Tsakos Energy Navigation Ltd (TEN) 2014 Q1 法說會逐字稿

Thank you for standing, ladies and gentlemen, and welcome to Tsakos Energy Navigation conference call on the first quarter 2014 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.

At this time, all participants are in a listen-only mode. (Operator Instructions).

I must advise you the conference is being recorded today, Friday, May the 16th, 2014.

I now pass the floor to Mr. Nicolas Bomozis, 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 Bomozis of Capital Link, investor relations advisor to Tsakos Energy Navigation.

The Company released its financial results for the first quarter of 2014 this morning. The press release has been distributed publicly. In case you do not have a copy of it, please call us at 212-661-7566, or email us at ten, t-e-n, @capitallink.com, and we will email a copy to you right away.

Please note that parallel to today's conference call there is also a live audio and slide webcast, which can be accessed on the Company's website on the front page at www.tenm.gr. The conference call will follow the presentation slides, so, please, we urge to access our presentation on the webcast.

Please note that the slides of the webcast will be available as an archive on the Company's website after the conference call. Also, please note that the slides of the webcast presentation are user-controlled. That means that 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 1995.

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, Nicolas, and good morning or good afternoon to everyone. As you know, I will retire as a Director and Chairman of the Board after 20 years. Today, permit me a few moments of reflection.

After military service, including the Korean War, I returned to the US to complete my college studies and to earn my MBA from Kellogg in 1956. The first job in my professional career was as a securities analyst. I continued in the investment research area for 14 years as an analyst or director.

In 1970 I switched careers to commercial banking, and I had the pleasure of opening and managing our bank's Athens branch. I later headed up ship finance and non-US real estate, before moving on to the Latin American operations.

In 1976 I drew the short straw and was called back to the USA to head the bank's real estate department, which, along with all of its peers, was in great distress. Later, I headed the US commercial banking operations. In 1980, I was made the Chief Credit Officer, and overall risk manager, a responsibility I held through retirement in 1990.

While in investment research, I sat for the three test process for the first class of CFAs. I have proudly maintained that designation for 50-plus years. I also served as a National Director of the Credit Managers Association, and on President Bush's -- number one -- Credit Standards Advisory Committee.

I share these reflections to establish my credentials to comment about corporate financial reporting and commentary. Investors and investment analysts have my sympathy. Today I read many financial statements which my head shakes in dismay.

A three-card Monte artist would be envious. I am very proud of our management, which, with the strong support of TEN's Board of Directors, has valued transparency and candor. The financial statements reflect the desired intent to communicate conservatively and clearly. There are no smoke screens or double talk. What you see is what you get.

Likewise, management's commentary is equally open and humble. There is nothing less certain than the future. Often crystal ball is foggy in a highly cyclical industry like shipping, but our management strives to communicate with you, the investors and analysts, openly and honestly.

As a participant in this process, I congratulate management for these high standards. I am confident that the incoming Chairman, Takis Arapoglou, who takes the baton later this month, will reinforce this ethic.

Well, thank you, Nicolas, and I'll pass it to Nikolas Tsakos.

Chairman, thank you very much, and today is a very important day for us, here in TEN, having our Chairman to meet with us in his title, with his current role, for our release for the last time. But he has promised to be around a lot. All of us want to thank him for his guidance, and mentorship through 20 years of shipping cycles.

He became our Chairman in June 1994. Our Company was established in October 1993, so we were an infant company at the time with 4 older vessels with a deadweight of 250,000 dead weight tons, smaller than one of our VLCCs or than our VLCC.

He is stepping down 20 years later to the date, as a very well organized Chairman, as Tsakos is coming of age -- we're actually becoming of drinking age now. We're getting our 21st anniversary, and our fleet consists of 60 state-of-the-art vessels, 6.2 million deadweight tons of carrying capacity, $1 billion in profitability over the years, more than $380 million in dividends, and you're leaving the Company with a very strong balance sheet, and back to profitability, as our results have shown this quarter.

