Tsakos Energy Navigation Ltd (TNP) 2013 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 2013 financial results. Today we have with us Mr. John Stavropoulos, Chairman; Mr. Nikolas Tsakos, President and CEO; Mr. Paul Durham, Chief Financial Officer; and Mr. George Saroglou, Chief Operating Officer of the Company.

At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session, at which time, if you'd like to ask a question, please press star, and one on your telephone keypad and wait for your name to be announced. I must advise you the call is being recorded today, Friday, the 2nd of August, 2013.

And now I'd like to hand the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relation Adviser 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 Adviser to Tsakos Energy Navigation.

The Company released its financial results for the second quarter and six months of 2013. The press release has been distributed publicly, and should you not have a copy of it, 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.

Parallel to today's conference call, there's also a live audio and slide webcast which can be accessed on the Company's website at the front page at www.tenn.gr. The conference call will follow the presentation slides, so we urge you to access the presentation and webcast.

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

And 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 floor, the call over to Mr. John Stavropoulos, the Chairman of Tsakos Energy Navigation. Mr. Stavropoulos, please go ahead, sir.

Thank you very much, Nicolas. Good morning, everyone. I'm pleased you're able to join us for the discussion today.

The tanker industry continues to be burdened by its supply-demand imbalances, but the pressures in certain areas are easing. I'm encouraged by TEN's diversification of vessel types and employment strategy, and future earnings visibility has clearly improved. I applaud managements for inspective management of costs, its unvarying quality of service.

As a shareholder, I'm optimistic that TEN is emerging from the four-year depression as a very strong company. Its fleet is first-class. The employment profile is very constructive. Its financial position is very solid. And its management is outstanding.

Thank you, Nikolas, your management team, and the entire Tsakos group for your [comment]

Mr. Chairman, thank you very much. And welcome, everybody, on our half-year and second quarter results. As the chairman said, we are on the right path -- we hope we are on the right path after a very prolonged -- one of the longest shipping prolonged crisis. The first six months of this year and the second quarter compare very, very favorably to where we were in 2011 and 2012.

The Company is returning to breakeven and hopefully profitability. We took actions by eliminating in the beginning of the year and late last year of the two VLCCs that actually dragged the Company's -- the Company's performance down, and we totally replaced them very quickly with our two DP vessels, but actually we are going to see that positive effect in the third and fourth quarter, since the vessels were delivered to the charters in the middle of May and the middle of June, respectively.

So these are actions we're taking in -- taking the Company down to the more specialized vessel path, a path that is much more profitable, that -- the day-to-day business in today's market. However, even in our conventional business, on our very large product carrier fleet, we are seeing profit -- significant profit coming in and a much more balance and act in the -- in our crude carrier fleets.

So overall, I think we are -- we've been saying this for the last couple of quarters. I think I started saying this, that we felt that 2012 was the bottom of the tanker market in general. We're trying to help this with taking the right moves in the sales and purchase market operation, keeping our costs down, having Tsakos Columbia, TCM, continuously keeping costs as low as possible and beating on the chartering side the indexes.

So we hope -- keeping our fingers crossed -- that the third and fourth quarter, which traditionally are more positive quarters for energy transportation, will bring us back to profitability after two years in the red.

And I think we could have been profitable in the first six months, if it not had been for -- as taking advantage of low market cycles to do our special survey for three of our vessels. And I think this has taken out quite the burden, since we only have, I think, but one vessel going forward in the next quarter. And, of course, repositioning our assets for better earning capacity.

We are looking in a brighter future than we were a year ago. And I will ask George Saroglou to give us all the actions that have been taken and give you more details of over the last 180 days, and specifically the last 90 days. Thank you.

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

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

Let's turn on slide number three, where we see the current fleet, which consists of 28 product tankers, all of them in the water, producing for TEN. This is one of the largest product fleets in the -- in the market operating in a product tanker market environment that continues to improve.

The Company has also 19 crude carriers, where we've seen rate improvements in certain routes in all three sectors. In VLCCs in the [DP] 3, in Suezmax in DP 5, in Aframaxes in DP 9, we didn't last as we enter the seasonally weak third quarter. The Company also has two LNG vessels, including one in the water and one on order.

The next slide gives us some market highlights. Despite subdued global economic outlook, especially for the developed economies, global oil demand continues to grow. In July, the International Energy Agency introduced its 2014 outlook, which forecasts demand growth of 1.2 million barrels per day over the 2013 figure. We are currently about 91 million barrels per day, which is an all-time high level.

