Tsakos Energy Navigation Ltd (TEN) 2014 Q4 法說會逐字稿

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

We have with us Mr. Takis Arapoglu, 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.

(Operator Instructions).

I must advise you that this conference is being recorded today, and now I pass the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relations Advisor of Tsakos Energy Navigation. Please go ahead, sir.

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

The Company released its financial results for the fourth quarter 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 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.tenn.gr. The conference call will follow the presentation slides, so, please, we urge you to access the presentation of the webcast.

Please note that the slides of the webcast will be available at an archive on the Company's website after the conference call. Also, please note that the slides of the 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.

And, ladies and gentlemen, at this point, I would like to turn the call over to Mr. Takis Arapoglu, the Chairman of the Board of Tsakos Energy Navigation. Mr. Arapoglu, please go ahead, sir.

Thank you, Nico. Good morning and good afternoon. Thank you all for joining us on this call today on the occasion of the announcement of the full-year 2014 results for TEN.

As you've probably already seen, TEN is back to profitability, coming out unscathed from a very challenging market environment in the last three years. As a matter of fact, through best-in-class operating performance during this recent difficult period, TEN not only mitigated the effect of poor markets on its balance sheet, but was also able to, among others, strengthen its equity, broaden its investor base, maintain a high level of liquidity, drastically reduce its financing costs, take prudential measures on the value of its assets, and enter into new, accretive long-term, top-quality relationships and projects.

I'm sure that for all of the above you will join the Board and me personally in congratulating Niko Tsakos, the TEN CEO and anchor investor, and his management team for the excellent results and performance. TEN owes a lot to its balanced asset allocation model, which revolves around the following principles -- to provide the full spectrum of state-of-the-art crude and product carriers; to service all needs of prime oil majors, while maintaining a smaller proportion of the fleet in specialized, high-value-added vessels like DP shuttle tankers and LNG carriers, deployed in highly accretive, long-term charters.

At the same time, TEN continues to manage very successfully the mix between time charters and spot operated vessels to achieve optimal use of market opportunities for the benefit of its shareholders. This particular angle of the model is paying off big time in the present market environment.

We continue to maintain that this excellent, consistent performance that clearly distinguishes TEN from all its peers, is yet to be duly appreciated by the market, as our stock price continues to trade well below net asset value.

We are very pleased that the stock's daily liquidity has nearly doubled in the last few months, but we believe that there is further room for improvement on that front, given the 70% free float.

Finally, it's time for investors to come to grips with the fact that companies with TEN's profile uniquely benefit in more ways than one in both a rising and a declining oil price environment, especially if they are being run by what is probably the best management team in the business.

Thank you. Over to you, Niko.

Chairman, thank you for your good words, and I would like to thank and congratulate the whole TEN and Tsakos and TCM team for making it finally a very profitable year, and we're looking for significant more profitability, we hope, for the year we are in, for 2015.

The market has started in the right direction. We hope that the first quarter and the second quarter would be very strong, and I think with this proofs we are maintaining an increasing -- we are maintaining the increase in our dividend, since being the anchor investors we hope we will be able to see further increases if this year -- as this year continues.

I would take this opportunity to ask our COO, George Saroglou, to discuss the 2014 and the year, so far, 2015, and then Paul Durham, our CFO, will give us the explanations behind the numbers, and we will be very happy to answer any questions, and looking forward to see most of you or anyone of you that is available in New York next week. The team will be moving for an East Coast road show, and we are planning an investors day on Thursday, the 26th, coordinated through Capital Link and Mr. Bornozis. George?

Thank you, Nikolas. It is my pleasure to speak with all of you today and provide you with details of the operation for 2014, the year the Company returned back to significant profitability.

For those who are connected to the Internet, at our website there is an online slide presentation whose format we will follow during the call. Let's turn to slide number 3.

We have a pro forma fleet of 64 vessels, if we include the option for a fourth shuttle, 44 of which carry crude oil and consist of 1 VLCC, 12 Suezmaxes, after the Company took delivery of two modern Suezmax tankers in mid-June and in early July of 2014, with 1 of these vessels trading in the spot market that is very strong since the start of the fourth quarter of 2014, with rates currently around $50,000, and a sister vessel on a profitable time charter to a major oil company.