I personally want to thank the Chairman for steering the boat on course and being my mentor for all these years. I'm happy to know that his advice will always be available, since he has agreed to stay on as an advisor to the Board. So, thank you, Chairman, and to many more.

Thank you.

And with this, I would like our COO, George Saroglou, to give us an update of this quarter and what we expect.

Thank you, Nikolas. It's my pleasure to speak with all of you today and provide you with the details of the operation of another quarter.

For those of you who are connected to the Internet and our website, there is an online slide presentation. We will try to follow the format of this presentation during the call. Let's turn to slide number three where we have a snapshot of the diverse and versatile fleet TEN currently owns, which enables the Company to take advantage of market opportunities and spikes.

We have 42 tankers that carry crude oil, consisting of 1 VLCC; 12 Suezmaxes, in this number, we include 2 modern Suezmax tankers whose acquisition we announced today; 17 Aframax tankers, 8 in the water and 9 new building vessels under construction for the Statoil business; 2 DP-2 Suezmax shuttle tankers on fixed long charters; and we have 12 out of the 26 product tankers in the fleet engaged at the moment in crude trade operations, resulting in 35 vessels out of the 48 vessel operating fleet trading crude oil. We have also 2 LNG vessels, including 1 in the water, and 1 on order.

The next slide shows the growth our Company has experienced since going public in 1993 in the Oslo Stock Exchange, where, as our CEO and President, Mr. Tsakos, said, we started with -- modestly with 4 vessels and 250,000 deadweight tons, but by the time we floated the Company on the New York Stock Exchange in 2002, we had gained significant size with 26 vessels and 2.3 million deadweight tons, and since then we have doubled, more than doubled, every category in every metric of the Company, and right now we have a fleet of 60 vessels with -- a pro forma fleet of 60 vessels, with 6.2 million deadweight tons.

Moving on to the market -- our outlook of the market, the first quarter of 2014 exhibited signs of levels that spot-freight rates for crude tankers may reach when market fundamentals are favorable. The spike in the spot-freight rates benefited in our case our spot and profit-sharing trading Suezmax and Aframax tankers. Rates surged to the highest level since 2010 for VLCCs and 2008 levels for Aframaxes before easing.

Despite the easing that we have seen, which is normal, asset values for modern tankers continue to go higher. The overall sentiment is positive again, and with limited supply growth for crude carriers, at least for the next 18 months to 2 years, the prospect for the crude sector is very good.

The next slide gives some market highlights with the global activity has been continuing to strengthen, and is expected to improve further in 2014 and 2015. For the first time since the crash of 2008, much of the growth is expected to come from advanced economies. So, in 2014 and 2015, global GDP growth is expected to grow 3.6%, and 3.9%, respectively, up from 3% in 2013.

Global oil demand will grow 1.3 million barrels -- grew 1.3 million barrels in 2013, and is expected to grow by the same number in 2014. At 92.8 million, the expected global oil demand for this year, this is a record number.

The order book, especially for crude tankers, is still low by historical standards. Suezmax and Aframax tankers expect little supply growth in the next two years, on average, less than 1% growth in 2014-'15 for the Suezmaxes, negative growth in 2014 and flat growth in 2015 for Aframaxes.

Far Eastern yards have covered their order books well into 2015. Most of the orders in the last 18 months have been on product tankers, MRs, and LR-2s. The overall tanker order book is now at 14.4% of the existing fleet, down from almost 40% back in 2008, and 22.3% in 2010. The end result calls for modest global fleet supply growth over the next 2 years.

On the first quarter facts and highlights, at the end of last year we announced a strategic alliance with Statoil, initially for 5 Aframax tankers, which during the first quarter expanded to 9 vessels. It's a milestone transaction for our Company, since these 9 vessels will have another 6-year charter, with extension options attached, which, if exercised by Statoil in full, will run to 12 years.

This transaction serves TEN's stated policy of owning and operating a young fleet. These 9 ordered vessels did not put any strain in the tanker order book, as these vessels are purpose-built to serve specific client requirements. In TEN, we believe in growing the Company and in building the fleet responsibly.

