Tsakos Energy Navigation Ltd (TEN) 2018 Q2 法說會逐字稿

Thank you for standing by ladies and gentlemen, and welcome to the Tsakos Energy Navigation Conference Call on the second quarter 2018 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. (Operator Instructions) I must advise that this conference is being recorded today.

I now pass the floor to Mr. Nicolas Bornozis, Capital Link, Investor Relations Adviser to Tsakos Energy Navigation. Please go ahead, sir.

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

This morning, the company publicly released its financial results for the second quarter 2018. In case you do not have a copy of today's earnings release, please call us at (212) 661-7566 or e-mail 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 you to access the presentation on the webcast. Please note that the slides of the webcast would 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, Nicolas. Good morning, everyone, and thank you for dialing in today.

Improving income by 23% from last quarter in this very poor market is quite an impressive achievement, and once again, congratulations are in order to Nikolas Tsakos and the team. Nikolas and his team would elaborate on the financials, but I'd like to underline that TEN's prudent and balanced strategy was designed and perfectly executed over time. Clearly not a fly-by-night exercise. Allows our fleet to outperform the spot market by over 100%, while at the same time a large proportion of our fleet, 80%, has secured more, $1.2 billion of minimum contracted revenues for the next 2.5 years. This allows us to cover most of our expenses and maintain a healthy dividend going forward.

Our strong balance sheet and ample liquidity allows us to operate comfortably in challenging markets. This underlines the broad recognition of TEN as an operator of the highest quality governed, and I said that, by best-in-class corporate governance practices. There should be absolutely no doubt about the quality of TEN's corporate governance, and this is something that the board and the company's controlling shareholders are fully committed to. This is the only way after all to attract and maintain our blue-chip client base.

Rest assured that we will continue to play a very tight defense, which, as they say, is also the best form of offense when the time comes -- when the time for this comes. And indeed, recently, there are increasing signs that we're getting closer to a more positive sentiment in the market for which we are perfectly positioned to fully benefit from.

So that's it from me for now. And I pass the floor on to Nikolas Tsakos.

Thank you, Chairman, and thank you for your good words. However, it's still very painful to report losses, even diminishing ones. As we had predicted and we discussed on our last call, we could say that the market environment is still very, very poor, but getting better. We believe that the first quarter, we were at the real bottom of the barrel. Things look to becoming a bit less bleak as we go forward as far as the spot market is concerned.

We have seen small but significant improvements also on spot rates since that period of time. The majority of the categories of our fleet is participating, we have seen the Suezmaxes operating close to $12,000 in the first 6 months rather than 7 in the previous period. The Aframaxes, where we have a very big presence, as you know, with $11,000, up from $4,000 in the previous period and also the Panamax where, again, we have a presence, tripled from -- or doubled from $3,000 to $7,000.

So the rates are still very depressed, at least they're covering, and I'm talking about the spot market, but at least they're starting to cover operating expenses, which for many owners, it is very important. In our case, of course, we have a very different picture having able to outperform significantly the spot rates, and I will get into exactly the analysis during my presentations and George, our COO's presentation later.

Again, there are signs that things are getting better. We are going to be entering the fourth quarter, which usually the market harshens. There are a lot of -- that we have the largest scrapping year so far, the largest or the biggest scrapping year so far since 2010 as tankers are concerned.

So these are reasons to believe that we are getting out of this very long and dark tunnel. In our case at TEN, we have been able to, as always, we counter-cycle. The company has a very strong balance sheet, I think significant in excess of $250 million in cash and looking to take any opportunities that arise either in our main business or on growing our LNG segment and the shuttle business.

And with this, I will ask George, our COO, to give us an overview of what has happened for 6 months and I'll be back with questions. Thank you.

Thank you, Nikolas. We are beginning to see a gradual market improvement and hope as we move closer to the fourth quarter for this to be reflected in the rates as well.

Global oil demand continues to grow in 2018, and the expectation for next year remains strong as well. OPEC has begun to pump more oil into the market. The global economy, despite recent headwinds from the emerging market economies and trade disputes continues to be strong, and vessel supply is improving as newbuilding ordering is [manazim] and scrapping at year-end 2018 is expected to be the highest year since 2010.

