Tsakos Energy Navigation Ltd (TEN) 2014 Q2 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to

Tsakos Energy Navigation conference call on the second quarter 2014 financial

results. We have with us Mr. Takis Arapoglou, Chairman of the Board; 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,

Monday, August the 4th, 2014. And I now 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 second 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@capitallink.com, and we will e-mail 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.tenn.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. And 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 contain certain forward-looking

statements within the meaning of the safe harbor provision of the Private

Securities Litigation Reform Act of 1995. Investors are cautioned that such

forward-looking statements involve risks and uncertainties which may affect

TEN's business prospects and results of 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.

Takis Arapoglou, the Chairman of the Board of Tsakos Energy Navigation. Mr.

Arapoglou, please go ahead, sir.

Thank you, Nico. Good morning, everyone. It's really a great

pleasure and honor to have been elected chairman of TEN, succeeding John

Stavropoulos. I'd like to thank the Tsakos family, the board of TEN, and Mr.

Stavropoulos for their support and confidence.

Under Mr. Stavropoulos' chairmanship during the past 20 years and with the close

cooperation and leadership of COO and Strategic Investor Niko Tsakos, TEN has

established itself as one of the leading and highly trusted oil tanker companies

in the world.

Going forward, we'll commit to perfect further our model of operational

excellence, capital efficiency and revenue growth, in order to continue to offer

value to our investors and customers while adhering to the highest standards of

corporate governance.

In doing so, we'll maintain our dynamic asset allocation philosophy with a

modern and ever-evolving technologically advanced fleet ready to cover the

diverse needs of our customer base, which as you all know is of the highest

caliber. During the last few years, the market has fully supported us in

raising new growth capital which resulted in the broadening of our investor

base, and the results of this can be clearly visible now in our financials.

A few words on our stock. Our stock has outperformed year to date all our

peers. However, we still believe that it continues being undervalued. We are

committed to rectify this going forward by committing to deliver superior

financial performance for the benefit of our shareholders.

So I'd like to thank you and pass the floor to Nikolas Tsakos.

Thank you, Mr. Chairman, and welcome onboard. We're very proud

and happen to have you and to continue our growth prospects. We're very glad to

report six months and second quarter results going towards the right director.

It seems that what we have discussed in previous quarters that the light at the

end of the tunnel is more visible today than it was, it's true. We have seen a

very strong first quarter. We have seen the seasonal correction of the second

quarter, and we have been surprised by the strength of the beginning in the

first 40-so days of the third quarter, the strength of that market.

Together, also we are surprised to see of the appetite of the major end users

for the operational (report) from companies like ours. We have good news to

report. We hope to be reporting quite a few items of good news going forward

within this quarter, as things develop and the pieces fall in line.

Before we get, I think, in the future, I will ask our COO, Mr. George Saroglou,

to give us a little history of the last six months and the last quarter where we

are and where we've been and where we're going. So, George, thank you, please.

Thank you, Nikos. It is my pleasure to speak with all of you

today and provide you with details of the operations of the second quarter and

six months of 2014. For those of you connected to the Internet and our website,

there is an online slide presentation [please] follow during the call. Let's

turn in slide number three, where we have a snapshot of the diverse [specified]

fleet TEN currently owns which enables the company to advantage of market

opportunities and slides.

We have 44 tankers that carry crude oil, consisting of one VLCC, 12 Suezmaxes.

We have taken delivery of two modern Suezmax tankers in mid-June and end of

July. One of them [is trailing] in a strong [fourth market] and the sister

vessel on (inaudible) to a major oil company.

We have 17 Aframax tankers, eight in the water and nine new buildings under

construction for Statoil, two DP2 shuttle tankers from [fixed long employment],

and 12 out of 26 product tankers in the fleet are engaged at the moment in crude

trade operations, resulting in 35 vessels out of a 50-vessel operating fleet

[trading] in the [group market] today, a market that is doing extremely well.

We have also two LNG vessels, including one in the water and one on order.

The next slide shows the growth TEN has experienced since going public in 1993

in (inaudible) stock exchange. And since the New York Stock Exchange

[flotation] in 2002, we have seen -- you can see the growth in all the metrics,

the size of the fleet and, you know, the deadweight.