We have 17 Aframax tankers, 8 in the water and 9 new buildings under construction for Statoil, 4 DP shuttle Suezmax tankers, 2 in the water, fixed on long-time charters, 1 on order for delivery during the first quarter of 2017, also fixed on a long-time charter, and we have an option for another one, and have 14 out of the 28 product tankers in the fleet engaged at the moment in crude trade operations, resulting in 35 vessels out of 50 vessels operating trading today in crude.

31 vessels have their earnings tied to a surging spot market. We also have 2 LNG vessels, including 1 in the water and 1 on order.

Thanks to our balanced time charter philosophy, we continue to operate the fleet at a very high utilization rate, almost 98% for the fourth quarter and full year, when the average utilization for the tanker fleet in 2014 is expected to be closer to 90%.

For the year, we should highlight the timely acquisition of 2 sister vessel, Suezmax tankers. The additional long-term contracted business with oil majors adding to the Company's current portfolio of new building assets, and we are talking about the 2 LR1 product tankers, and 1 DP2 Suezmax shuttle tankers, and the 9 Statoil Aframaxes, all of which are under long-term contracts which create a series of assets with potential gross revenue generation, if all charter options are exercised, of approximately $1.25 billion, with average charter duration of approximately 11 years, making most of these vessels candidates for an MLP spinoff, when conditions and valuations in the MLP market come closer to the levels that meet the Company's expectations.

We chartered 8 vessels during 2014, and 3 so far during 2015 on a combination of charters with profit-sharing arrangements, and fixed-time charters at higher levels than expiring rates. The 2015 features include the Company's VLCC tanker, which has been extended for 6 more months on a solids contract at a fixed rate reflecting the current market reality, and 2 Panamax tankers on profit-sharing arrangements.

The collapse in the price of oil, which accelerated from the start of the fourth quarter 2014, and reached 6-year lows in mid-January 2015, impacted the crude sector in TEN in a very positive way. Greater-than-consuming countries stockpiled cheaply priced spot crude oil in onshore and offshore solid tanks and tankers.

In addition, seasonality demand factors, winter weather delays, falling bunker prices, and limited supply of new tonnage created a rally in spot trade rates for crude tankers that we haven't experienced since 2008, and which has been sustained well into the first quarter of 2015. Storage is, once again, expected to play a key role, as it did between 2009 and the first half of 2010, by removing tonnage from the market, creating a positive trickle-down effect on tankers smaller than VLCC.

Bunker builds have been held, impacting positively voyage expenses.

The next slide is our main financial highlights of our press release. Strong improvement of every metric leading to a profitable quarter and full year. $33.5 million net income for the 2014 year, versus a loss of $37.5 million in 2013.

Almost 130% increase in operating income to $76 million, $180 million of EBITDA for the full year, which represents almost 36% increase from the previous year, with positive EBITDA for the whole operating fleet.

Very strong cash reserves of $214.4 million. 31 vessels benefiting from a very strong spot tanker market and rate, which is triggered by the reduction in the price of oil, and, of course, we continue to have an impeccable debt service record since the crisis started back in 2008, while maintaining the firepower to grow responsibly.

The next slide is a snapshot of all three sectors where the Company operates, which is the crude, products, DP2 and LNG. The fleet is very sophisticated, purpose built to the fit the transportation requirements of the Company's clients.

On slide 6 we see the Company's pro forma fleet, which includes the 50 vessels in operation and the vessels under construction. 73% of the 2015 sea-available days from this date are on spot or spot-related contracts. The fleet is very modern, with the average age of the operating fleet today at 7.9 years versus 9.4 years for the world tanker fleet.

Slide 7 shows the clients of TEN, all blue-chip names 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 group. These 10 client names account for 78% of the 2014 revenue.

The next slide shows you the low cost base which TEN has, where most of the fleet has been built before the rise of new building prices. With the tanker market expected to remain firm in 2015, the prospects for 2015, barring, of course, any unforeseen circumstances, point out to an even better year than 2014, and this is also reflected in the snapshot of the rates that we see at the right side of the slide.

The next slide, as you see, we continue to have a balanced employment strategy, with a mix of spot charters, CoAs, pooling arrangements, and period charters with fixed rates -- with minimum rates and profit-sharing arrangements. Right now, we have 19 vessels on time charters with fixed employment, 10 vessels in profit sharing, and 21 vessels trading in a combination of spot CoAs and pools.