Although the market, especially for crude tankers, continues to have challenges and no major rate improvement is expected until the fourth quarter of the year, the good news is that we haven't seen any new orders for crude tankers for more than a year, and in the next two years, the growth in all three categories, VLCCs, Suezmaxes, and Aframaxes is very limited, with the Aframax fleet marginal reducing during the 2013 and 2014 period.

Our product tankers rates -- in our product tankers, rates have rebounded from four years of historical low levels, talking about the period between 2008 and 2012, and the product tanker story continues to gain traction, as refinery capacity continues to build closer to the oil reserves, in particular the Middle East and further away from the OECD-consuming countries, creating ton mile demand for all type of product tankers.

Looking at the corporate highlights, TEN successfully completed the projects for the DP2 shuttle tankers by ordering, building and taking delivery on time of two high-specification vessels that passed all charters sea trials, and approval tests, and begun in May and June of 2013 their 15-year time charter to Petrobras.

The Company's pro forma fleet of 49 vessels includes 48 vessels in operation and one tri-fuel LNG vessel under construction. The Company managed to change the size of the order for -- from 162,000 cubic meter to 174,000 cubic meters and the delivery date from the first quarter of 2015 to the first quarter of 2016.

The new size reflects the expanding requirements of the main LNG charters and end users, which management believes will make the 174,000 cubic meter-sized vessel the workhorse of the LNG industry going forward.

Although the prospects for the LNG market are solid and the current order book appears balanced, as the bulk of the new buildings on order will be delivered in the 2014-2015 timeframe, management decided to also change the delivery date to account for any potential start-up delays in projects that are expected to be producing gas before the 2015, early 2016 period.

The Company also holds an auction for one more LNG vessel, sister vessel to the pro forma to be declared later in the year. The fleet is 100% double-hull, very modern, 6.6 years. 21 tankers have ice-class capabilities, and 32 vessels out of the firm 49 vessel pro forma fleet have term employment that ranges from 1 to 15 years.

One of our 1A ice-class vessels, the LR2 Propontis, is currently performing the northern route sea passage, taking a cargo of [napa] from Northern Europe to Japan. Thanks to our tank charter philosophy, we continue to operate the fleet at a very high utilization rate, 98% for the first half of 2013, when the average for the tanker industry is around 85%.

Let's move to slide number six. This slide is the main highlight of our press release, 65% increase in operating income, significant improvement in both second quarter and six-month 2013 net results, almost breakeven for the half-year against the loss of $14.5 million in 2012.

We maintain a strong balance sheet and cash reserves and raise $15 million in a preferred offering at the beginning of May, which further strengthens the Company's growth prospects. We have introduced nine charters -- we have introduced new charters for 11 vessels since January 1, 2013, with minimum revenue of approximately $135 million. And this is the year that we celebrate our 20 years in the capital markets.

The next slide presents the corporate fleet as it stands right now. We focus in three market sectors, conventional tankers, which covers both crude and product tankers, LNG, and shuttle tankers. Of the four markets, LNG and offshore shuttle tankers are potential growth areas for TEN due to the growth prospects, favorable supply demand fundamentals, and barriers to entry.

Within conventional tankers, TEN operates both crude and product tankers. We are one of the largest and most modern product tanker fleets in the water, and we are in the water now, which we take advantage of freight environment which keeps on improving.

We have 21 ice-class tankers. The first two Greek-flagged shuttle tankers which are on 15-year time charter to Petrobras and have one LNG in the water and one tri-fuel vessel under construction, plus one option. Since 1997, the fleet was built exclusively with new building orders in Korea and Japan.

The next slide shows the clients of TEN with whom the Company is doing repeat business over the years, thanks to the quality of service, fleet modernity, and the safety record of the enterprise fleet. In the same table, besides the names, we also list the top seven clients of TEN and the -- and the revenue of the Company for 2012.

The next slide is the employment slide. We continue a balanced employment strategy for the corporate fleet with a mix of core charter, COAs, cooling arrangements, and period charters that have fixed rates and minimum rates with profit-sharing arrangements.

If we look at the product fleet, out of the 28 vessels, 21 operate in time charters, with fixed and profit-sharing arrangements, and seven vessels trade in the spot market. Of the 21 vessels with fixed employment, six have profit-sharing arrangements. If one adds the seven spot related vessels, you have 13 product tankers that already take advantage of an improving product tanker freight rate environment.