In this environment, TEN's proven commercial strategy of fixing most of the vessels in the fleet on minimum to long-term time charters paid dividends again as it helped the company to outperform the average spot market indices by over 100% in all vessel categories the company operates. We believe that tanker rates will recover from the low point of the current cycle and look forward to the fourth quarter of this year.

For those of you who are connected to the Internet and our website, there is an online slide presentation, the format of which we are going to follow during the call.

Turning to Slide #3 where we have the key corporate highlights. After the sale of Millennium, the company's oldest vessel, TEN has now a pro forma fleet of 66 vessels, including 6 vessels in operation and 2 newbuilding orders to an oil major against long time charters. 25 vessels in the fleet have ice-class capabilities. The average fleet age is 7.9 years versus 10.3 years for the world tanker fleet.

We have a balanced employment strategy that takes advantage of market peaks with profit-sharing arrangements. Out of the 66 vessel pro forma fleet, 50 vessels are on secured employment contracts with an average duration of 2.5 years. The emphasis is on charters with profit-sharing arrangements that enable TEN to take advantage of spikes and stronger freight markets.

We have secured minimum contracted revenue of $1.2 billion with potential additional revenues from profit-sharing arrangements. We have a modern diversified fleet covering clients' transportation requirements in crude, products, shuttle and LNG, and we have become the carrier of choice for many of the top oil majors, commodity traders and refineries. LNG and shuttles remain the sectors where TEN is trying to grow its presence even more.

Slide #4, we have a breakdown of the current 66 vessel pro forma fleet. As you can see, 48 vessels are engaged in crude trading, 13 in products, while we have 3 shuttle tankers and 2 LNG carriers.

Slide 5 lists the clients of the company, all of which are blue-chip names, with whom TEN is doing repeat business over the years, thanks to the modern fleet, the safety record and the quality of service. The 10 names that you see listed on the left of the slide represents 72% of the revenues generated for the company.

Slide 6, strong secured coverage with upside potential. We have so far announced during this year new charters and charter extension for a total of 23 vessels in the fleet. The charter periods for these vessels ranges from 6 months to up to 12 years, if we include optional periods granted to charterers by the company.

50 vessels out of the 66 vessel pro forma fleet are fixed under secured revenue contracts, a combination of time charters, time charters with profit sharings and CoAs, while 37 vessels are on market-related charters, including the vessels currently trading in the spot market, securing the company's ability to immediately capture the market's upside. The revenues expected from the vessels in the fleet with secured employment cover the company's annual operating and financial obligations.

On Slide 7, the left side of the slide presents the all-in breakeven costs for the various vessel types the company operates. As you can see, the cost base is low. In addition to the low shipbuilding cost, we must highlight the purchasing power of our technical managers, Tsakos Columbia Shipmanagement, and the continuous cost control efforts by management to maintain a low OpEx average for the fleet, while keeping a very high fleet utilization rate quarter after quarter that we believe qualifies as full employment.

With almost 80% of the fleet on secured employment, the revenue these charters generate cover the company's operating and finance expenses, including the dividends.

In addition, the combination of time charters with profit-sharing, CoAs and spot charters guarantee for the company a share of the market's upside every time we have a spike or a sustained strong freight market.

Based on the current number of vessels operating in the spot market and in time charters with profit sharings, for every $1,000 increase in spot market rates, we have a positive $0.07 impact on annual earnings per share.

The next few slides from 8 to 10 tell you basically what we see in the market today. We see solid global economic background, which translates to strong global oil demand growth. 2018 marks the fourth year in a row with global oil demand growing by at least 1.4 million barrels per day against the long-term demand growth figure of 1 million barrels per day. The trend appears to be holding strong as the International Energy Agency in their latest report forecasts 2019 demand growth to slightly accelerate to 1.5 million barrels per day, although the risk from escalating trade disputes are noted.

With global oil stocks currently below the 5-year average level and looming U.S.-led sanctions against Iran from next November, OPEC in their last June meeting decided to relax compliance with the agreed output costs. The market is already seeing OPEC increased production, which historically has always been positive for tanker demand and the freight rates. U.S. continues to develop as a major crude oil exporter to the world.

During 2017, the average U.S. exports were in excess of 1.4 million barrels per day. The latest figures indicate that U.S. crude oil exports are closer to or at 2 million barrels per day, meaning that for 2018, the average growth is going to be higher. The growing U.S. exports have created new long-distance trade routes, mainly to Asian destinations, adding to ton-mile growth.