On the tanker market, the next slide, the [quarter CAPEX slow] thanks to

scheduled refinery maintenance in the northern hemisphere before switching from

[shipping oil] to gasoline production that made the tanker fleet look bigger.

However, we experienced a big rally starting from the second half of June that

listed the earnings of VLCCs, Suezmaxes, and Aframaxes that continued well into

July. Rates for Suezmaxes and Aframaxes surged to levels we have seen in

January of this year, as more [barrels] continue to head east to Asia.

The outlook for the balance of the year continues to improve for all three crude

(inaudible) as the third quarter appears to be much stronger than typical,

mainly due to a growth in Chinese imports as China continues to build their

strategic reserves and their [infrastructure feeding] as their refining capacity

continues to increase this year, as well.

Despite their political risks and financial headwinds, the global economy is

expected to grow at 3.4% in 2014 and 4% in 2015. Especially in 2015, growth is

expected to come from advanced economies. That's the first time since 2008 that

advanced economies other than the United States are expected to contribute to

have GDP growth.

Global oil demand also continues to grow, breaking the demand record every year

since 2010. Demand for 2014 is expected around 92.7 million barrels per day,

which is 1.2 million barrels per day growth over 2013 demand levels. The

forecast of 2015 as macroeconomic conditions improve is for 94.1 million barrels

per day, the growth of 1.4 million barrels per day over 2014.

The order book, especially for crude tankers, is still low by historical

numbers. Suezmax and Aframax tankers expect little supply growth in the next

two years. On average, less than 1% growth in 2014 and '15 for Suezmaxes,

negative growth in 2014, and flat in 2015 for Aframax. [Far Eastern yards]

appear to have covered their order book well into late 2016. Most of the orders

in the last 18 months have been [on product tankers in March and levels twos].

The overall tanker order book is now around 14% to 15% of the existing fleet,

and we are talking about vessels over 30,000 deadweight tons, down from almost

40% back in 2008 and 22.3% in 2010. The [end result] calls for modest global

trade growth for the next two to two-and-a-half years.

The company pro forma fleet -- the next slide -- continues -- the company's pro

forma fleet of 60 vessels includes 50 vessels in operation, as two [modern]

Suezmaxes recently joined the fleet, nine are from [our crude] carriers under

construction for delivery in 2016 and '17, and [one priced] (inaudible) vessel

under construction.

The fleet is 100% double-hulled, very modern, and the average age of the

operating fleet today is 7.3 years, much younger than the average of the world

tanker fleet. Twenty-one tankers has [I plus] capabilities, and 21 vessels of

the company's 50 vessel operating fleet have [fixed term] employment, nine

vessels operating profit-sharing charters [that together] with the [fixed term]

vessels ranged from a few months until the end of the year for 14 years, 20

vessels [trade] in the [spot market], including [pure spot] for 17 vessels,

[COAs] for two vessels, and [pulling arrangement] for one vessel.

Together with the nine vessels and profit-sharing, TEN has today 29 vessels that

can take full advantage of market [supplies]. Thanks to our balanced [time

charter] philosophy, we continue to operate the fleet at a very high utilization

rate, 98% for the second quarter and the first half of 2014, when the average

utilization for the tanker fleet in 2014 is expected to be a little lower 86%.

Let's move to slide number eight. The slide has the main financial highlights

of our press release, significantly improved numbers in every category for the

first half of 2014, leading to profitable operation in the first half of the

year. 18% improvement in [royals revenue], $243 million versus $206 million in

the first half of 2013, 22% increase in the EBITDA over the same $83 million

(inaudible) you know, the figure of the first half of 2015. 80% increase in

operating income, $33 million versus $18.3 million in the first half of '13.

Net income of $14.8 million versus a modest loss of $500,000 in the first half

of 2013. [Impeccable] debt service records since the crisis started back in

2008, while maintaining the firepower to grow responsibly.