Looking at the crude sector, of the 19 crude tankers, 10 have fixed employment, and nine vessels trade in the spot market, mainly the seven Princess series Aframaxes and the two Suezmax tankers. Out of the 19 crude tankers, six operate in fixed-time charters and 13 in a combination of market-related COAs, spot voyages, and pool arrangements. The slightest improvement in the spot markets for Aframax tankers will impact very positively the bottom line of the Company.

If we try to put a dollar value -- this is the next slide, slide number 10 -- as of today, we have fixed 74% of the remaining days -- available days of 2013 and 60% of the available 2014 fleet operating days. If we assume only the minimum rates, then TEN has secured 1,182 months of forward employment or 2.1 years per vessel and almost $1 billion -- to be precise, 975 million -- in minimum gross revenues.

The next slide has the Company's track record in sale and purchase activities since 2013. Sale and purchase activities are an integral part of our operation, as our record indicates. Fleet modernity is a key element of the corporate strategy, and since our New York Stock Exchange listing in 2002, we have generated capital gains of approximately $280 million, or another $21 million per year.

And we have reinvested these capital gains in the renewal of the fleet by ordering the majority of our new building tankers before new building prices started to rise.

Slide number 12 is the dividend history. With the next dividend of $0.05 per share on the common shares will be paid on September 12. In total, since 2002, we have paid $9.68 in cash dividends, or approximately $380 million, and this compares with a listing price in our IPO of $7.50, adjusted for the November 2007 2-for-1 split. We also announced and paid during July a dividend on the recently issued preferred shares. We paid 44 cents per preferred share on July 30, 2013.

That concludes the operating part of our presentation. Paul will walk you through the financial highlights of the second quarter and first half of the year. Paul?

Thank you, George.

The really encouraging news is that for the first 181 days of 2013, we effectively broke even with a loss of only $500,000 versus a $14.5 million loss in the first half of 2012. And quarter two results turned out better than expected. The net loss being $1.5 million clearly considerably better than the nearly $6 million loss of quarter two 2012.

Operating income for quarter two was $8.6 million against $10 million in quarter two 2012. But for the six months, we achieved $18.3 million operating income against $11.1 million in the first half of 2012. While our quarter two revenue was actually a little better than quarter one, certain factors nudged the overall results back into red. These were mainly the continued fickleness of the tanker market, which especially hurt the Aframax spot results, and three dry dockings against just one in the first quarter.

This negatively impacted revenue, voyage expenses, and operating expenses, which was additionally affected by a build-up of stores after two belt-tightening quarters. One of these dry dockings continued into quarter three. Fortunately, for the rest of the year, only three more dry dockings are currently scheduled, of which only one, Panamax Andes, starts in the third quarter.

Quarter two revenue after commission and voyage expenses at nearly $72 million was close to the previous quarter two level, while for the six months, $141 million was achieved versus $138 million in the first half year of 2012. The product carriers, many employed with market-related rates, achieved higher average rates than in quarter two 2012, but slipped slightly from quarter one's achievements due to seasonal factors.

Suezmaxes earned less on average than the previous quarter two. And Aframaxes, mainly on spot voyages, earned slightly higher than prior quarter two. Despite cheaper fuel and the quarter four sale of the VLCCs, voyage expenses were considerably higher in quarter two than the prior quarter two due to several vessels entering the spot market during the quarter.

For the six months, all the vessels have positive EBITDA, which totaled $68 million against $62 million in the prior comparable period. The second quarter generated a respectable $34 million EBITDA.

On their voyages to Brazil to start operations, both our shuttle tankers were able to pick up a spot cargo and earn a respectable freight. Otherwise, they started their new charter hire only in mid-May and mid-June respectively. Their full income-generating potential will first be seen in quarter three, with $8.5 million revenue contribution each quarter.

Finance costs for quarter two were $10.4 million, a 36% fall from the previous quarter two, mainly due to a reduction of swap interest after the expiring of seven swaps and to positive valuation movements on non-hedging swaps.

In quarter two, we repaid $44 million in loans, but there was a new loan of $46 million relating to the second shuttle tanker, though total outstanding loans at June 30 remained at $1.44 billion. But net debt to capital fell to 57%.

Finally, we raised $50 million gross from a preferred stock offering with a positive effect on liquidity and leverage. Although preferred dividends, whether paid yet or not, do not impact the bottom line, they are included in calculating the loss per share, in quarter two, adding one negative cent.