Another way to read the employment details of the fleet is that 31 vessels have secured employment from less than a year to 15 years, and 31 vessels have an earnings tied in full or up to 50% over and above our minimum base rate to a spot market that is at levels we have experienced back in 2008.

The next 2 slides, slide 10 and 11, give you a snapshot of the overall market. Oil demand continues to grow at about 1% per year, and the global economy, despite the headwinds in some key regions, continues to expand. The supply-driven drop in oil prices benefits the tanker market. Rising volumes, longer distances, very modest fleet growth for crude tankers, and increasing floating storage are expected to support the market's solid growth beyond the first quarter of 2015.

If we put a dollar value on the fleet, on the employment of the fleet as it stands right now, we see that we have fixed 45% of the available 2015 operating days and 31 of the 2016 operating days in time charters, and if we assume only the minimum rates, we have secured 819 months of forward employment, or 2.3 years per vessel, and $750 million in minimum gross revenues.

By choice, the Company has currently the highest spot market exposure in order to take advantage of the strong spot rate market. 73% of the 2015 sea-available days from this day are at spot or spot-related contracts.

Sale and purchase has always been a key part of the overall strategy, and we expect that this year we are going to see some more sales of some of older but very reliable vessels. Besides the recent acquisition at attractive price of 2 modern Suezmax sister vessels, as we said, the Company strategically and opportunistically could be seen divesting certain assets that provide capital gains and release cash.

Fleet modernity, while growing responsibly with committed business rather than building on speculation, remains key elements of our strategy.

The next slide shows the history of our cash dividend distributions. We announced that the next dividend of $0.06 will be paid on May 28th, and, in total since 2002, we have paid $10 in cash dividends for approximately $405 million, and this compares with a listing price in our IPO of $7.50.

Although we floated the Company in 2002 at $7.50, our share price reached $40 in 2007. In comparison to 2007, we have a bigger operating fleet, a new building program where 12 out of the 13 vessels are tied to long, 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 prospects, and the current state of the booming trade market.

The next slide shows the most recent NAV calculation, and lists the analysts covering TEN.

The management's vision is to continue growing the Company responsibly, and, at the same time, having the reality -- 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 year. Paul?

Thank you, George.

Well, 2014 gave us the best results in 6 years, results that could have been $0.12 per share better, and for quarter 4, $0.09 better if the unexpected drop in oil prices had not turned our hitherto protective bunker hedges against us.

But the oil price fall did compensate us with a far more rewarding silver lining in the form of greatly reduced fuel prices, and a surging demand for our tankers at robust rates, as George has described. The hedges, anyway, are of a very short-term nature, while we foresee a much longer duration of continued buoyant demand and lower fuel costs.

There was no impairment charge in 2014, so when I mentioned 2013 comparatives, I'll ignore the 2013 impairment charge.

In 2014, therefore, operating income was $76 million, double that of 2013. Quarter 4 operating income was $29.2 million, 6 times above quarter 4, 2013. Our net income in quarter 4 was $13.5 million, compared to a net loss of $7.3 million for quarter 4, 2013. 2014 net income was $33.5 million, compared to a $9.2 million loss in 2013.

The greatly improved results over 2013 were due to a far more prosperous tanker market, especially in crude, to the 2 new Suezmax tankers, and because the shuttle tankers operated for a full year in 2014.

2014 gross revenue, at $0.5 billion, was 20% up, while quarter 4 revenue was up 31%. 2014 daily average TCE was $20,900, a 17% increase over 2013. Quarter 4 average rates increased 34% to $23,300.

For the year, all the vessels had positive EBITDA, totaling $179 million, $47 million more than in 2013, while quarter 4 generated EBITDA of $55 million, nearly double that of the prior quarter 4.

Our Aframaxes and Suezmaxes provided the biggest increases in both the full year and the final quarter. Aframaxes, mostly on spot, earning average rates over double those of the prior quarter 4. Suezmax average rates were up by 40% over the previous quarter 4 due to lucrative spot voyages, and profit shares.

The product carriers achieved similar overall results in 2014 as in 2013, but at last made a strong recovery in quarter 4, carrying through into quarter 1.