The next slide presents basically the fleet as it stands right now. Again, you

look -- you see it at the very modern, diverse and purpose built fleet. We

focused in three market sectors, conventional tankers which covers (inaudible)

product tankers, energy and (inaudible) tankers, of the four markets, LNG and

(inaudible) are potential growth areas for TEN. These are the growth prospects,

favorable supply-demand fundamentals and barriers to entry.

Within conventional tankers (inaudible) product (inaudible) as you can see, TEN

has one of the largest and most modern [group fleets] in the water, taking

advantage of a surge in crude market environment and a versatile product fleet

with almost half of the products' vessels in the fleet engaged in their

(inaudible) crude oil trading at the moment.

We also have 21 [high-class] tankers. We have entered the (inaudible) shuttle

tanker sector with (inaudible) tankers with 15-year time (inaudible) for

Petrobras. This is a sector -- the [shuttle] tanker sector is being monitored

by TEN, where we expect to see more expansion going forward. We have one LNG in

the water, one [pipe fuel] LNG also under construction. Since 1997, the vessel

was built exclusively with (inaudible) in Korea and Japan.

The next slide shows the clients with whom the company is doing repeat business

over the year 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 7 clients of -- the top 8 clients of 10 and (inaudible) in the

revenue of the company during 2013.

Let's go to the next slide, which is the employment slide. We continue the

balanced employment strategy of a fleet that has a mix of [port charters],

[COAs], and pulling arrangements, and (inaudible) charters with fixed rates and

minimum rates with [corporate sharing] arrangements. With 21 vessels

(inaudible) fixed employment, nine vessels in profit-sharing, and 20 vessels

trading in a combination of (inaudible) [and puts].

Another way of reading the employment details of the fleet is that we have 33

vessels with [secured employment] from a few months until the year end to 14

years and 29 vessels with earnings tied in full for up to 50% over a minimum

base rate to a spot market that continues to improve.

If we put a dollar value in the next slide on the above, as of today, August

4th, we have 58% of the remaining available 2014 fleet operating days, 39% of

the available 2015 fleet operating days, and already we have fixed 22% of the

2016 fleet operating days. If we assume only the minimum rates, TEN has secured

858 months of forward coverage or 2.2 years per vessel, which translates to $800

million in minimum gross revenues.

The next slide talks about the (inaudible) track record of the company. The key

takeaways here is that the [sale] (inaudible) activities are an integral part of

our operation, as the record shows, and that fleet modernity is a key element of

the corporate strategy. Since the listing in the New York Stock Exchange, we

have generated capital gains of approximately $280 million, or another $25

million per year. The company [reinvested these capital gains] in the renewal

of the fleet by ordering the majority of its [new building tankers] before [new

building] prices started to rise.

TEN has already acquired at attractive price levels two modern Suezmaxes, sister

vessels to Suezmaxes already operating in the fleet, and is actively looking to

sell some of its existing tankers in the current environment of rising asset

prices.

At the same time, the company's working on projects with similar

characteristics, like the recently announced (inaudible) so the company's next

growth phase will be with transactions for [purpose-built] vessels that will

serve all major requirements from medium- to long-term business based on

accretive minimum rates and additional profit-sharing arrangements with the

charters.

Slide 14, this is the history of our cash dividend distributions. The next

dividend of $0.05 per share on performance shares will be paid on August 14th.

We have announced today another dividend to be paid on November 25, 2014. In

total, since 2002, we have paid $9.88 in cash dividends, or approximately $394.7

million, and this compares with a listing price in our IPO of $7.50 adjusted for

the November 2007 2 to 1 split.

Although we floated the company in 2002 at $7.50, our share price reached $40 in

2007. In comparison to 2007, we have today a bigger operating fleet, a new

building program, where 9 out of the 10 vessels are tied to loan-accretive

charters, [but the] current share price doesn't seem to reflect according to

management, the company's financial strength, the embedded company's growth, and

growth profits, and the improving state of the freight market. The management

vision is to continue growing the company responsibly and, at the same time,

have this reality being reflected in the company's share price.

That concludes the operational part of our presentation. Paul will walk you

through the financial highlights for the second half of 2014. Paul?

Thank you, George.

