that hopefully the worst is over in our segment of the business; which is the tanker, gas, and offshore business, including shuttle tankers.

The reason we have seen a traditional very weak quarter -- which is the third-quarter -- having been much better for the whole market, and specifically for TEN, because of our long-term and conservative employment strategy than where we were a year ago. So we hope, and we are always guardedly optimistic that we might -- we are hopefully a year closer to returning to a much more profitable environment, and much more balanced environment.

We are seeing supply of our business really in a [hang out], in a dead still, which is very few or, actually, no ships really being ordered as we speak. And at the same time, we see a significant increase -- regardless of the world economic state -- demand for our services. So we are one year older and wiser than last year, and hopefully one year closer to returning to a much more profitable environment.

We are keeping the Company, as possible, ready to take advantage of this situation, so while it will navigate the choppy waves. I will not tire you anymore with -- I will be available for answering any questions.

And I will ask our Chief Operating Officer, Mr. Saroglou; and our Chairman to come in and pull datum to give you their take. Mr. Chairman?

Thank you very much, Niko; and good morning or good afternoon to all of you involved in our call. I want to take this opportunity to wish everyone a very happy Thanksgiving. Those of us closely associated with TEN are particularly grateful to the leadership of our Company and strong support of the entire Tsakos team. Not unlike the Pilgrims of Plymouth Rock, we have a great respect for those who have brought us to a safe port despite the epic storm.

Although our harvest in fees will be somewhat delayed, we anticipate a grand banquet in the future for all of our stakeholders. Again, happy Thanksgiving to everyone.

Thank you, Chairman. George?

Thank you, Mr. Chairman. Thank you, Nick. It's my pleasure to speak with all of you today to provide you with the details of the operation of another quarter. Let's turn to slide number 3 in the online presentation, and let me start by briefly talking about the market conditions.

Although the third quarter is seasonally the weakest for energy transportation demand, this year we have seen glimpses of improvement. On the demand side, China's crude imports in the third quarter were lower than the first half of the year; but we have seen, now, rebound again. We've had decrease in crude oil exports coming out of the Middle East; and, particularly, from Saudi Arabia, as increased local consumption for power generation, for big summer demand, absorbed more barrels locally.

And, on the supply side, we had the new building deliveries, which continued to press freight rates lower, especially for large crude tanker categories like the VLCC and the suezmax sectors.

On the more positive thing now, global oil demand -- despite the recent downturn revision by the International Energy Agency due to the financial headwinds the global economy continues to face --it's at all-time high levels, around 89.6 million barrels per day. And these are the levels that we have for 2012.

The latest forecast for the next year calls for growth of 800,000 barrels per day. So we are looking at the demand number of 90.4 million barrels per day for 2013. The fourth quarter that we have entered is seasonally one of the strongest quarters for tanker demand, and this is supported by both the global demand forecast of 90.1 million barrels per day, and the actual freight market.

VLCC rates going in have rebounded to levels above $35,000, almost reaching $40,000 as we speak. While product tanker rates, even before Sandy hit the East Coast of the United States, were strong and are still -- and getting stronger.

New ordering continues to slow. It's almost non-existent lately, hitting a 10-year low. We have a slide in the appendix, slide 13, which is showing the growth of the development of the order book from 2009 until the present time. If you look at 2009, we had 27.4% of the fleet on order. Now that figure is down to 11.7%, and going to levels that are much more manageable for the industry.

Bank debt -- it's restricted to a smaller group of owners, and it's getting more expensive. And that could temper the appetite of future speculative orders. And if scrapping gets stronger, then the tanker supply side could be well-balanced earlier than most people expect. In this environment, TEN continues to focus on having a balanced and flexible chartering policy; in maintaining a very high fleet utilization; in operating efficiencies, cost containment and selective growth.

The Company continues to invest in LNG, a sector in the energy transportation with several fundamentals and growth prospects. TEN is also looking for opportunities in the shuttle tanker offshore sector, another energy sector with good growth prospects, as most new oil discoveries in the world are also discoveries. And of course, we look at the opportunities in conventional tankers, which we expect that -- more will come in 2013.