Daily vessel average OpEx rose in quarter 4, partly due to the new Suezmaxes and timing of expenditure on spares, repairs, and stores, offset by a stronger dollar, which will have a positive impact on 2015.

2014 OpEx also increased, much due to the shuttles working full year, to the 2 new Suezmaxes, and our VLCC coming off bare boat, and so, bearing OpEx throughout 2014. But all these vessels earned several times more revenue. Indeed, as George has said, the VLCC is now earning $55,000 daily on a 6-month storage contract.

Quarter 4 finance costs were $15.6 million against $10 million in the prior quarter 4, and annual finance costs were also $2 million up. The effect of reduced interest margin and expiring interest rate swaps was offset by the increase in non-cash negative valuations, and costs on bunker swaps of over $7 million.

These costs, now capped, are greatly outweighed by lower fuel costs. The bunker swaps valuations will revert in 2015 as hedges expire to offset actual swap payments. So, finance costs are expected to return to an average $10 million a quarter in 2015.

In quarter 4, we repaid $34 million of debt, and we received $31 million of new, pre-delivery debt relating to our LNG new building, leaving $1.42 billion outstanding at the year end. Net debt to capital fell to 50.6%.

Given our over $200 million of cash, strong cash flow, healthy leverage, success in raising debt at competitive terms with pre-delivery installments, plus rising valuations of vessels, certain of which we aim to sell, we are in a comfortable position to meet all our capital expenditures commitments.

Our managers continue to operate our vessels safely and efficiently, and with minimum days lost, and the quarter 1 market continues to generate significant overall earnings, and positive EBITDA for each one of our vessels.

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

Well, thank you very much for the -- for explaining the good news. We are all very, I think, glad and relieved that we have placed the Company in very solid ground in the last 3 years, and we are able right now to take advantage, and this -- I hope this will be the start of a much more exciting period for the tanker market.

The current oil price and the supply and demand dynamic looks that we are in for at least a couple of good years, hopefully longer, and as long as most of the owners we are able to protect ourselves by avoiding new buildings and mainly speculative new buildings, I think we will be able to maintain a healthy market. And with that, I would ask any questions from all of our friends and shareholders. Thank you very much.

Thank you. You have a question coming from the like of Michael Webber. So, please ask your question.

Hey, good morning, guys. How are you?

Very well. Hi, Michael.

Hey, I wanted to talk, first, about potential uses of cash. Obviously, the market leverage is paying off right now, and I'm just curious as to how you think about using some of that inbound cash, be it potentially adjusting the dividend policy, and/or looking at new assets, and I kind of want to delve into the latter there in a second question? But maybe just your thoughts on use of the cash, specifically around the dividend?

Yes, I mean, as, I think, George mentioned, TEN has been a steady divided payer, and we have been an aggressive dividend payer in the past. We have never regretted this. We are a dividend-paying company, and we pay dividends through thick and thin. We never stopped our dividend policy, even though the very difficult period that Paul referred to between 2010 and 2014.

We are looking in the long-term prospects of the market and of the Company, and, of course, we will -- if the Board -- the Board will judge if further dividend increase within -- after 2015 would be required. But we are a dividend-paying company and we like that.

Right. But we'd be more likely to see a flat bump as opposed to some sort of a special or anything like that, correct?

I think so, yes.

Okay, fair enough.

This is the policy.

And just on the second point around use of the cash, around acquisitions, you mentioned avoiding new builds in terms of, I guess, speculative new builds kind of ruining the supply/demand balance.

I'm just curious of what your thoughts are around asset values here, with 5-year-old Suezes up at 70, and Afras, I think, around 55, whether or not you think those are attractive, given that it seems like they're pricing in pretty firm rates for quite a while.

Well, as, I think, as it has been discussed by George and in our press release, we are always open in the sales and purchase market. We are looking to replace some of our, I would say, older -- although we have a very young fleet -- our 2002s and 2004s and 2005 vessels. We will be selling, in today's environment, some of our ships, and we will be looking to replace when the time is right.

When I saw we are not looking at speculation, we never see TEN to order 10 product carriers, just because they will -- it will cost a couple of tons less to run them, or 10 Suezmaxes in order to try and find -- and go out and try to find out who is going to charter them.