The Company's pro forma fleet of 60 tankers includes 48 vessels in operation, 9 Aframax crude carriers under construction for delivery in 2016 and '17, 2 more Suezmax tanker sister vessels to Suezmax tankers already operating in the fleet, and 1 tri-fuel LNG vessel under construction.

The fleet is 100% double hull, very modern. The average age of the fleet, including the 2 Suezmaxes that will join the fleet in June and July of 2014, is much younger than the average of the world tanker fleet.

21 tankers have ice-class capabilities, and 20 vessels out of the Firm's 48-vessel operating fleet has fixed-term employment. We have 9 vessels that operate in profit-sharing charters that, together with the fixed-term vessels, range from 1 to 15 years.

We have 19 vessels that trade currently in the spot market, and together with the 9 that have profit-sharing arrangements, we have 28 tankers that can take full advantage of market spikes.

Thanks to our balanced time charter philosophy, we continue to operate the fleet at a very high utilization rate. 98% is the rate for the first quarter of 2014, when the average for the tanker industry in 2014 is not expected to be higher than 86%.

The next slide has the main financial highlights of our press release -- significantly improved numbers in every category, and much stronger profitability than the profits reported for the first quarter of 2013.

So, looking at the bullets, we see the 34% improvement in voyage revenues, $130 million in the first quarter of this year, versus $97 million for the first quarter of last year.

44% increase in the EBITDA over the figure of the first quarter of last year. 153% increase in operating income, which translates to $24.5 million versus less than $10 million in first quarter of 2013.

And back to profitability, $14.6 million, strong number, versus $1 million in 2013.

We also maintained a very strong balance sheet and cash reserves, with $204 million cash at the end of the quarter, compared to almost $172 million at year end 2013.

We have an impeccable debt service record since the crisis started back in 2008, while we maintain firepower to grow responsibly with new building orders against projects with long-term employment, like the two shuttle tankers, the acquisition and long employment of Suezmax tankers Spyros K and Dimitris P, and the Statoil deal. Also, one of the vessels that we are acquiring -- we announced acquiring today has a significant remaining charter to a major oil company.

The next slide, number nine, presents the corporate fleet as it stands right now. Again, very modern, diverse, purpose-built fleet.

As you can see, we focus in three market sectors -- conventional tankers, which cover both crude and product tankers; LNG; and shuttle tankers. We have the first 2 (inaudible) shuttle tankers with our 15-year charter to Petrobras. We have 1 LNG in the water and 1 tri-fuel vessel under construction.

And since 1997, we've built exclusively with new building orders in Korea and Japan.

The next slide shows the clients of TEN with whom the Company is doing repeat business over the years, thanks to the quality of service, fleet modernity, and the safety record of the enterprise fleet. In the same table, besides the names, we also list the top clients of TEN and the share in the revenue for the Company during 2013.

The employment slide is slide 11. We continue to have this balanced employment strategy where the corporate fleet is fixed through a mix of spot charters; contract of affreightment; and pooling arrangements; and period charters with fixed rates and minimum rates with profit-sharing arrangements. We have 20 vessels on time charter with fixed employment, 9 vessels in profit-sharing, and 19 vessels trading a combination of spot, CoAs, and pools.

If we put a dollar value on the above in the next slide, as of May 15, we have 57% of the remaining available 2014 operating days, 36% of the available 2015 fleet operating days, and 23% of the 2016 operating days. If we assume only the minimum rates, TEN has secured 898 months of forward employment or 2.3 years per vessel, and $823 million in minimum gross revenues.

The next slide presents the Company's track record in the sale and purchase activities, and the key takeaways here is that the sale and purchase is an integral part of our operation, as this record indicates, and also the fact that fleet modernity is a key element of our strategy.

We have shown almost $280 million -- we have registered $280 million capital gains since 2002, and we have reinvested these capital gains in the fleet by ordering the majority of the new building tankers before new building prices started to rise.

In a current environment of rising asset prices, TEN is looking to sell some of our older tonnages and replace with modern recent tonnage, as the acquisition of the 2013 and 2012 Suezmax tankers shows.