Well, as expected, the softening of the crude market is [partly due] to seasonal

factors [affecting] future earnings after a robust quarter one. Quarter two net

income was $200,000, at least a considerable improvement over the $1.5 million

loss in quarter two 2013. So negative earnings per share, which (inaudible)

However, for the six months, net income was $14.8 million compared to a loss in

the first half of 2013. Operating income for quarter two was $8.5 million,

about the same as in quarter two 2013. But for the six months, we achieved $33

million operating income against $18.3 million in the first half of 2013, an 80%

increase.

Revenue after voyage expenses in quarter two increased marginally over quarter

two 2013. Average daily time charter equivalent per vessel was over $18,100 --

sorry, $18,100 quarter two compared to $18,000 in the previous quarter two.

However, half year average [TC] per vessel was over $20,400, versus nearly

$18,100 in the last year first half.

Those (inaudible) in a difficult market for most of quarter two were actually

(inaudible) earning nearly 30% more compared to the previous two. Suezmaxes

earned less than average than in Q2 2013, but rebounded in later quarter two and

especially into quarter three. Product carriers on market-related rates

achieved lower average rates than in quarter two 2013.

Despite slightly cheaper fuel and fewer days [on spot], voyage expenses were $2

million higher in quarter two than in quarter two 2013 due to higher (inaudible)

consultation on longer haul voyages and higher port expenses.

Operating expenses increased from the prior [quarter two] (inaudible) higher

operating costs than conventional tankers, but they had earnings that easily

absorbed these costs, and also there was a 5% fall in the dollar against the

euro, which affected [crew expenses].

On an average daily cost per vessel, operating expenses fell sharply from the

recent quarter one (inaudible) returning to more acceptable levels. Finance

costs were nearly $2 million down quarter against quarter and also for the half-

year (inaudible) mainly due to the [expiry] of three rather expensive interest

rate swaps.

All vessels generated a positive EBITDA in the half-year, with total EBITDA of

$83 million, 22% over the first half of 2013. In quarter two, EBITDA of $34

million was similar to that achieved in quarter two 2013. Committed new

building capital expenditure related to the [nine Statoil crude] Aframaxes and

to one LNG carrier.

[Remaining payments] in 2014 will be [$52 million], and $57 million will be paid

next year. We have finalized financing arrangements for the Aframaxes with the

leading banks at competitive terms, which include financing all the remaining

pre-delivery [yard installments]. [Debt at services due] was $1.36 billion

after $42 million was drawn for the acquisition of the [Suezmax Eurovision].

$39 million was also recently drawn for the acquisition of the second [Suezmax

Euro]. At 30th of June, leverage based on values was 56.6%. Net debt to

capital was 49%. We have strong liquidity and cash flows, fully capable of

meeting our operational needs, CAPEX commitments, debt service, and dividend

requirements, allowing us also to consider new proposals. The recent increases

in crude tanker rates, despite fluctuations, bode well for Q3 results and [for

service cash flow] generation this year.

And this concludes my comments. Now I'll hand the call back to Nikos.

Thank you, Paul, for really analytical description of what has

happened in this -- in the last six months, and especially in the last quarter.

I think that we're optimistic looking forward. The beginning of the third

quarter started very, very well. The -- I think the supply-and-demand

characteristics that George spoke about for the (inaudible) in the crude

carriers, specifically the Suezmaxes and the Aframaxes are very positive for the

owners for a very -- for the first time after a very, very long time, more than

they indicate.

We have not heard of negative growth as it is in the Aframaxes and almost

breakeven growth on the Suezmaxes and [oiling] tanker (inaudible) 14% of which

most of it has to do with unfortunate -- unfortunate orders of product carriers

that happen in the last couple of years. So I think we are looking forward to

finally a well-balanced market. We can see this coming also because the

majority of our clients are looking to take (inaudible) long-term employment, so

the longer the better.

2014 so far is going to be the year with the biggest demand of [prolonged term]

employment, which means business for six months and over. Six months to 10

years and over -- and over by the major oil companies. So far this year, we

have close to 280 long-term charters signed, in the whole -- [350], the whole of

2013, and it hasn't been a year that [we've exited] 250 in the last 10 years.