We continue to see strong demand for our vessels from our clients. Since the beginning of two in 2012, we have chartered or rechartered nine vessels, including the Neo Energy, our operating LNG vessel, to a four-year time charter. We have rechartered our suezmax Arctic to a three-year time charter with profit-sharing; chartered the aframax Proteas at a one-year time charter with profit-sharing. We have chartered three of our MR1s -- Aris, Ajax, and Appolon -- to fixed-time charters for five and three years for Aris and Ajax; and one year for Appolon, with profit-sharing; and extended for two more years both the aframax Nippon Princess and the handysize Didimon; and, for one more year, the panamax Maya.

These nine fixtures would generate minimum revenues of $220 million over a 2.4 year period. And as we speak, we negotiate more vessels in the fleet that have chartered that are due for renewal going forward. From the beginning of 2011 until today, we have been able to charter and recharter 32 vessels out of the 51 vessels the Company owns, on time charters with period employment lasting for one year to 15 years.

A combination of fixed-rate charters and charters with profit-sharing will generate over $1.1 billion in minimum revenue from the above fixtures. This time charter strategy has helped the Company navigate safely through the [trench] of previous and the current market downturn; and has given TEN the ability to maintain a strong balance sheet, uninterrupted dividend distributions, and enough liquidity for further growth.

Going back to the highlights for the third quarter of 2012 in slide 3 -- as we speak, TEN has a pro forma fleet of 51 tankers. This figure includes 48 vessels in operation; two DP2 suezmax shuttle tankers under construction, with expected delivery in the third quarter of 2013 and second quarter of 2013. The fleet is 100% double-hulled, very modern; 6.2 years, if you exclude the two VLCCs that are held for sale and have agreement to be sold before the year end. 21 tankers have ice-class capabilities, and 33 vessels in the fleet have secured employment of ranges from 1 to 15 years.

Thanks to our time charter philosophy, we continue to operate the fleet at a very high utilization rate -- 98% for the third quarter of 2012, when the average for the tanker industry in the third quarter has been around 80%.

Let's move to slide number 4. This bullet slide has the highlights of our press release. Paul will present in detail the financial results for the quarter, but a quick takeaway is the overall improvement in the net result; which still doesn't make us smile because it's a loss -- and the tight control of the expense side of the business, but always not at the expense of the safety. And, obviously, reported EBITDA that we have driven generated from all operating vessels.

The next slide lists of the fleet as it stands right now. Since inception, we have built a sizable, versatile, and very modern fleet to cater to the needs of our clients. Our crude tanker fleet today has 23 vessels, ranging from VLCCs down to aframax tankers. We have 26 product tankers. We are one of the largest product tanker owners in the world, ranging from aframax LR2s down to handysize. And we have two LNGs -- one in operation, one on order, and an option for a third one. The fleet has been built primarily with new building quarters in Korea and Japan before new building prices started rising.

The next slide is the employment slide. We continue the balanced employment strategy of the fleet, mixed with spot charters, COAs, [stay]pools, and period charters; with fixed rates and period charters with profit-sharing arrangements.

We currently have 16 tankers trading in the spot market, four vessels in pooling arrangements, and 29 tankers in period charters with fixed-rate and profit-sharing arrangements. This figure includes the two DB2 shuttle tankers, which will begin producing when delivered to TEN in the first and second quarter of 2013.

The next slide puts a dollar value for the current fleet employment. As of today, we have fixed 63% of the remaining available 2012 operating days; and 50% of the 2013 available fleet operating days. If we assume only the minimum rates, TEN has secured 1245 months of forward employment for 3.6 years per vessel, and over $1.1 billion in minimum gross revenues.

Overall, we are optimistic for the long-term prospects of our industry, the tanker market, and continue to position the Company to benefit from a sustainable recovery in freight rates when the upturn will happen, thanks to the profit-sharing element that most of our time charters have in place. We have 13 vessels in the fleet that have a profit-sharing element built in in their time charters.

Slide 8 demonstrates the track record we have in the sale and purchase, which is an integral part of our operation. Since we have announced today that we have agreements for two of our oldest vessels to be sold before year-end. And, basically, the key takeaway is that we have generated $280 million of capital gains since the New York Stock Exchange listing, which averaged approximately $29 million per year.

Let's go to slide number 9. This is the dividend distribution. This slide shows the history of our cash dividend distribution. We announced today a dividend of $0.05 per share to be paid on December 20, 2012. In total, since 2002, we have paid $9.58 in cash dividends; or approximately $374 million, and this compares with the listing price in our IPO of $7.50.