But you might see TEN ordering additional shuttle tankers against 10, 5, 8-year long-term contracts, very accretive contracts. These are ships that will not put weight in the existing market, because shuttle tankers are not participating in the day-to-day spot market. So, this -- we will be looking at that.

You might -- and you might see us increase our -- after we sold a significant number of our VLCCs, we might -- you might see us increase some of our VLCC participation through vessels, hopefully, modern, second-hand vessels with long-term employment. I think this is the prospect.

Got it. That makes sense. Just one, maybe two, and I'll turn it over. Just around that process, and around what we're using in the market, is the spike in rates and spot profitability, in terms of the kind of volume you're seeing on acquisition for charter tonnage, does that provide a window where maybe you could go in and buy more charter tonnage at a bit of -- if there was maybe some sort of value dislocation there where you can go in and get Afras or MRs that are on period contracts because you can get them at a discount to where prevailing longer-term rates area?

I think the vessels that we are looking to purchase are specialized vessels. So, I think from -- in the Aframax market, we have 9 Aframaxes coming up, starting from early next year. So, I think we, most probably, would be looking at ships that are charter free.

Okay. Thanks. Just one more, I'll turn it over. You mentioned the bunker hedges. I think you said -- Paul, I think you said $0.12 on the fourth quarter, and they were shorter duration. Do you have a sense on how much of that bled through into Q1 on a per share basis?

Paul, is that bleeding or not bleeding?

Well, yes, because we've capped those hedges. So, we can't bear any more valuation losses. There will, obviously, have to be swap payments to be made, but as I've pointed out, these valuations, these non-cash valuations will turn around during the course of the year, and although they may not match the payment exactly over the period of the next 9 or so months, they will compensate each other. So, hopefully, we won't see any significant negative impact in quarter 1.

Great. All right. I got to follow up with you on that offline. Thanks for the time, guys, I appreciate it.

The next question comes from the line of Fotis Giannakoulis from Morgan Stanley. So, please go ahead.

Yes. Hi, guys, and congratulations for the good quarter.

Thank you.

I want to ask you about your growth strategy. You mentioned that you are not interested in ordering any new buildings, but you might see some second hand acquisitions, mostly to replace older tonnage. Are you going to need any capital? You already have $200 million in your balance sheet, but I see your history, you always want to have around this level of cash at every single quarter.

Are there any thoughts of issuing any equity at this time, or it's something that you completely dismiss?

I think at the levels that we are trading, there is no thought of raising any equity. We -- I think, as George very correctly said, and Paul, we have the luxury of being one, perhaps, of the few companies that have been able to maintain a stellar bank record during the crisis by never, not even negotiating one of our -- any of our loans.

So, there is a lot of very cheap debt out there. We have almost a 50% debt to equity right now, which is a very comfortable position to be, and so, I think we will need to see at least a double-digit share price to start talking to the board about anything to do with equity.

Okay. Thank you. And regarding the stock price, you mentioned, you presented your NAV estimate of $11. Can we assume that this $11 of your NAV is practically the benchmark that you have, whether you raise equity or not?

Yes. As I said, the NAV is a double -- as correctly you said, it's a double -- it's a double-digit figure, and I think this should be the start. Hopefully, with your help and I know all your analysts are doing a very good job educating our shareholders, the shareholders, that in this current market, the lower the price of the product we carry, crude oil, the better it is for us. And we expect this to finally move our share price.

Thank you. Nik. I want to ask you about the two main markets that you are involved, crude and the product carriers.

You -- it seems that your main focus or you main area of optimism comes from the crude tanker market. However, we have seen the product tanker rates being quite strong the last four or five weeks. Can you explain to us what is happening there? Where do you see the -- this market moving, and what is the reason that you feel even more confident about the crude tanker market, at least for the next two quarters, vis-a-vis the product tankers?

Yes. Well, I think, as you rightly said, there has been a significant rebound on the product market. We are seeing that the lower the price of crude is, the easier it becomes for refineries to have higher margins and make some -- finally make some money.

So, I think this is leading to more products being refined and moved around, a significant growth, and that's why we're seeing in the last 6 months a much firmer spot market, and period market for the products. And I would say we have a 20% increase from a year ago on the Handysize and both the LR1s and LR2s.