So, you know, we are seeing that the clients who know forward the requirements

are looking to cover themselves, because they can see that the supply-and-demand

is [finally towards] the owners' benefit.

So without trying, you know -- we have to be conservatively optimistic, but I

think we are looking forward at a good year. We believe 2014 will be a positive

and hopefully substantially positive year. And we're looking to come back to

the market and talk to you about the opportunities that we're going to be

looking.

As George said, there's a lot of interest for long-term employment [and critical

employment] (inaudible) needs to get a surprise not to the $7.50 that we went

public in 2002, but significantly above that. We really believe that right now

the whole segment is at a very low point.

And with these thoughts, I would like to open the floor and would be happy to

answer any questions about the company and the market. Thank you.

Thank you very much, indeed, sir. (Operator Instructions) And from

Stifel, your first question comes from the line of Ben Nolan. Your line is now

open.

Yeah, thanks a lot. Nick, you were just mentioning some increased

activity on the long-term charter side. And I think you guys have done some of

that specifically with some of the Suezmaxes that you've got. I guess with

respect to the two vessels -- the two Suezmaxes that you just recently acquired,

is that something that you would consider doing with those? And, you know, what

type of tenure are you looking at? I mean, are we talking two years? Are we

talking 10 years with respect to sort of what your interest would be and someone

locking down charters on your assets?

Well, right now, we have to say that we are fighting and it's

been a while to feel this way -- we are fighting business away. We would not

charter a long-term without either a significant...

(inaudible)

(inaudible) because we expect that the market (inaudible)

(inaudible)

(inaudible) political (inaudible) that are (inaudible)

(inaudible)

(inaudible) whole Ukrainian situation. We have the problems in

Iraq, the Kurdish oil coming out. And we have a longer -- longer hauls, longer

(inaudible) happening. I mean, the -- the Russian oil that Europe was

absorbing, it's a huge market for Suezmaxes and Aframaxes, the Black Sea, any

embargos on that will lead us to get (inaudible) and starting getting [oil] from

either West Africa or Venezuela or the U.S. (inaudible) so I think that is going

to increase the pressure on the rates.

[On assets] I think we described a very tight supply-and-demand situation, and

I'm boiling this out, because our industry really has suffered for the last six

or seven years from the oversupply. Demand (inaudible) 2009, which was a year

that people actually tightened their belts even on energy, was always there. So

I think what we have been trying to achieve is get owners more responsible

(inaudible) it has happened. I hope -- it won't last for long, but we're going

to enjoy as long as it lasts. So we are not looking to [charter fixed rate].

We are [set to] do business anywhere between, you know, 2 to 5 years with an

accretive minimum and profit-sharing, and there's a lot of that type of business

that is coming our way by the major oil companies.

Okay. Very helpful. And then my next question, actually, sort of

goes with the crude side. I did notice that when you split out your -- the

percentage of your fleet that's in the product market versus the crude market,

there's only -- it only looked to be 14 vessels, I believe, in the product

trade.

Have you guys been actively moving or rotating your product fleet into the crude

market as a function of, you know, better rates in that area? And would you

characterize that as sort of a longer-term move or just sort of opportunistic,

you know, making better rates when available?

You know, we [got it] anything -- any form of energy, so we do

not have any, I would say, preference. We have the luxury to run a very

versatile model fleet and a good operation (inaudible) can actually turn around

those vessels [in the market of a week], going from (inaudible) is a bit -- is a

bit harder, but going from clean to dirty, it's much easier. So it has been a

very process having the right vessels with the right equipment to do it.

We are -- we are client-driven, so we are seeing our clients and the rates being

on the crude, and we have -- so, you know, our three Aframax [product carriers

operating fuel and crude right now], the same with all our Panamaxes, and a big

part of our (inaudible) vessels, other than [14 ships], as you said. So, you

know, we have the type of fleet that is able to turn around and carry the energy

that pays more.

Okay, that's helpful. And could you just maybe four main

categories, what the -- what the differential is that you're seeing right now,

crude -- or dirty versus clean? I mean, how much on average more profitable do

you think it is on the dirty side?