TEN's prudent business model and to generate returns throughout the shipping cycle is validated, particularly in the current market environment; where TEN stands out with its strong balance sheet, liquidity, modern fleet, and long-standing customer relationships. Shipping is a volatile and cyclical business, where a significant portion of the overall investment and return is based on the timing and pricing of the asset acquisitions.

Weak markets can present strong companies like TEN with the opportunity to expand significantly shareholder value for the long-term. And the Company's entrance in the shuttle and offshore sector, and the expansion in the LNG aims at that.

That concludes the operational part of our presentation. Paul will walk you through the financial highlights of the third quarter.

Paul?

Thank you, George. As you will have seen, TEN's Q3 results were far better than the previous third quarter. While for the tanker sector as a whole, it was a pretty rough quarter, even given the usual seasonal downturn.

Except for our spot suezmaxes, all categories -- especially the LNG carrier -- enjoyed higher rates than in quarter-three 2011. Bunker costs fell by one-third due to reduced consumption, mainly because we were spared that painful repositioning voyages of the two older VLCCs that occurred last year.

Quarter three revenue, after voyage expenses, was $68 million, against $59 million in 2011. Quarter-three rounded average daily TCE per vessel was $16,600, compared to $14,100 in quarter-three 2011. And for the nine-month period, $17,150 in these nine months, and $16,150 in the previous year's nine months.

Operating income was $0.8 million, against a $9 million operating loss in quarter-three 2011. For the nine months, operating income was $11.9 million, against $4.6 million last year, which included a $5 million capital gain. Excluding the nonoperating VLCCs, only four other vessels did not generate positive EBITDA in quarter three. For the nine months, all the operating vessels achieved positive EBITDA. Total EBITDA amounted to $26 million; $8 million more than in quarter-three 2011. For the nine months, $88 million was achieved.

The $10.4 million net loss in quarter three was a nearly $14 million improvement over the previous quarter three. And for the nine months, it was an $8 million improvement. Total quarter-three operating expenses were $33.1 million, about the same as in quarter-three 2011, despite the small increase in the size of the fleet. Some increase in repair costs due to extra drydockings was offset by savings in other categories, partly because of the weakening of the euro.

Daily average OpEx per vessel was $7663, slightly down from quarter-three 2011. Finance costs in quarter three were $11.3 million, a 27% fall from quarter-three 2011. Compared to the previous quarter, there was a positive swing of $4.7 million in bunker and interest rate swap valuations from the previous quarter three. In addition, cash paid on interest rate swap was $1.3 million less than quarter-three 2011. But cash received on bunker swaps was less by a similar amount.

Since August, six interest rate swaps have expired. In 2012, payments on these swaps were $14 million. We will increase cover, possibly soon, that it will be at a much lower rate, and with considerable savings. In quarter three, we repaid $30 million in loans and received $28 million in new loans. So total outstanding loans at the end of quarter three remained at $1.47 billion, and net debt to capital was 58%.

The new loans related to the two shuttle tankers under construction [being] pre-delivery financing of the building installments. A further $28 million in debt will be obtained in quarter four for the next-year installments.

This will be $47 million to be paid on each vessel on delivery early next year; again, through debt. There is $189 million remaining to be paid on our new LNG carrier. $21 million will be paid in early 2013; $53 million in 2014; and $115 million in quarter-one 2015. Debt has not yet been arranged for this vessel.

And this concludes my comments, and now I'll and to call back to Nicholas.

Thank you, Paul. Well, I think that -- I hope this has been a comprehensive description to the Company's -- both on the chartering commercial side and the financial side, for the last three and nine months.

And with this in mind, we would like to open the floor to further any questions. Thank you very much.

(Operator Instructions). Gregory Lewis, Credit Suisse.

Yes, thank you, and good afternoon. Hi. You guys talked about, in your prepared remarks, about medium- and long-term outlook, and what you seem to think about in terms of future investment opportunities. Now, clearly, when you look at where the balance sheet is today, there's really only so much that you can do in terms of investments, and potentially playing the next upcycle. When you seem to think about making investments at this point, where do you want to focus what availability of cash you have? Where do you see the best opportunities right now?