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

Thank you, Paul. And hopefully in -- during your autumn report, you can report some profits.

I hope so, too.

Again, thank you very much for listening in, and if there are any questions, we will be very happy to answer and clarify any points. Thank you very much.

We will be happy to ask you to open the floor for any questions.

We are awaiting questions at the moment.

Thank you very much. (Operator Instructions)

The first question we have today comes from the line of Ben Nolan from Stifel. Please ask your question.

Great. And thank you, guys. I have a question -- actually a couple questions as it relates to the LNG vessel that's on order. First of all, can you maybe give us an update on financing and employment for that vessel? And then, as it relates to the option, could you maybe give some sort of timeframe as to when you would need to exercise that option?

Thank you. Yes, well, as we said before, the LNG is one of the segments that we will keep on growing the business. We will not be seeing the Company becoming a full LNG carrier for the time being in its current format, so we're looking very closely.

We ordered -- the vessel at 162,000 cubics a couple of quarters ago, and then we have been talking to a lot of our clients, and they have insisted that with the changes in what's happening mainly in the United States, perhaps the 174 design could be a more acceptable design for the major client.

So I have to say, we took this decision because we had clients in mind. The delivery is in the first quarter of 2016. We expect to have charter for the vessel in the first quarter -- by the first quarter of 2014. We do not have to make any more payments.

We've paid all our down payments from our cash flow for the vessel, so we don't have to make any more payments until the third or fourth quarter of 2014. And, of course, by that time, the vessel will have been chartered -- we feel strong about that -- and having being charted, the remaining will be -- the remaining will be financed.

Okay.

And the second option vessel where we are also -- we have technical options to fit the requirements of our clients, TEN, we have it, it's going to be a fourth quarter -- a fourth quarter event.

Okay, perfect. That's -- that's very helpful. And then the -- while maybe associated with that, when you upsize the capacity of the vessel, does that -- does it cost more? Is there more CapEx associated with it than was originally the case?

And then -- and then my last sort of follow-on question is, could you maybe give us an update as to where things stand with respect to the idea of splitting some of the fixed-rate assets into an MLP and maybe, you know -- I don't know, where things stand, timing, that sort of thing?

Sure, sure. Well, yes, it's like buying a larger car. Usually the sales -- the secondhand salesman wants you to pay more for a larger car than a smaller car. But if you decide to buy two cars, they may let you have it for the initial price, if you know what I mean. So that's where we are, and depends, really, what we will do with our options. I don't know if this clarifies the position.

Yes, of course, you have to pay more for a larger, newer design, but if you end up doing two ships, you might not have to do so.

Okay, that's -- that's helpful.

So that's -- that's in the -- still going on. And as far as the MLP, it's one of the Company's, I think, strategic decisions to go forward. I think it will be -- as we speak, we have lined up, and we're talking to underwriters. We have done a lot of progress. We have set up [the companies] that might be required to do this. And depending on the market environment, this would be a fourth quarter to first quarter event as we speak today.

Perfect. That's very helpful. Thank you very much.

Thank you very much. The next question we have today comes from the line of Fotis Giannakoulis from Morgan Stanley. Please ask your question.

Yes, good afternoon. And thank you. You know, you had a pretty good quarter compared the overall shipping market, particularly in the crude tanker space. And it seems that the Company's very close to profitability, hopefully next quarter.

I want to ask you with your view on the overall shipping market. If you can position each of the sectors, meaning the crude and the product LNG containers and dry bulk sectors, in the cycle. When do you think that each of the sectors will be turning around?

Fotis, thank you. And first of all, congratulations for the very happy event in your life from all of us here around the table.

Thank you very much, Nik.

Well, as you understand, I mean, we [have said] we are not so much focused on the dry cargo and container markets, so let me start with the energy markets, which we are, you know, focusing all our energy in.

I would say that we are seeing, as we -- as we speak, in the last six months, a much better -- as you, of course, understand -- a much better products market. And as long as people do not, you know, shoot ourselves in the foot by over-ordering, I think this is a market that has momentum for the next couple of years. So we are positive in that.

I mean, we are likely -- because we, as George said, we have the vessels, 28 product carriers in the water already. And we're taking advantage of this. I mean, we're seeing -- looking on the earnings of even our smallest ships, our 37,000-ton product carriers, earning in excess of $20,000 a day, which is much more than people can say for crude carrier [realities].