High scrap prices and the weak markets have resulted in a significant increase in tanker scrapping. The average age of the scrapped vessels is coming down to about 20 years. With the upcoming regulations for the water ballast in 2019 and the global sulfur cap from 2020, we believe in the company that owners of older vessels will continue to prioritize the (inaudible) in scrapping their older tonnage rather than passing them to an expensive forced special survey. The effect of which will be lower net fleet growth for the next couple of years.

That concludes the operation part of our presentation. Paul will go through the financial highlights for the second quarter and the first half. Paul?

Thank you, George. As the Chairman mentioned, in quarter 2, TEN improved on quarter 1 results with the loss smaller by 23% than in quarter 1. Given the market, the loss of $9.6 million or $9.2 million before loss on vessel sale which equates to $0.18 -- minus $0.18 earnings per share is at least encouraging in direction and is mainly due to reduced costs. For the half year, there was a loss before vessel sale of $21 million.

In such a market, losses were also contained due to our time charter coverage and full employment. Our average daily TCE rates for quarter 2 was a respectable $17,200 per vessel and for the half year, $17,500, well above average market rates.

In quarter 2, we still had 18 vessels on spot, mainly Aframaxes and product carriers, which mostly operated at below breakeven, but at least covering operating costs.

Fortunately, the dry-docking schedule was lighter in quarter 2 with just 2 vessels in dock. Average daily OpEx at $7,570 per vessel was 4% down from the prior quarter 2 and 7% down from the high level incurred in quarter 1.

Daily overhead costs per vessel remained stable at $1,200. Finance costs fell by over $1 million as bunker hedges generated cash gains of $2 million and positive valuations of $3 million. This was partly offset by increased interest of $3 million, mainly due to the new vessel in 2017 at a higher interest rate. While our time charters did again generate cash to cover most operating overheads and finance costs, our expectations for a recovery in the spot market within 2018 remains cautious. And therefore, concentrated in the half year on ensuring adequate liquidity to meet all eventualities with confidence that conditions will begin to improve going into 2019.

In this respect, TEN issued a new series of preferred stock raising $150 million. Total cash at June 30 was therefore $280 million.

TEN started Q2 with $1.72 billion outstanding loans. We refinanced loans on 12 vessels repaying $244 million and obtaining new loans at more favorable terms totaling $255 million. Also $10 million debt was repaid from proceeds on the sale of VLCC Millennium. A further $37 million was paid in scheduled repayment.

So at June 30, the outstanding balance was $1.68 billion and net debt to capital was down to 47%, indicating total indebtedness is now declining. Negotiations to finance the 2 newbuilding Aframaxes at very competitive terms are now in their final stage.

And this concludes my comments, except to add that obviously, we will strive to ensure that the promising trend in results continues through the year-end, hoping, of course, that the market will help.

And now I hand the call back to Nikolas.

Thank you, Paul. And from your mouth to God's ear, as they say, hopefully, we continues turnaround in the last 2 quarters. And as I said, we are fortifying the company by getting long-term business. This long-term business allows us to maintain very strong liquidity, allows us to maintain our conservative dividend payment, which is somewhere around 6% yield, as we speak today, and our industrial approach in chartering ships long term gives us the terms to always significantly outperform the market.

In the previous quarters, we had so far averaged approximately $23,000 for VLCCs against the market of $11,000; our Suezmaxes at $15,000 against the market of $7,000, spot market of $7,000; our Aframaxes $18,000 against the market of less than $8,000; and our Panamaxes, where we still have quite a significant fleet, at $14,000 towards -- against the market of $8,000. And we are, I think, at market with our Handysize vessels.

This policy has fortified the company. As the Chairman said, it is playing defense which sometimes is a very offensive way to proceed. And we hope that we are able to take advantage of the upside to be approaching more and more as we speak and we get the feeling also from the appetite of the major oil companies that are there to charter our ships for long periods of time.

And with that, I will not take any more of your time for me speaking. I would like to see if you have any questions for us to answer. Thank you very much.

(Operator Instructions) Your first question is from the line of Mark Suarez.

If I could start off with the series F refinancing. What is the priority for that? I mean, is it on the series B and C refinancing? Or what are the proceeds intended for?