Thank you, Greg. On the conventional business, I think we are -- we have a very young fleet of vessels that is ready to take advantage of the upside in the market. So I think we would not -- we are not actually looking to do much volume expansion on our conventional business.

However, saying that, we are in discussions perhaps of selling two of our [very nice]. We are getting a bit -- because of the age of our fleet -- greedy, perhaps, here; 10-year-old suezmaxes, for a good returns, as you know is, we have the -- the majority of our fleet has been ordered at logical, pre-boom rates. So those ships, even today, have good -- would provide a good capital gain.

So, if we end up selling two of our older -- [202] suezmaxes, where we are seeing interest, we might consider, depending on the demands of our replacing them, with two -- one or two similar ships from the conventional business, as opportunities arise. So, that's the same -- could be -- it's not in the books right now, but could be for our VLs.

I think George mentioned that we have agreed (technical difficulty) of our own, the VLCCs. They serviced one for quite a peroid of the time. But they are -- our VLCCs are the only ships we operate that are pre-21st-century, so we're looking to replace them. If we see opportunities from a client with something like this, we might do.

I would say, in the remaining segments of our conventional business, we are content. I think we have a very good exposure from the products. This exposure has fared well for us in the last couple of quarters. In this quarter, in the fourth quarter, we are seeing quite a hot clean market in the Med, in the Far East; we're enjoying rates closer to about the $20,000s. And our 53,000-tonners are just all bit under that; and our 37,000-tonners; and I think we have a very good stretch of fleet on that side.

We are very content with our state-of-the-art [very echo] type aframaxes of Sumitomo's, which are specific ships built with 750 LOA so they can actually work as a panamax. Not to tire you, I'm sure you know our fleet. So, the short answer, on the main business, we're running -- might be doing replacements at low levels. Where we have seen, as you know, is we have ordered another LNG. We are negotiating a 20-year contract for that ship. But hopefully, as of next year, we will be able to announce that business.

And so, of course, we are expanding our shuttle participation, again based on long employment. So, the growth is more specialized; and the conventional growth will be on the replacements, most.

Okay, and great. That actually leads to my next question, because I think you may have mentioned it earlier on the call. But I think I've read elsewhere that Tsakos is considering expanding its shuttle tanker fleet. If that were to happen, when we think about the cash position on the balance sheet right now, what types of deposits would -- how much cash would you have to tie up, over the two-plus-year build cycle on that vessel if you indeed do go ahead and order one or two more shuttle tankers?

Well, as you know, we have two shuttle tankers that are going to be delivered first quarter and second quarter, and they will find a home. They have found a 15-year home for them. So I think we will be replacing the lines of credit for those ships. The actual final equity outflow on those ships will be, I think, south of $20 million.

No, I'm sorry, I was -- is there the potential for Tsakos to go out and order one or two additional shuttle tankers over the next couple of quarters? I think I heard or read that somewhere.

Yes, yes, yes, yes, yes. I think we are looking -- first of all, we are tying the business up. And we are looking to the payment [tenche] for those vessels. As I said, the payment [tenche] for the next couple of years will be south of $20 million.

Okay. And just one final question for me, and it's more on thinking about managing through the current market environment. Clearly, you made the decision to lower the dividend. And that's clearly a defensive move to get more cash back on the balance sheet. Given TEN's position and its balance sheet, would you say it is prudent to be going after additional acquisitions right now? Or would it make sense to batten down the hatches, boost up the cash position, and really not look at expanding at all?

Well, I think we are a Company that has stayed out of expansion mode, I would say, since 2006. That was our last expansion mode because we thought that the values of ships where a illogical, to say the least, at the time; and we were sellers of ships. As I said, we will be looking at opportunities and we'll be not be tying down the hatches.

There are many ways which we are looking to -- other than our increase in customers -- we will be financing our growth. And I think we have this cash that perhaps with you and we can bring that one of the ways when we feel that the big expansion is needed, is the move to the MLP structure which we are studying very, very closely. And that structure, I think, will provide us with about $300 million of additional growth when and -- the time we believe.

So, I think that is -- internally, we are doing -- we are not -- we are growing the Company conservatively with our existing resources. But I think we're preparing, also, when we see the values bottom. And perhaps there might not be there, but they are getting very close to the bottom. Then, of course, we will have the MLP structure, which we think very strong that will give a very nice advantage to the existing Company, and to the new company that will be provided.