And regarding the reason why you focused your optimism for the crude tanker market in the first and the second quarter, is there something that concerns you after that, or it's just too soon to be able to have a view? And, also, if you can comment about the order book, how it's developing during the year, and if you see any link between the tanker order book with what is happening in the dry bulk market potential slot that they have been kept for dry bulk vessels, that they could be switched into tankers that might concern you?

Well, as -- the reason we are not -- we usually have a seasonal first quarter, first quarter is a very strong quarter. Second quarter growth seems to be maintaining strength. A lot of interest, a lot of increase in long-term business and time charters offered by the major oil companies. So, that makes us also quite optimistic.

We are optimistic for 2015, but we like to take it a quarter at a time, and the closer as we move forward, I think, we're looking at a relatively strong or very strong year. We are seeing a lot of time charters coming out. We have seen last year up to the end of March we had about 10 time charters for 6 months and above for VLCCs. Today we had 33 up to today in 2015.

Last year, there was almost none, 2 or 3 long-term time charters on Suezmaxes. There have been close to 15 so far this year.

So, you will see that, also, the major oil companies are taking the view that we are in for at least a 3 to 5 year positive strong period.

Okay. And this optimism that you mentioned, that the oil majors are showing through period chartering is it in -- more obvious in any specific sub-segment? You mentioned about a lot of VLCCs, but what happens in the other segments? And, also, what happens in the product tankers, and how do you explain the potential differences between the inquiries for long-term chartering across the different asset classes?

Well, just to simplify it, I think we are seeing much more demand for long periods for crude -- for crude vessels. We are seeing a lot of interest for the Panamax, for the LR1s, and we announced a couple of extensions of our ships last month on new buildings and on existing ships.

So, yes, crude carriers so there is much more interest, whereas on the product carriers, because it -- the market just turned, as we said, about 5 months ago, it needs a little bit more convincing for it to go long term, meaning 3 to 5 years. There's plenty of business for 1 year, but nobody would like to fix -- I mean, today the spot market is at $22,000. Why would you fix a vessel at $14,000 or $15,000 for a year?

Thank you, Nik. One last question. I'm going to ask about the smallest segment of your investment, the LNG segment. You have 2 vessels, 1 of which is already in the water, and soon we'll reach for renewal, and a new building vessel.

What is the situation there? Have you had any indications of any attractive contracts, especially for the new building that is coming in early 2016?

Well, there is a lot of interest for -- in gas, sure. We all consider that this is the future. However, I would say the stars of the game today are the products, the crude and the product carriers. I think what -- the LNG market is suffering from, also, the low price of oil, making LNG, short term, less attractive, this price differential.

So, as we speak right now, there are interest, there are accretive business out there, but our intention is, on the existing ship, which is in the water, has another year and a bit on charter, and on the new building, which is coming in 2016, the closer to the delivery time, we will get a much better rate.

Okay, thank you very much for your answers.

Thank you.

(Operator Instructions). The next question comes from the line of Mark Suarez from Euro Pacific Capital. So, please go ahead.

Yes, good morning. Thanks for taking my questions.

Nik, you talked about significant demand now for the long-time fixes or the long-term charters for the crude tankers, and I'm wondering how do you think about your employment strategy for the vessels coming up for renewal in 2015? Do you feel that maybe returning them under long-term contracts, TCEs, with a profit share will be more attractive at this point, or do you think that maybe going under spot contracts and giving you a bit of an upside, especially given the lower bunker costs makes sense at this point?

We are maintaining 73% of our available days for 2015. We are spot oriented. So, this is the most we've been spot for a very, very, very long time, and I think we do not regret it right now. We have specific returns that we want to achieve, but I think when we are -- when we are close to them, we are going to be chartering ships to 3 or 5 years with profit-sharing arrangements.

But right now, we are enjoying the $50,000 and $60,000 a day on Suezmaxes, and the $30,000 and $40,000 on the Aframaxes, and I think our clients are coming to grips that they will have to pay strong numbers to get ships under their belt for 3 to 5 years, but we're getting there.