So that market seems to have turned a corner as far as demand is concerned, and it's up to us not to oversupply it. And as vice chairman of [Intertango], you know, we're trying to tell our members that we should be careful not to oversupply the market, because finally this market has turned a corner.

Going on the crude carriers, I think whenever something is very depressed for very long, which is the case for crude carriers, this is the time that you start being optimistic. And we see signs that the market is balanced. We see, where there are movements of ships moving out of the Mediterranean or -- and going down to the US gulf, you can fill the gap of even five or six ships [meeting] -- Aframax, I mean, from the market. So I think it's a time of -- you know, these markets should start turning.

The LNG -- the LNG, you know, if you follow the projects that are there, done for the LNGs, you know, the prospects are very, very positive.

However, as you know, all this big infrastructure projects take a lot of financing and time, and any -- any world slowdown can put them six or nine or 10 months down the road, and that's why we took the decision, also, to move the delivery of our ship for six to nine months with new orders, because we believe that we will fall in a time where, you know, all the excess capacity that was ordered will be taken out of the market.

So we will -- if you ask me to, you know, I would feel very strong for the -- number one, for the LNG, then the offshore market, which is the market where our shuttle tankers are there, products and crude, to put them in line.

I am afraid I do not want to -- I am not educated enough in the other markets to give you an answer for containers and dry cargo -- and dry cargo. But perhaps in a personal call, we can discuss these markets, also.

I appreciate your answer, and thank you. You mentioned earlier about your expansion plans and the potential of exercising the LNG option. Can you remind us, what is the final date that you can exercise this option? And also, in the past, there was a discussion for a potential shuttle -- additional shuttle tanker or even FPSO transactions. Is there any activity in this front?

Yes, I mean, we are looking at [Tour de France] of energy, and I think you -- you touched most of the ones that we are dealing with right now. The LNG, we're looking at the option to be in the fourth quarter. On the shuttle tanker, we're looking with -- right now we have a team down visiting our clients that are using shuttle tankers to see if finally we will take that option or do something else with it.

On the FPSO, we -- a couple of days ago, we -- our very good VLCC vessel, the Millennium, which we built in 1998 on a 15-year charter, has been -- come out of that charter, and we're negotiating a five-year FPSO project with that. So we keep our -- without losing the focus, which is the day-to-day of chartering the ships, we are looking also at more exotic, call them, markets.

So I understand that there are not any immediate plans for acquisition, let's say, product tankers. And also if you can comment on the LPG market. We saw some of your peers entering into this sector. And how do you view the potential of you buying LPG vessels, as well?

Well, I think we do not exclude we are seeing that the LPG market, which actually follows -- or depends on the LNG market is having momentum. And, you know, we are an energy -- we are an energy company, and we do not exclude looking at these opportunities. And actually yards are bringing us -- the big Korean yards are bringing us these possibilities, so we are looking at those, too. But, again, you know, we keep our focus on the day-to-day business.

Thank you for your answers. Appreciate it.

Thank you very much.

Thank you very much. (Operator Instructions)

The next question we have today comes from the line of Urs Dur from Clarkson Capital. Please ask your question.

Hi, good morning, good afternoon, guys. Thank you very much. And actually my question was on expansion plans, and I think you really addressed everything there. And as such, I was just wondering what you thought of -- we're seeing some real growth in the order book on the product tanker side, and everybody talking about the eco-ship discussion.

I was wondering if you could opine as to the eco-ship value and your views on -- on the design or whether you want to refrain from that, I'm not sure, but just -- just to hear your expert view on that front.

You want me to make headlines again on this ..

Oh -- oh, no, I didn't mean to get you in any -- if you don't want to say anything, that's fine. But...

Oh, no. I mean, I have to say, I think the things we say are very -- you know, I think very -- I hope they sound logical to everybody, but what we are saying is that we are all -- you know, we look -- we are all supporting technological changes. We have, you know, a team of our naval engineers, and, you know, we always look at this. We built our shuttle tankers in a yard from scratch.

I mean, we look at -- but what we believe is that technology and economy has to make also financial sense. What we're saying today is that, for companies like ourselves, with very -- with very modern fleets, it's worth spending, you know, $250,000 to $500,000 -- if you can see [active] -- and I'm talking about the product carriers, and not the very large ships -- you (inaudible) exactly the same results on an investment of $500,000 rather than an investment of $36 million.

And so, right now, the market has been suffering for -- from being flooded by vessels. So any [supporter] with a long-term view who is not a short term fund or et cetera, et cetera, is looking to be able to make, you know, returns for him, his shareholders, for a long period of time.