The last slide, slide 14, shows the history of our cash dividend distribution. The next dividend of $0.05 per share on the common shares will be paid on May 22nd. We have announced today another dividend to be paid on August 14, 2014. In total, since 2002 we have paid $9.83 in cash dividends or approximately $390.4 million, and this compares with a listing price in our IPO of $7.50, which is adjusted for the November 2007 2-for-1 split.

That concludes the operational part of our presentation. Paul will walk you through the financial highlights for the first quarter of 2014. Paul?

Thank you, George. In quarter one last year we achieved a very welcome net income of just $1 million. One year later, net income for quarter one has increased nearly 15-fold to $14.6 million.

With two new shuttle tankers and the dynamic crude spot market, revenue, after voyage expenses, was $96 million against $73 million in quarter one 2013. Average daily TCE per vessel increased 25% over the prior quarter one to $22,750.

Crude carrying Suezmaxes and Aframaxes earned significant higher spot rates than in quarter one 2013. A number of product carriers also earned impressive spot rates, but in general the average rate achieved by the product carriers was about the same as in quarter one 2013.

Voyage expenses increased due to 24% more days on spot voyages and some longer-haul voyages, offset by an 8% fall in bunk prices from the prior quarter one.

EBITDA of $49 million was 70% over the recent quarter four. All vessels earned positive EBITDA except for 2 vessels, 1 of which underweight drydocking.

While operating expenses increased from the prior quarter one, much of this was due to the shuttle tankers having higher operating costs than conventional tankers, but they also earn more than most.

Also, crew costs were up due to wage increases, modest new taxes, and a weaker dollar. There was also heavy resupplying in quarter one after a lean quarter four, however, we expect the euro to weaken in 2014, and timing of supplies to even out over the year, reducing daily average OpEx below the quarter one level.

Depreciation increased by $1 million due to the impact of the shuttle tankers, offset by reduced depreciation on the 4 oldest vessels, as a result of the impairment charge incurred in quarter four.

Finance costs were similar to quarter one 2013. Reduced debt and the expiry of expensive interest rate swaps helped keep total finance costs down.

Total debt fell by $26 million in quarter one to $1.35 billion outstanding. Net debt to capital fell to 51%, and, with improving valuations, leverage fully restored to compliance at 62%.

Committed new building capital expenditure relates to the construction of 9 crude Aframaxes and 1 LNG carrier. Remaining payments in 2014 amount to $78 million, with $57 million next year.

We are currently finalizing related financing arrangements for the Aframaxes with prestigious lenders at competitive terms which allow pre-delivery drawdowns. We are buying 2 modern Suezmaxes for $121 million, and negotiated related finance of $80 million at competitive terms. We forecast the revenue from these vessels will add a meaningful contribution to the bottom line.

Finally, we hold over $250 million in cash, designated primarily for known capital expenditure in the next 12 months, while allowing us to give serious consideration to other attractive proposals to TEN.

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

Thank you, Paul, and we will be very happy to answer any questions from anybody on the phone, and we are happy that we are back in strong profitability, and are looking forward for this year to be a very successful year for TEN, as our business is growing. So, please, I will open the floor. Thank you.

Thank you very much, sir. (Operator Instructions). From Stifel, your first question comes from the line of Ben Nolan. Your line is now open, sir.

Yes, thanks. This is Ben.

So, my question is on the Suezmax acquisition. First of all, it seems like a pretty good price, although it was -- you did buy it from an affiliated company. I guess my question is, how exactly do you come to those prices, and then a follow up to that, are there any other assets that would be a good fit that maybe we could see similar transactions on in the future?

Yes, hi. We have an independent committee that deals with this. It does not happen very often, but usually all the tanker assets are owned by TEN. So, I do not see anything like this happening again. Those were 2 ships, actually, that were ordered as an en bloc decision for 4 vessels in order to get better prices, and, at the time TEN did not still have the capacity to absorb them, so I think it was -- it became a home.

And it seems that the -- we get comments from one of the analysts that this is a very good price for us in TEN, so it seems that our independent committee did a very good job --

Yes.