Okay, perfect. Thanks for the time, Niko.

Thank you.

Noah Parquette, Global Hunter Securities.

Thank you. Following up on Greg's question on investments and the growing of fleet, where do you stand now on the LNG option? Is there certain points you want to make with existing new build in terms of arranging a charter, or bank financing before you exercise that? Or, what are your thoughts there?

As I said, bank financing is not really one of the priorities when we look at decisions in the Company's history. Employment policy is very important. So, as I said, what we are looking is to put the one -- the existing vessel, the firm order, on here, long employment, which hopefully we can do within January.

And at that time, we will decide if we want to go for the next option. So, basically, it has to do with the employment prospects. Because we understand that in this market, no one is going to take blind decisions on ordering ships down -- and when we speak about ships, talking about LNGs, which are not the really expensive ships.

So the employment of the existing order will -- then we will sit down with the Board, and decide if we want to have the option now or go for it later.

All right, that's very helpful. Thank you. One other question is, you have great charter coverage for most of your fleet, but on the aframax side you still have a lot of market exposure. Are you comfortable with that? Or are you looking to increase the coverage there?

Well, we could fix all our aframaxes today. But I think the levels we could fix them today, we would not be proud of. As you follow the market, as you know, no part of it -- I think 50% of our spot are working on contacts of [affreightments] in the carriage. And as we speak today, that goes to $25,000 a day in the last month or so -- four or five weeks.

That gives justification for us, keeping those ships on the spot market for now. The market is poorer in the Mediterranean. It stronger for our other two aframaxes in the Far East; where, again, we're happy we're getting close to $30,000, $35,000, on some of those ships. And the Mediterranean is in the very low teens.

And of course, then we're keeping our ice-class ships actually all over the -- around the North Sea, hoping that we will get a freezing winter. And then we will get the -- that's how we spread the aframax risk, which is, as you said, which is on the spot.

So far this quarter, I think it was a wise decision not to have fixed. We have three of them that are fixed out. The remaining eight are on the spot.

Great, that's helpful. Thank you.

Fotis Giannakoulis, Morgan Stanley.

Yes, good morning, gentlemen. We've seen that this quarter of the market, as you mentioned, is getting better. But let's take a conservative assumption that after this quarter, this is an anomaly. The market returns to the previous pool levels. Obviously, you have a lot of options to manage your cash flows. Would you be able to rank these options to us, if the operating cash flow is not sufficient to cover the schedule that repayments?

Well, as you -- hello, first of all -- as you see, we have been able to ever slightly increased operating income and deposit it, so far this year. We do not expect that the market, operating-wise, will turn negative. I think we have the resources -- I think it goes to $160 million -- to cover any shortfall from that.

We hope that it will not come to that. But I think our Company, for the last 20 years, has been paying principal and interest to all our obligations. And we're not actually looking for any possibility not to achieve this, at least for the next two or three years.

If things continue to be bad after two years, we will have to take other measures. But, of course, in the meantime -- and I think I mentioned this before -- the Company is taking measures to recapitalize and provide growth capital through various transactions, one of them being the MLP that I referred to in the previous question.

Is there any chance that we see, in order to increase your liquidity and potentially the cash available for growth, to you see any capital increase, possibly with family participating, or contributing to some new growth capital? Or we will see more traditional ways, apart from the MLP -- sale and leasebacks, for example?

Well, I think the family will always -- the management -- family will always participate [pari passu] about a year ago or so, to -- with any offerings. Leasebacks is another way that could be studied. And we have quite a few ships that make it very attractive, because we have very long employment, as you know, on a number of our ships; with first-class charters going up to 15 years, 11 years, 10 years. So that's another way we could do.

We would prefer, I think, the MLP. The MLP way is a growth way, with the long employments we are organizing. And, mainly, if we end up getting our 20-year charter on the next LNG, I think then we have one of the, I would say, more secure -- if you can say MLP's with first perhaps names, ranging from people like BG, Petrobras, HMM; anywhere from 15 years, 11 years, 20 years. So that will be a better way to do it.

But of course, as you correctly said, the sales and leasebacks could provide an additional $100 million-plus easily in our balance sheet, if we require it for growth.

Okay, gentlemen. Thank you very much for your time.