I think it's 60/30 as we speak today, but we're still -- you

know, what we -- we're seeing the product carrier. We see more and more

(inaudible) United States, and as they come down, turn right, and go through the

Panama Canal to the far east. I think that's going to balance it -- to balance

it. So we're ready for that. As I said, you know, we have nine Panamaxes,

that's what they do, and then [we're there] to take advantage of that market if

they have to.

Okay, perfect. And then my last question relates to the potential

for you guys doing an MLP is, has the timeline changed on that at all? Are you

still maybe thinking the first part of -- or first half of 2015? Is that the

target?

That's correct, exactly.

Okay. All right. That does it for me. Thanks a lot, guys.

Thank you. Now from Morgan Stanley, you have a question from the

line of Fotis Giannakoulis. Your line is now open.

Yes, good morning, gentleman, and thank you. I would like

to follow up on the last question [on TEN]. I think it's the third time in the

last three calls that I'm asking about that. Have you started drafting the

prospectus for the MLP? And when shall we be expecting the first filing over

what type of vessels and see what type of vessels you're going to include in

this MLP?

Yes, thank you for (inaudible) as I think we discussed, yes, we

are -- we have, I would say (inaudible) two-thirds of the expenses and the work

being required for the MLP. So it is -- it has gone down that road.

And can you remind us, which are the vessels that you are

considering of including in this MLP? And what type of growth you think that

the MLP is going to be having?

It will be initially any vessel (inaudible) five years period

[or longer], which, of course, includes our -- some of our Suezmaxes, some of

our -- some of our DP2 [saddle tankers]. And the LNGs, as they come on long-

term charters. And, of course, the growth will be almost -- at least a vessel

per quarter from beginning of 2016 as the long-term target (inaudible) will be

dropping in, so it will have a good (inaudible) but there is quite a lot of

business that we might be announcing for new vessels with very long employment

from within this quarter.

Yep?

I mean, we're actually right now negotiating businesses that

range from, again, you know, 5 to 15 years (inaudible) are pushing (inaudible)

to go (inaudible) with profit-sharing arrangements.

So you mentioning the -- that there are more deals to be

done. And I think in the last quarter, you said that there are probably more

similar to what you executed with Statoil. Is there any progress on that, on

the other oil majors that -- oil producers that are looking to -- to employ

vessels long-term or even give you a contract for a new building assets that

will allow you to order more vessels?

It's true. I think we're looking at least at a half a dozen of

these transactions that, you know, we will be able to announce with -- most

probably within this quarter.

And is it also for a similar type of vessels, Aframax

vessels? And if you had to make an estimate or give us a probability, how many

vessels are we talking here?

I believe that, you know, we could be talking about from now

until the end of the year about another six vessels.

Again Aframaxes?

Well, within -- you know, both [the crew] and the -- [crew]

then the, you know, ranging from VLCC, which is a segment of the market that we

are not -- as you know, we have [sold] (inaudible) assets, and we're looking to

renew, so it will start from VLCCs down to (inaudible) Suezmaxes, Aframaxes, and

LR1s.

Well, that looks very exciting.

We are excited, and we're waiting -- I think, as I said, I

think within September we'll be announcing some very [interesting] transactions.

Despite that, and all this good news that you are

delivering right now, we see the stock price for some reason is dropping. It

could be the very [thin liquidity] of the stock. What -- you mentioned about

the MLP earlier. Of course, that should help bridge the gap between your NAV

and your stock price. What other steps are you willing to take? Are there any

thoughts of potential share buybacks? You have plenty of cash in your balance

sheet. Have you thought that your stock might be an interesting investment in

addition to buying ships?

We believe our shares -- I would say, a very interesting

transaction. [We'd consider it very cheap] (inaudible) major shareholders have

always [been biased]. And I think at these levels, of course, it's a very good

buy. I think after we set the dust settles down about what is the new

requirement from the new business (inaudible) growth capital, I think our next

step will also look -- will be looking to look how attractive the share price

for a buyback. As you know, we are paying a dividend -- I think we have

dividends coming this month and then in November and so on and so forth.

And apart from that, obviously you have the capital

requirements for your potentially new business. Are there any thoughts of

issuing any preferred? We saw that some of your peers, they issued high-yield

or preferred -- or convertible in order to fund buyback programs. Is this

something that you have been also considering?