Yes, I mean, our being a conservative company and being, as I said, proactive, we want to secure that future obligations, when we say future, we're talking about an average of 2 years going forward, can be dealt with. And this is a priority, and of course, funds for further growth. As I said, we are seeing opportunities in the LNG. We have never said that -- we have never kept a secret that we are always looking at business in the LNG sector. We participate in every single tender. As you know -- as you might recall, we are one of the first that started in this business from this second wave, but we ordered our first ship in 2004. However, we have kept a small fleet mainly because of the changes in technology. And I think we have not regretted it because that market has gone through a lot of cyclicalities and the tickets are quite large, talking about approximately around $180 million to $200 million per vessel, but this is -- our aspiration is to increase the size. So a combination of conservative preparations for our step-up of returns and fleet growth.

Okay. In the last quarter, you talked about a possible transition time for IMO 2020 implementation. Do you have any updates there?

This is -- yes, this is the 10-billion-dollar question now, because now with some inflation, the 8-million has gone out of fashion. It is a battle which is happening as we speak. There is a very strong preference from all of us, I would say, to be able to have 0.5, say, sulfur burning on our ships by January 1, 2020. However, the way that things look today and what we are experiencing is that if there is no transition period, we're going to be seeing a big number of ships having actually navigational problems and breakdowns because of the quality of barges and distillates that are being produced. Right now, there is no standard available. It's really very strange that we are less than 18 months from the due date and it's -- I think I mentioned this last time, it reminds me very much with the Brexit negotiations. There is a date and there's no plan how to achieve it. So that's where we are. But, however, any disruption of business will be positive for rates.

Sure. You have a unique advantage that you could see it for -- I guess, you get to see how it affects crude tankers and product tankers and LNG. Which segment do you think it's most beneficial for?

Come again. Are you talking about the 2020 or in...

Yes, 2020, I mean, is it best for crude tankers because it maybe slows down the fleet, is it best for product tankers because it creates additional demand, maybe new routes, is it best for LNG bunkering? What does it benefit most?

That's a very good philosophical question, but I think what -- if I would say, I think it will be product carriers, which we have about 50% of our fleet is product carriers, I believe we'll be the first in taking advantage because they will actually have to move this product that can be distillate and refined, let's say, in the modern refiners of India and Arabian Gulf to Europe and the United States. So they will have, in addition to disruption, more trade. I think then it would be the crude carriers because of what we mentioned. And LNG, the longer -- I mean, it's a much longer-term prospect, that would be the last to be benefited from something like this.

And your next question is from the line of James Jang from Maxim Group.

This is James from Maxim. So just talking about IMO, again. Nikolas, have you seen or do you think there will be any waivers granted for IMO 2020?

It depends what you mean waivers. I think what the industry is trying right now is for a transition period to allow for the right type of bunkers to be available. Today, people are experimenting. They take something which used to have a 3.5% sulfur content and they throw some sort of liquids inside and they hope the best. However, all these things destroy the engines of the ships, you have breakdowns of engines. We're fighting right now -- our COO is spending most of his days fighting claims for people not to get our engines damaged. So I hope that people will see the light and they will grant a 2-year transition period. It's not -- and when I say 2 years, it doesn't have to have a specific date. When the actual bunkers are there -- are available, then we can start burning them.

So is this something that INTERTANKO as a group is kind of pushing for? Or is it just...

Yes INTERTANKO -- not only INTERTANKO and all the other associations, which we call the Round Table, which is, I mean, we represent tankers and gas, all the cargo ships in the world. And then you have associations like BIMCO, where you have most of the containers. So -- and you have the largest container mover in the world, which is Maersk Line, very clearly stated that they are not planning to spend a single penny on -- I think this hypocritical and bad for the environment scrubber idea.

So for Tsakos, will it be fair to say that you guys would not be looking to install scrubbers ahead of 2020?

What we're saying is, as you know, the majority of our fleet is chartered long term. We have cases where we have 5, 10, 15-year contracts that the end users or clients might decide to their time and expense to install scrubbers. I mean, it's likely to have rented the car out on a long lease, we cannot stop the end user doing whatever they want to do there. We cannot stop them. So we will allow them to at their time and expense put scrubbers. So I do not exclude (inaudible) for us out of fleet of 66 vessels to have in a -- dozen ships has scrubbers, but those will be paid by the charterers and not speculatively by us.

Okay. So have -- so just to follow up on that, have you had any discussions with charterers yet? Have they expressed interest in installing scrubbers?