Joseph Sheer, SL Investments.

Yes, good morning, Nikos, John, George and Paul. Congratulations on a quarter that significantly included my expectations, concerning the operating environment that has been experienced during the third quarter, on both the revenue as well as the expense side. You had, obviously, great control on both.

I want to make sure that I understand fully what's going on with the VLs. And I believe at some point there was talk about using the two VLs perhaps as storage tankers on a short-term basis; and, therefore, they would produce some revenue. In today's press release, it suggests that they didn't operate at all, and there was 0 revenue from the two VLs that were held for sale. Is that correct?

Yes. Hi, Joe. While it is correct that there our one VLCC, La Prudencia, was tied up on a joint venture with [TK bankers] in creating -- in building an [FBSO] project for storage in the Far East, in Malaysia. Unfortunately, this did not go through. So we have decided that the expenditures of those ships are quite substantial, to keep them; they are our older ships.

In the last six weeks, we have a lot of interest for this type of vessels. And I think a lot of it has to do with the narrow-ish news of the main oil companies, of where there might be some sort of geopolitical event in the next quarter. And they are looking to buy those ships and use them mainly in the US Gulf or the Far East, as storage vessels. We have a firm negotiations with one of the large Chinese oil companies to provide them the vessels.

Great. And to follow up on this -- and basically, short answer is more than sufficient. But I believe you had mentioned, George, that the VL rates had jumped to the $45,000 per day. Obviously, that's newer vessels. What kind of a comparable jump has been experienced for VLs of the age of the two vessels that are held for sale?

Around $30,000 for an AG going is.

So, $30,000 versus -- I believe it was around $10,000 at the low, right?

(multiple speakers) That is correct.

Okay. So, I would guess, based on that, that the reserve that you took for anticipated loss on disposition is greater than will actually be realized. Is that a safe guess?

The loss on the sale of the ships?

Yes.

Now, I think it will be very close to breakeven. We do not expect any significant loss from selling those ships.

Well, you took a charge when you announced you were selling the ships. And the question really is, do you think the ultimate price that's realized will result in a lower charge than was taken back in Q4 of 2011?

No, no, I don't think so. Paul, what do you think?

Now, we brought, at the time -- we brought the values of those vessels down to practically scrap value, as it was then.

Right. But now that the market has improved, I would think that --

As it happens, yes. The interest that has been shown in those vessels over the past couple of months has been, fortunately, well over that, even though scrap rates have fallen. So, sale price will be effectively around that kind of mark. So we're not expecting (multiple speakers).

Could be around -- not a big variation from the charge that was taken.

No, no.

Okay, fair enough. Moving on to question two, the LNG tanker that is on order, Nikos has been flying around the world trying to negotiate a new contract for this thing for many months now. Could you characterize -- and obviously, one day it happens, and -- boom, that's it. But could you characterize at all, Nikos? Do you think you're closer? Do you think you're at the -- at basically the same point you were at three months ago? And what do you think in terms of the rate that will ultimately be realized versus the $80,500 that the last one was leased out at?

Well, as we are advised, and I think the feeling we get is really not to be on the LNG -- the prospects from the brokers are that we should really wait rather than charter a vessel out. So we're not -- we are only looking at the really strategic, industrial offers, rather than -- if we have offers we do to charter the ship for three years or five years today --

You'd want to go longer-term, I'd assume.

We have them; but we are advised that we should wait until the ship is going to be delivered in two years, which would be within 2014; closer, to really get the better rate. We're only looking at really long-term, strategic businesses that will provide other business structure. So I would say, yes, we are closer. But we are not in any real hurry. Because the full advice we get from the brokers who specialize in this market, is -- it pays to wait.

Got it. Okay, that was the sense I had. And with regard to the second LNG carrier that you have the option on, I thought the option on that expired sometime in September. Had that been extended, or --?

Yes, it has been extended after the [EBITDA] that we're participating into now, so which we hope will be at the end of January.

Okay. So, the option now goes to the end of January, right?

That's right.

Perfect. Let's see if I have anything else here. Yes. Last but not least -- the last we spoke, you were relatively close to breaking a covenant on one of your small bank loans. And it had been mentioned that you were in negotiations to either pay that off, or have the covenants eased. Has that been taken care of? And where do we stand with other bank loans that are coming due in the relatively near-term?