-- by doing this, which means that it's based out of London, and they actually to all -- to three of the big brokerage houses and then they come with the price that they believe it's fair.

Yes, I agree it does seem fair to maybe even a good price, but associated with that, I think 1 of the 2 vessels had a time charter contract into the second half of 2015. Could you maybe, just for modeling purposes, give me a sense of where that rate might be, or, at least, the annual EBITDA that you would expect it to generate?

It's in the mid-20s.

Okay.

It's very accretive. It's with a first-class name, with whom we will be developing much more business as we go forward.

Okay, great. Well, that's good. And then lastly, I know that you guys have been sitting on and pushing back the option for that LNG vessel. Do you still have the option for the third LNG vessel? And if so, or if not, I mean, what is your thinking with respect to that segment of your business, going forward?

That's a very good point. I think we have -- I think, as George mentioned, we are, perhaps, one of the few companies out there that have only built ships in specific areas in Korea and Japan. We have not yet tested the more exotic places in the world to build ships, so that means the latest, big guys like Hyundai are very close. So, yes, if we wish, we have the option out there. But we might consider, depending on what our clients' needs are, to replace the option of the LNG with 2 VLCCs.

Okay. That's interesting. All right.

As George said, we are only -- we are building responsibly. We will not build the VLCCs just for the fun of it to make more, to put more tonnage in the market. We will only build them against specific long-term charters. So, this is something that we try to do and protect the market.

Because what happened in the quarter we are reporting, it's very obvious that the supply and demand is so close right now to equilibrium that a small event like a much colder winter than expected, et cetera, et cetera, created a huge push to the market. So, we are there and we don't want to spoil it.

(multiple speakers)

Yes --

(Inaudible) to spoil it.

Yes, that makes sense, and is there a strong, or are there charterers out there, similar to what you did on the Statoil deal, who would be interested in taking VLCCs on long-time time-charter contracts? Is that something that is relatively easily done, do you think?

I think I mentioned this on the road show that, yes, there are very few companies of our size, strength, and operational capabilities left, unfortunately, so the peer group has shrunk to almost a handful. So, it -- we are seeing a lot of business coming on our -- to our way from major oil companies for long-term charters. So, not only in VLCCs. In -- the vessels are too specialized.

So, you are correct. There's much more business than a year ago, which also shows that the oil majors believe that the market will be turning.

Okay. All right. Well, that's all very helpful. Thank you, Nick, for the time.

Thank you.

Thank you very much, sir. Now from Morgan Stanley you now have a question from Fotis Giannakoulis. Your line is now open, sir.

Yes, good afternoon, and thank you. I also want to thank the Chairman, Mr. Stavropoulos, and wish him all the best to his new step in life.

And I want to go ahead with a few questions about the MLP that we discussed at the previous earnings call. You said that you might be thinking of doing an MLP late this year or early next year. How are these plans developing? Have you started drafting, and which vessels do you think will be eligible to be part of this MLP?

Yes, thank you for this one. As you know, we are -- we cannot do much for the next 90 days, but, of course, we are planning, and right now we, depending on the market conditions, we would like to, after -- in early September, we would like to be able to start finalizing the details for the MLP and leave to the market conditions to see if it's going to be October-November or January-February the best time to close it.

It will initially include the 2 LNGs, the 2 shuttle tankers, and the 2 vessels, the ships which we just bought, the Spyros and the Dimitris, all of them with long employment, 9 years, 8-1/2 at that time, between the conventional Suezmaxes with profit sharings, 13 years remaining asset time for the shuttle tankers, 2 years on the LNG -- on the existing LNG, but, hopefully, by that time it will have been fixed together on an en bloc deal with the new LNG.

So, that will be the ships, and then, as of the beginning of 2016, we will be dropping the initial Aframaxes or the other ships that by that time we will have contracted with the oil companies.

And where does your -- where do you stand regarding the chartering of the LNG vessels? One of them is expiring quite soon, in a few months, so you will -- I assume that you will need an extension in order to include it into the MLP.