I would say high-yield we like to receive it from our charters,

not to pay it out. So I think we will speak -- I think we will speak to the

[costs] that we are generating as we speak today. I mean, we always have our

eyes open in the market. And as soon as we know the transactions that we are

negotiating, we'll have a very good view what we're looking for, but I think all

the transactions are going to be very accretive, so there will be -- hopefully,

we'll reverse the trend in the market.

Thank you, Niko. One last question. You mentioned earlier

about the orders that they were -- that they took place during the last couple

of years in the product tanker market. I understand that you are only

interesting in ordering new buildings with long-term contracts, but in

hypothetical scenario that you would be buying vessels without any contracts.

What type of vessels would these be? [Product carriers] or crude or even

expanding further in the LNG space?

As I said, I am a very strong advocate that no one should be

ordering ships that they do not need at this stage, so I think I should stick to

that, because, you know, I've been [printing that] for a while. And thank God

the crude market seems to have reached that stage, and I hope we will find the

appetite -- we will get a lot of U.S. exports to take care of all the product

carriers that have been ordered in that -- in (inaudible) 2012-'13 period. But

I think right now there are more than enough ships out there to move the oil and

allow the owners to make a respectable (inaudible) at the same time.

Thank you very much for your answers.

Thank you.

Thank you very much. Your next question from Canaccord comes from

the line of [Noah Parket]. Your line is now open.

Thanks, good morning. A lot of my questions have been answered,

but I thought you could just go into more detail. You mentioned, obviously, you

know, your VLCC fleet, there's only one ship left, and you're looking at new

contracts. I mean, is this -- can you talk a little bit about your outlook for

VLCCs, you know, why you sort of avoid the sector now? And would we expect

more, you know, new builds with long-term contracts? Or how do you plan to get

back really into that space?

Well, yes, I think this is a very good question, but, you know,

in order to be a significant player in the spot market and the VLCC, you need to

have a dozen ships. We -- you know, I think we have more than half-a-dozens

ships in any other sector. The VLCC market is a very important market, and we

are client-driven. Being client-driven, it's when a client needs our services

in VLCCs. It makes sense. And plus the addition that we have a very small

presence in this market, you know, makes it easier for us to decide when we talk

to the border to move in that direction.

We will only move when we have contracts that will amortize the ships to scrap

or to zero and we will be left -- still left to the model 10-year-old ship that

has no obligations and hopefully we'll make a good retainer, between that time

and going forward.

Okay, and then you mentioned -- you talked a little bit about the

[common state] -- potential for [common state] cargoes out of the U.S. We saw I

think two, maybe three cargoes, you know, the last few weeks on LR1s. Can you

talk a little bit about what you see -- you know, how that new trade route plays

out? Is that going to all go to Asia? And, you know, and broader implications

for -- how will the -- you know, the crude export ban in the U.S., how do you

see that developing over the next couple of years?

Well, I think the first step has been made. And it's a very

important first step. Either it goes to the Far East, that's significant ton

miles. If it comes to Europe, to balance some of the Russian crude that, you

know, perhaps Europe will not be importing, that's also, you know, a very good

[volume]. So I think -- it is a very positive and, I would say, unexpected trip

for ship owners, the opening up of the American exports.

All right, thank you.

Thank you very much, indeed, sir. Now from Euro Pacific Capital, you

have a question from the line of Mark Suarez. Your line is now open.

Hi, good morning, gentlemen. And thanks for taking my call.

Niko, you talked, you know, in the beginning of the Q&A here that, you know, for

those charters that may be coming up for renewal and given sort of the

improvement that we have seen in the tanker space, especially in some of the

Suezmaxes and Aframaxes -- I know the VLCCs are beginning to improve now and

gaining some momentum -- should we start thinking about maybe those charters

coming out for renewal in the next 12 to 18 months? By that I mean, because

that's an important (inaudible) '15, that maybe as they come up, you put them

into shorter charters with profit-sharing arrangements and maybe expand your

fleet or expose to the spot market a little bit more than the long-term

employment? Is that a fair way of thinking about it?