This situation is not much different from the previous couple of quarters; where, yes, there have been shortfalls, but they are manageable. We don't have any serious problems on our backs. We have great relationships with our banks, and they respect us a lot. They recognize our strengths. They recognize our cash flows. And so the position is pretty much the same as it was in the previous quarters.

Good. Glad to hear it, because I had gotten some reports that some of the banks, Deutsche in particular, basically wanted out of the shipping industry, and they were just calling in all the loans. And, obviously, that's not the case with TNP, correct?

Yes.

Okay, great. And, lastly, congratulations on cutting the dividend to $0.05. I think it was a great move in terms of getting rid of the negative arbitrage that you had in paying out, effectively, 19% on money that was costing you a lot less than that. And I think you -- I've got great confidence that you'll utilize that cash flow savings in a profitable and great, long-term fashion.

So, I was glad to have seen the cut. And obviously it's great that it was eliminated. But I think the cut was the right thing. I don't know if I'm in the minority or the majority, but congratulations. And I'll look forward to seeing your representatives at the Capital Link conference next week. Thank you.

David Beard, IBERIA.

Good afternoon, gentlemen. Two questions -- and first, I would like to echo the congratulations on cutting the dividend. I think that was a prudent move. First, would you comment a little bit on the near-term movement of rates, and what accounts for the difference between ship classes, where we are seeing the VLCCs quite strong and the suezmaxes less so?

Well, yes. I think this is a very good point that you're making. And the explanation is that this surge of VLCC market has happened because of, as I mentioned before, demand and the Far East; but, also, geopolitical tensions that make people want to be able to get as much oil in those ships as possible.

So it is logical for the largest ships to start getting the effect first. As soon as those ships, then, are covered, it really moves down to the other categories of vessels, like the suezmaxes. So, you are right. We expect this to have effects on the other categories as winter moves in; and, of course, some sort of tensions all over the world provide.

Okay. And then, lastly, to shift back to your thoughts relative to the MLP structure. Would you care to elaborate what types of assets you would like to include, and what type of charter duration may be included in that package?

If you're planning to invest, yes, I will. No, I'm kidding.

(laughter)

Well, as I said, we are looking to -- in a sense, TEN will be the general partner. And TEN will be the majority owner of the MLP, anyway. What we are looking to include in there, are the offshore as we call them; the gas and offshore vessels; shuttle tankers; LNGs -- that have a long employments.

So, it will basically be as different segments of our business, which will be run -- you need the expertise to run it all so differently. And you will need a more expert -- sorry, Chairman, I didn't mean this -- Board of Directors that focuses on the LNG and the shuttle tankers. And I think that will be provided when this structure comes in.

That's very helpful. I appreciate it. Thank you.

Urs Dur, Clarkson Capital.

Good morning, good afternoon. Can you remind the audience of your exposure to the product tanker business for 2013 -- what's covered, what's not? And then I wanted to get into your views on that space.

Well, yes. As George, I think, has said, we operate one of the largest product carrier fleets that is around today. This includes eight of our -- eight panamax product carriers. It includes three aframax LR1s, as we'll call them -- LR2s -- aframax product carriers. It includes six 53,000 tonners and it includes another eight 57,000 tonners.

So it's a really very large product carrier fleet, of which -- out of that very large fleet, about one-third of it can take advantage of the spot market immediately. And another third can take advantage of it through profit sharing arrangements.

I think it's a market that has served us well. The smaller ships -- looking at the rates that they're making today is quite the impressive. On spot value, so please do not annualized those rates. Because then we would have to increase the dividend again. So please -- as I see it today, but we're fixing those ships in the Black Sea; making $35,000 for the 37,000 tonners; 34, 27, 19.

So they're very healthy. We do not expect this to be annualized. It's a seasonal event. But as long as they stick to the mid- to upper-teens, I think that we'll be well above our breakeven point.

Great. And your view on the broader market -- as you said, some of this is seasonal. But we have demand from the Middle East to Asia being very strong, heading into the Northern Hemisphere winter. And the Atlantic basin is tight, with relatively low inventories. Do you suspect this will be a stronger seasonal period than in previous years? Is this unprecedented? Or is this just better than average?