Oh, no, no, no. No, no, it is -- actually, it's been extended. It's actually now it's going to -- with the same rate and expiring in the middle of 2016. So, we have two more years for the existing vessel. This is --

You're absolutely right. And do you think that you're going to have an extension on this vessel before the time of the MLP?

Yes, I mean, we are working right now on a dual deal which the shipper will take the new ship at a nice rate and also extend the Neo Energy.

Thank you for that. That's very helpful.

I want to ask a little bit about your earnings and your EPS calculation. I was running some quick and dirty estimates of the market value of your fleet, and it seems that there is some difference with what you have in your books.

How would your earnings per share look if you had marked to market the vessels in your books?

I'll give you to Paul.

Yes, I'm not quite sure where you're coming from, Fotis. The earnings per share are calculated based on our operational revenue and expenses, and the valuations -- any movements in valuations are not taken into account in earnings per share.

You might have a problem in calculating earnings per share if you haven't realized that we deduct -- although it is clearly shown in the income statement -- that we do deduct the preference dividends, preference stock dividends.

No, Paul, what I'm referring is your depreciation, if your depreciation reflects -- that you have in your -- that you show in your income statement reflects the actual depreciation of your vessels and whether it is overstated or understated?

Ah. Well, I think we state our depreciation fairly accurately. I mean, one doesn't know how long a ship is going to live, and our residual value is based on market prices. I think the only way that depreciation might be affected if we actually impair vessels, like we did in quarter four, and that did have an impact on the 4 oldest vessels that we impaired, and that has an impact of about $0.5 million a quarter. So, that did impact our earnings per share.

Okay, so, that might be on these older vessels, you think that the last one that you have, you think that there might be another impairment, going forward?

No, these were the 4 oldest. I mean, we do an impairment check every quarter. There was no indication that they needed further impairment. We will look at them closely. But the rest of the fleet, as George was saying, is very new, and the likelihood of having to do another major impairment is distant.

We follow US GAAP rules, and we can't do anything about taking into account valuation -- movements in valuations of vessels except through impairment.

Okay, thank you very much. One last question about the market. We have seen that it has been quite volatile. The first quarter was quite good and late last year, but the second quarter seems to be developing worse than expected. What -- why do you think this has been happening, and how do you see the latest part of the year developing, and what kind of rates do you expect for Suezmaxes and Aframax vessels?

Yes, well, you are correct. I think the first quarter, as I said, we had -- because of mainly weather conditions we had a very good order book, as it stands today for maybe the tanker vessels. It's well below the average of the last 10 years. So, with a little more demand, we had very strong rates.

This had led the oil companies that I would say they were, of course, unprepared for the strength of the market in the first quarter, to go out and look for companies like ourselves and others to provide long-term business where we're looking for the minimum rate and the profit sharing.

I think the second quarter started slower. We are facing a lot of geopolitical uncertainty. Some of the routes are like it was a year ago. We had a big lack of cargoes in the Mediterranean because of the Libyan problems, which still remain. Today we're facing the same, mainly with the vessels like the Northern European trading starting from Primorsk. (Inaudible) we're seeing that because of, also, some of the measures taken against Russia less and less cargoes coming out of this market, which, of course, at some stage, will have to be in place.

So, that's why we hope that very soon the market will come back to normal. It will either be replaced from (inaudible) and we're seeing that right now the United States is discussing to release some and allow export of some of its cargoes, and, of course, this will create a big long-haul voyage market.

So, I think we are in a nervous geopolitical market right now, but it will sort itself. Otherwise, we see China building up its strategic reserves, as we speak.

So, in general, we are not expecting to have a similar as we did in the first quarter, but I think we're looking at -- calculate, if you would ask me, I think we are looking in the mid to upper 20s for Suezmax rate for the remainder of the year.

Thank you very much, Nick. That's very helpful.

Thank you.

(Operator Instructions). Thank you. You now have a question from Euro Pacific Capital from Mark Suarez. Your line is now open, sir.