I think in general, it is -- it's the correct essence. And I

think it's the first time that you see charters willing to take profits --

profit-selling, which, you know, we have always said it has been a very good

arrangement for both parties, but I think it (inaudible)

And do you think that market is now beginning to move in -- is

that like a big -- has the market significantly moved into those profit-sharing

arrangements, something that we haven't seen in the past? I mean, has this --

has that been (inaudible) in your view?

Well, I think, you know, it has been like pulling teeth in most

cases to get the end users to accept profit-sharing, as it's a bit easier, I

would say, right now.

Okay. And going back to the -- I know you have an LNG option.

Maybe I missed it in the comment. I don't know if you talked about it. But are

you still thinking about maybe replacing that contract with construction of the

two VLCCs, if you have a charter attached to it? Or how are you thinking about

that? Do you think that could be a good entry point to be expanding your VLCC

fleet?

I hope you're not reading my e-mails. Yes, I think that could

be -- yeah, it could be a good alternative.

Okay. And then lastly, I know you did some secondhand (inaudible)

acquisitions, you know, with the Suezmaxes. You know, should we expect maybe to

see similar transactions [obviously chartered attached] -- you don't want to

just buy something for the sake of buying -- over the next 6 to 12 months, or

should we be thinking more about the transactions like you did in Statoil? I

think you commented that maybe you want to -- you're thinking of doing something

like that and you're going to be announcing it soon.

I think we will not exclude, but it will be a smaller percent

of the (inaudible) of buying ships in the open market, unless it is for a

specific purpose. Let's say (inaudible) and they would like someone to operate

them for them, we'll be happy to do that. So in that case, you'll see us doing

something like that.

Right, right, okay, that makes sense. And then lastly, you know,

[senior contracted] cash flow continues to rise, you have raised your earnings

capacity. Now especially with the [future delivery] of the nine Aframaxes, at

what point do you think the board could consider raising dividends again? Is

that something you see happening? What sort of metrics would you like -- you

have to see before that happens?

I will have to ask my chairman here. No, I think we always --

we are a dividend-friendly company. And I'm sure, you know, the board, when we

see that the market environment has stabilized, within 2014, I think we will be

happy to consider something like that.

Okay, great. That's all I have for now. Thanks for your time as

always.

Thank you very much, indeed. (Operator Instructions) As there are

no further questions at this time, I'll now pass the floor back to Mr. Nikolas

Tsakos for closing remarks.

Well, again, thank you very much for following the company. As

we said, I think we are optimistic of going forward. I mean, all you have to do

is look back in our COO's presentation on the income statement and see that in

2005, 10 years ago, the company was half the size of what it is today, and we

had an EBITDA of $215 million and a market cap of in excess of $1 billion and

something like that at the time.

So I think today the company is not only double the size, but you double the

size in quality, so I think the prospects are strong. So we're looking to take

advantage of that. You know, we believe we have weathered the very difficult

years of 2008 to 2013, and we have -- and we came on the other side stronger

with a stronger, larger company with a stellar banking record, having all our

obligations met without any negotiations, and we have done that because we have

the support of our shareholders and our banks and, of course, our clients in

going forward.

So we are very excited in welcoming our new chairman and we're looking forward

to move the company and share price to where it has to go. So with that, we

wish you a very good and peaceful and restful summer. Make sure we will not be

resting, because we need to get the share price up, at least not all of us at

the same time. And with that, I would ask our chairman for his [wise words].

Well, thank you, Niko. I think if you look, as I mentioned

earlier, the last six months, our stocking has outperformed our peers, which

means that the market is beginning to realize the attractiveness of our shares.

I think the broadening of the investor base of the increase in the liquidity of

the stock in the last six months have been phenomenal. Together with the truly

stellar operational efficiency of the company, I think we will see going forward

this correction that we mentioned on the evaluation of the company for the

benefit of everyone.

So with that, I'd like to issue you a happy, enjoyable summer and talk to you

again in the fall. Thank you.

Thank you very much, indeed, sir. And (inaudible) today. That does

conclude our conference. Thank you for participating. You may now disconnect.

Thank you.