Yes, I mean, we have charterers that have approached us and they have decided in a very small amount of vessels to install at their time and expense scrubbers, but majority of our charterers, the top-tier major, world companies because they are environmentally responsible have decided that it's their responsibility to provide the right fuel for us to burn without installing scrubbers. So I would say 2/3 are not looking at scrubbers, 1/3 might consider scrubbers.

Your next question is from Magnus Fyhr from Seaport Global.

This is Magnus Fyhr, Seaport Global. Just a question on your fleet renewal strategy. I mean, you have a very modern fleet, but you also mentioned that you think the product tankers are best positioned for IMO 2020. Your product tanker fleet has been shrinking here over the last few years. Should we expect a focus on that segment going forward or where do you see the best opportunities?

Yes, I think we are always looking at vessels that have dual -- that are able to have dual capabilities, which means products and crude. And -- whereas, if you look at our fleet is balanced. I mean, today, we're only having 13 of our vessels working in the product segment. However, we have very large amounts, of about 28 of our vessels are ordered ships, so they couldn't actually carry products, if they have to. So we're almost in the middle between crude and products, but we have decided because of our clients' requirements, sometimes charterers, that they want more aggressive trading, but otherwise, we have a large number of products ourselves.

And what's the process there of taking them from dirty to clean if you want it to ahead of the 2020?

I mean, it is not -- from all the costs that are associated in shipping today, water ballast treatment and the scrubbers, et cetera, et cetera, this is the least of the core. I think you will need on average a week's cleaning for the big ships and 3 or 4 days for the smaller ships at a cost of about $200,000 for the large ships and half of it for the smaller ships. So it is not -- it can be done and we do it all the time when we have to.

And as far as the vetting process with the major oil to go from dirty to clean?

The major oil companies, they do not have a problem with this at all. What your charterers would like, of course, is to make sure that the vessel is clean enough. So they usually give you fuel cargo and a gas oil cargo as your first cargo after cleaning before you go into the naphthas and to the veg oils and the more sensitive cargoes.

Okay. And just one last question. With your balanced chartering strategy, I mean, you have -- I just realized you have $282 million of cash in the balance sheet and your market cap today is $282 million. Any thoughts there of buying back stock going forward?

Yes, I think, as I said, right now, as our Chairman said, we are in the defense, and I think the way we play defense is to make sure that we will never need to dig deep into our cash reserves by fortifying the company with not burning cash, sort of it. But I think when we see the market is turning, that will be -- we will do this in a big way, but we need a little sign that we are out of the woods. As long as we are in the woods, we are keeping fortified.

And your next question is from the line of Randy Giveans from Jefferies.

It's Randy Giveans of Jefferies. Regarding dry-docking, I know you strategically put forward some dry-docking as a result of kind of the weak market to get ahead of some of the regulations. So what is your expectation for dry-docking in the back half of this year and 2019?

Well, we have about -- this year for the balance of the year, we have only one, which is going -- it is happening right now as we speak. Next year, we have, I mean, on a big fleet like with 60 vessels plus, you have on average something like 8, 9 vessels per year that you have to go through special survey. Last year, we did quite a few -- put forward quite a few. And also in the first quarter, we took advantage of a slower market and we put forward vessels, 5 -- not all of the 5 vessels had their special survey due falling in the first quarter. So we took advantage of the slower market to accelerate the repairs and right now, we are ready and in position to take advantage of the market when the market will improve without disrupting and taking them out of service.

Perfect, okay. And then, lastly, can you just give us some guidance on quarter-to-date, I guess, current spot rates for some of your open Suezmax and Aframax tankers. Have you seen the market improving since 2Q?

We have seen the market improving. The majority of the Suezmaxes that we have right now are on profit sharing. They have a base rate, with the base rates being between $12,000 and $14,000 for most of these vessels. Right now, the spot market is around $10,000. So the 2 vessels that are in this spot market and they don't have a base rate with profit-sharing arrangement. They are earning currently rates closer to this $10,000.

And then the Aframax on the crude side?

We have a big part of the Aframaxes that are on time charters. And I mean, we have -- we told you I think that the average is around $10,000, but we have done $18,000. And so this is something that you should put forward in your calculations.

And your next question is from Michael Webber from Wells Fargo.

This is Greg on for Mike. So just going back to the bunker contamination that you touched on earlier, I just wanted to get your full take on it to see if there is any update from the regulatory side and then see how you think it affects IMO 2020.