Well, let's put it -- it is not unprecedented for those of us who were working here before 2008. And don't forget, we are completing four years of a downcycle market, which has been painful. We have not -- we were able, as a Company, to be profitable in 2008, 2009 and 2010. 2011 was our first non-profitable year after 18 years in business. It seems that this year will be -- and hopefully 2013 will be the turning point.

So it is not unprecedented. It has to do with the drying up of supply that was huge -- as George said -- almost close to 30% of the tanker order book was, in 2009, thrown in the market on an annual basis. Today we're down to 11%, and diminishing. So, I think it will be stronger; and looking forward to enjoy some of those rates.

Right. Okay. What is your view, if you have one, considering growth there, you've seen a lot of -- well, not a lot -- but you've seen significant interest in the Ecospec, MR space, and new builds. What's your view on the Ecospec discussion at this point in time?

Well, I think our view, we have a very modern fleet, if you appreciate. So our view is for any vessel which is 10 years or younger, you can -- the investment required, which we have done with our technical team here, and the upgrades we have done. And no shortage of measures like the trim of the ship, and the size of the propeller of the ships, the paint we use, the [noxels] in the engine.

So, by spending a fraction that what you will need to build a new ship, you can buy 3% to 5% to what, supposedly, a brand-new ship or eco-ship can do. So I think, for anybody who has an older fleet -- which is after the second, third space of survey -- I don't think it's worth making the investment. But for young ships like ours, I think the difference is minute. And it can be accomplished without providing more oversupply in an oversupplied market.

So, I think the whole industry -- other than some people that might have old [events] so they have to say this -- but the whole industry is looking to upgrade their current ships. What the industry has been doing since the crisis of 2008, also slow steaming, has provided environmental preservation and a huge economy savings -- optimization.

Okay. And then, as you've mentioned before, finally, you have some exposure to the product tanker space. I think a number of people are relatively positive about that space; and earnings could significantly, year on year, on average, improve, which would assist your bottom line significantly. And third quarter was pretty poor. But wouldn't that indicate that eventually you guys could consider, over the course of 2013, moderate dividend hikes again?

Yes, I think this is our intention. And the management is the largest shareholder and, of course, enjoys the dividend significantly. Our intention is to see how the year goes. And, depending on what our Chairman will say, and the Board -- that we would like to be able to, at the end of the year, gave a hike on the dividend.

So, you're not hoping to just stay at $0.05 for the next three years?

No, I hope not. I have three kids.

Understood.

Our corporate governance structure -- we rely on management to make recommendations relative to the dividend. And then, obviously, we prudently examine our financial wherewithal, and decide if we want to underwrite and approve the recommendation. I have heard Niko's comment, and I hope when we review the financial structure of our Company at the end of 2013, that his wish will come true.

Great. That's very helpful. Thank you, guys, for your time.

Joseph Sheer, SL Investment.

Yes, thank you; a very brief follow-up. I remember that you received virtually no premium on the significant number of ice-class vessels in your fleet last year. What is your best guess in terms of the likelihood of them realizing at least a modest premium versus the non-ice-class portion of the fleet this year? And I know you are not weather forecasters; but you've got a better guess than I do.

Well, I think we see charterers interested in chartering ships for six months, at double the today's spot market. And we will -- hopefully we will be taking advantage of this type of charters in the next -- starting on the middle of December. So, yes, be glad expecting a colder front. And, I think, all companies also are bracing for something like that. And that's why we are positioning our ships to take advantage of that for the next four months.

And what percentage did you mention, Nikolas, that are being charted chartered, and what percentage higher than current rates?

Are you talking about the whole fleet? We have 33 of our vessels --

No, I know what the fleet is. But I'm talking about current (multiple speakers) current rates that are being contracted for six-month periods, versus the spot rates that you're currently getting.

Well, today, as we said, if you have a $16,000 continent or Mediterranean aframax market, you get about $22,000 for the ice trading offered to you by the oil companies.

Okay, so the premium is $6000 on $16,000 -- it's sort of 28%, 29%, something like that. At present versus last year, was virtually no premium, if I recall correctly. Is that accurate?

That's right, yes.

Okay. Thank you very much for taking the follow-up.

Thank you. There no further questions at this time. Please continue.

Well, again, thank you very much. We would like to wish everybody a very peaceful Thanksgiving; enjoy the turkey. And looking forward to be able to have better results for you when we report the next quarter.

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