Hi. Good morning, gentlemen. Thank you for taking my questions here. I just have a follow-up question on your alluding to strategic alliances similar to Statoil. I'm thinking about, should we think about a transaction similar to that in terms of new building programs with guaranteed charters within the tanker industry, or are we thinking more of the LNG space? What are your preferences in terms of the segment that you're aiming to maybe go into a similar transaction?

And should we be thinking about this as a 2014 event or this is more like a long-term, 2015-2016 kind of thing?

I think we are looking at both. Of course, the ships, if we are going to go for new buildings, which, again, it's not our preferred route. We are trying to give charters to existing ships. You will be seeing us doing this like (inaudible) charters with existing ships among the majors, but many charters need more modern ships, ships that are built specifically for their needs.

So, actually, the deals will be here in -- they will be signed in 2014. The actual deliveries of the ships will be, I think, from 2016 and onwards for the new vessels.

Got you.

I think -- I believe that the next, within the next maximum six months we will be announcing a couple of transactions, starting transactions similar to the Statoil, which we're working right now on.

Oh, okay. That's very helpful. That sounds good.

Now, I'm sorry if I missed this because I got cut off by (inaudible) minutes. Can you just break down your remaining CapEx for the third and fourth quarters, 2014, and then, '15? I'm sorry if I missed this, again, I just couldn't hear it.

Yes, sure.

So, our CapEx for this year, as far as the 9 Aframaxes are concerned, we've paid $46 million in quarter one, and we're going to pay another similar amount, $46 million in quarter three. And then in 2015 there will be a $36 million payment, and then 2016 when we start to get the deliveries, it goes up to $180 million and 2017, $155 million.

Most of it will be financed.

And we will get pre-delivery drawdowns, as I mentioned in my talk.

Okay.

On the LNG carrier, we've already paid $52 million in prior years, so we only have one payment this year in quarter four of $31 million, and next year $21 million, and in '16 on delivery -- and this is depending on the extras and what we decide about the LNG option -- it could be between $105 million and [$107] million.

Got you. Okay, that's clear enough.

Now in just -- just kind of a market question. We have actually seen over the past, I would say, six months increased financial distress sales. And now, I don't know if you guys are looking at those types of sales or such, but I'm wondering what the trend has been over the past three months. Have you seen increased distressed selling activity, maybe some distressed sources getting desperate and trying to sell that tonnage away from their balance sheet?

Yes. I mean, right now there are fleets of mainly VLCCs that are marketed from distressed sales. The problem with those ships, the majority of those are built in China and there were -- I have nothing against the Chinese -- their ships are not yet at par with the clients that we are serving.

So, there is -- there are -- there is a couple of ships I think some of our -- some other owners bought some of those ships in the last couple of months. Usually those ships have been abandoned to -- and there is a lot of up breaking on top of this. They have been built not at the high-quality yards.

You are concentrating to second-tier clients on those ships. And this is not a game -- I mean, we will look at opportunities, but this is not a game at Tsakos. We will build -- we use tailor-made ships for high level end-demand clients.

So -- but they are real -- we've seen a lot of -- right now, there are two full fleets of VLCCs out there that are distressed. The court is over it and no one is standing the ship, no one is taking care of the ship, so they are a disaster waiting to happen for whoever buys them, and someone will buy them.

Right. Okay. That's very helpful. Well, thanks for your time again. That's all I have for now.

Thank you.

Thank you very much, indeed, sir. (Operator Instructions). Now, gentlemen, there appear to be no further questions, so I shall pass the floor back to you for closing remarks.

Well, again, thank you very much for attending our first quarter release. And, as I said, this is a special day for us having our Chairman as a Chairman on this for the last time. Again, we want to thank him for all his help and assistance, and the all good seamanship that he brought to the Board, and looking forward to our next -- the team will be in New York. Our team will be in New York for Marine Money, which is in about a month, and look to talk to you soon around our meetings on the 30th of May this year, and we're looking forward to see you and talk to you during our August release. Thank you very much.

Thank you very much, indeed, sir. And with many thanks to our speakers today, that does conclude the conference. Thank you for participating. You may now all disconnect.

Thank you, gentlemen.