Well, this is something that -- first of all, we had a large-scale contamination that started at the beginning of the year out of the Houston area, which affected in excess of 120 vessels. And from a point of time, a lot of this contaminated cargoes have been sold to other parts of the world, in essence, contaminating almost the full global bunker chain. With in excess of 120 incidents, it's a little bit disappointing that, as we speak right now, we have not seen anybody taking responsibility. And this is not an event, a random event, this is something that, as bunker buyers, we have seen happening every 3 or 5 years. So we need to take corrective action to make sure that we don't take unnecessary risk for which we pay because the bunkers are not given to us for free. So we're paying for the bunkers. And we need to make sure that we use these bunkers to move from A to B, and we would like to do it in a safe way. So we think the bunker industry is responsible in making sure that they would provide the right fuel, which is fit for purpose and we will not have to deal with the difficulties that we have been dealing and in the large scale that the latest incident the industry has faced. And of course, with 2020 ahead of us, where the majority of the fuels appear to be blended fuels, we feel that this problem -- and without having standards for this 2020 fuels, we feel that this thing is only going to get worse.

Okay, that's helpful. And then going back to the product tanker trade routes, have you seen this developing already, as some of the majors have started to test trials on the compliant fuel? Have you seen the trade routes start to change and develop and that fuel start to get carried around? Or is that something you see more of a H1 '19 or H2 '19 event?

I think this is more of a second half '19 event. I mean, most probably a fourth quarter '19 event. There are some suppliers who have -- who are selling today 0.1% fuel oil that is more or less a gas oil type. We have been using these fuels in the SECA zone instead of burning pure 0.1% gas oil. And the expectation is as we are going to have price assessment for the 0.5% fuel oil from the start of next year to gradually see almost everybody put out in the market 0.5% fuel oil.

Okay, and then last one from me. I mean, it looks like delays for IMO 2020 are highly unlikely. But given your comments earlier about the scrubbers, like what kind of regulatory risk do you think there is? What is the likelihood that the hammer comes down on open-loop scrubbers dumping this into the ocean either in 2021 or 2022 or even in 2025, that something could happen and open loops could be outlawed?

I believe that there is a very good chance that the open loop will be dropped and I think -- and rightly so, because instead of now what we're trying to do is protect the air emissions and reduce the air emissions, but at the same time, we are killing the source of oxygen, which is the sea. So this is very, very short term, it's a very short-term fix. And we as INTERTANKO have been -- and as owners have always been very critical. It's like inventing a new -- as I said, it's like inventing a new drug that perhaps will kill -- will cure one of the illnesses, but will kill the patient through another repeat illness. So it's not something we're looking forward to have and that's why we're not taking -- and I believe it's going to be a very short-term fix. Some owners out there are ordering for repairing their ships with scrubbers, but still it's a minute amount. I mean, there are 40,000 vessels out there that have to follow the legislation of the 0.5%. Right now, less than 1,000 -- 800 ships have scrubbers, the majority of them cruise vessels up in the ECA zones, which are in Alaska or the West Coast and Scandinavia. So from now until -- if everybody try to fit a scrubber from now until the end of the year, you could not achieve more, I would say, than 2,000 vessels. So I think it is going to be interesting to see the result. But the industry is starting a bit late, but is starting to focus and come together in this and through my participation as Chairman of INTERTANKO, we are going to be having a very, I would say, exciting and heated September in various IMO discussions and hoping that March, which is the last deadline of any transition period, something can be done.

At this time, speaker, please continue. No questions. Speaker, please continue.

Well, there are no more other questions?

No further questions at this time.

We would like, again, to thank you for tracking the company. I have to say that we are, being the largest shareholders, the most disappointed from anybody with not being able to have a positive result, which we have pride ourselves in our 25-year history. We hope to be able to reverse this trend for sure in 2019 and 2020 and make it less painful for all of us by preparing the company in this low environment to take advantage of the opportunities that will come. In the meantime, we're trying and I think, as Paul said, maintain expenses to the minimum, utilization to the highest degree, 96.2%, way above the industry average of 85% and make sure that we are there to provide a healthy, efficient, environmental friendly and, hopefully, very profitable service for us, to our clients. And with that, thank you very much.

Thank you. That does conclude the conference for today. Thank you all for participating, and you may now disconnect.