Got you. Okay, that's -- that makes sense. And then now, turning to the product segment, given that we have seen a lot of substitutions into the LR1s and the LR2s. Do you continue to see opportunities to maybe fix your product tanker fleet into those crude trades, if you will, to continue to enjoy those high rates over the next 12 to 18 months? How do you see that playing out, that substitution effect, between the crude and the product?

That's what -- that's what we've been doing. We've been keeping, as I call it, the ships dirty on the spot -- the ones that are on the spot market. And in the last couple of months, as I think it was mentioned before, the clean market is doing -- is creeping up, also.

So, I think right now we have, of course, being on the crude -- on the crude side, it's still 25% to 30% more profitable than being clean, but the clean is becoming in the $20,000s. For small ships, this is not bad.

Okay. And then, I guess, finally, just touching on the contango, Brent forward curves here, I think we have actually seen some flattening out since December of last year, and I'm wondering if you guys are seeing any evidence of maybe decreased demand for oil storage in the crude tanker space? I know you mentioned there's been some fixing for the sole purpose of oil storage. I'm wondering how do you see that trend playing out, if you continue to see that flattening of the Brent forward curve here?

Yes. I think the way things are today with the storage, the storage craze of the end of the fourth quarter and beginning of the first quarter has slowed down. When we were -- I think we've got almost -- we've got the big -- we fixed one of our -- we fixed our VLCC at $55,000 for 6 months, so we're enjoying -- and I think our all-in breakeven is about $12,000, so we're enjoying -- it's going to be helping with the first two quarters significantly, the bottom line.

But right now, as the price has dropped, we're seeing less interest. However, it seems that a lot of the land, the land storage facilities are getting full, and there is also another way of having ships as storage, not purely for contango, but as ways to be able to store the product.

Okay. Okay, that makes sense. Well, that's helpful. Well, that's all I have for now, Nik. Thanks for your help, for the answers.

Thank you.

(Operator Instructions). Your next question comes from the line of Spiro Dounis from UBS. Please go ahead.

Hey, good morning, gentlemen. I just wanted to switch gears to shuttle tankers, if we can. It looks like last night the UK government started to relax some of the taxes on producers in the North Sea. I'm just wondering, does this create more opportunities for shuttles in your view? Does that make you more bullish in that sector? Or do you think that's really just a move to stop the bleeding, for now?

No, I think the -- it is to encourage and help the bleeding of the very expensive North Sea oil, but I think this is positive news for owners, like ourselves, of shuttle tankers. This only happened very recently, so we have not seen the effect, but it is a move toward the right direction.

Makes sense. And then just on the MLP, if you don't mind. I think a peer of yours formed an MLP back in November, and at the time it was a little precarious. People were still trying to figure out where the oil price was going to shake out, and what that meant for tankers. And even in that time, I think they were able to drop down some VLCCs for 20% to 30% prices above the prevailing market rate at the time.

Clearly -- I mean, that sounds attractive to us, but it sounds like you're still tracking this market and valuations aren't quite where you want them. Without giving away any secrets, how should we be thinking about what you think is attractive, whether it be yield, multiples, just to kind of us give us some color on when we think you're going to be ready to make that move?

Well, I think the MLP -- the MLP time horizon, I think, is still on. And it's -- the drop of the vessels will be starting as early as February, in about 10 months. So, we are on track. We have done our work with the SEC, but I think the way that we look at it is that if we are going to do something like that, we would like to be able to have a single digit this time yield, and I think this, right now, not -- it's not happening. We had some, for the wrong reasons, offerings of MLPs at in the teens, and I think TEN has no reason to make an MLP that will be so dilutive to the main Company.

So, it is there. We're looking at it, but if we can see 6%, 7%, 8%, perhaps, then we can -- the Board might consider doing it, but where it is today, I think, it is not accretive for the mother Company.

Okay. Yes, that's very helpful. That's it for me. Look forward to see you guys next week.

Thank you.

Same here.

(Operator Instructions). It seems there are no further questions at this time, so please continue.

Well, again, thank you very much for being and listening to us and supporting the Company. We have been -- I think we have navigated the worst part, so far, and this is a bit calmer. Looking forward to see all of you with a team of our COO, our Chief Financial Controller, is going to be there, together with our Deputy Chairman in New York for next week, and if you have any more questions, we'll be very happy to answer face to face.

Thank you very much from all and good morning from you from Athens.

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