So I think we are -- we are supporting new technology. We believe that new technology always matures, and you have a new technology after that coming. So from our case, I believe we're doing good for the market to refrain from new buildings until our charters are there to significantly pay for them and until the technology is proven.

So we are not against any of those ships, but we believe that the industry -- when I say we believe, Intertango, which I represent as the vice chairman, and ourselves -- we believe that the industry has suffered five bleak years because of oversupply and the [length] supply we put in the market, the better it is. But this does not mean that we're not going to look when the time comes to those -- for those new ships, when the technology actually will prove itself.

Yes, no, excellent. And then -- thank you for that. How about the possibility of modifying or retrofitting ships to eke out more efficiency? I know you run efficient ships in the first place, so it's not a comment necessarily on your fleet, but is that something you've considered for certain ships? And do you think there's some value in doing that? Again, more of a broader market discussion, not referring to your specific fleet.

No, no, no, also to our fleet. Yes, we are doing this on any special survey. I mean, we're putting a new -- new paint. We're exacting the trim. We're working on the propellers. We're fixing, you know, the boilers, the blowers. So right now, we have a VLCC -- I don't want to give too much technical information out -- VLCC, steaming at 12 knots, and burning in the mid-30s, you know, between 35 and 38 tons.

So I think this is -- you know, this is things you can achieve. You have modern ships with spend a couple of million dollars on that VLCC, [1CK] she was in the yard, to be able to achieve these results. And, of course, instead of burning 70 or 80, if you are able to burn, you know, an average of between 40 and 50 once it's loaded, tons, it's a huge -- those 20 or 30 tons in today's environment, it's, you know, 12,000, 13,000 a day.

So there is a lot we can do as an industry with modern ships, without having to order new ships. But, you know, I mean, I think we are -- we should all be in the same boat. I don't know anybody who really wants to order ships and bring the market down. So, you know, I think we should all be exactly in the same boat.

No, fair enough. And very much thank you for your insight there. I appreciate your time, guys. Thank you.

Thank you. Thank you.

Thank you very much. The next question we have today comes from the line of Omar Nokta from Global Hunter Securities. Please ask your question.

Yes, thank you. Good afternoon, guys. I am -- just wanted to follow up on the comment you made regarding the VLCC, the Millennium rolls off contracts soon. And you mentioned currently negotiating a five-year charter, if I'm correct. I just wanted to get a sense on what kind of CapEx you're looking at having to put into the -- into the vessel in order to fully convert it into an FPSO?

Well, this -- yes, actually, we're [arriving] this calculation. The vessel will be a supporting vessel for the FPSO, and I think the calculation regards couple of million (inaudible). Mr. -- the head of our new building department confirms -- he's here at the table, but it will take a couple of million plus about 20 [days off hire], 30, 35 days off hire

Are you -- is this to be as an FPSO or just as a -- just regular FSO?

That will be supportive -- historic supportive VLCC for an FPSO project.

Oh, I see. Okay. So it'll -- sorry, I misunderstood. I thought for some reason it was going to be an FPSO.

FPSO would be a bit more expensive than that.

Yes, yes, okay. All right, so -- yes. So just a couple of million and just a little bit of off hire.

Yes.

Okay. All right. And are there any other assets in your portfolio now that you think would at some point go this route, as well? I know you have a pretty modern suite outside of the VLCC. But do you see anything else that you'd point in that direction?

Well, I think our first generation Suezmaxes, which -- although they still have a very lucrative long-term employment, they will be the next -- naturally the next contenders, when the market is better for sale candidates of some sort.

Okay. All right, well, thank you very much. That's all I had.

Thank you.

Thank you very much. (Operator Instructions)

We have a follow-up question here from the line of Ben Nolan from Stifel. Please ask your question.

Actually, Omar asked the question on the FPSO, so that did it for me. Thanks.

Thank you.

Thank you very much. (Operator Instructions)

Thank you very much. There are no further questions at this stage. Please continue.

Well, thank you very much for participating. We hope that the next -- our next report sometime in November will be even -- even better. We hope it will be significantly better. We want for all of you to enjoy August. Make sure that you drive a lot in your car, so you spend gasoline that we transport, and you help the product market go better. And wish you a nice and peaceful, relaxing summer.

Mr. Chairman? Some wise words from our chairman, thank you very much.

I don't know how wise they are. I've been reading the reports of the major oil companies, BP, Chevron, and Royal Dutch Shell, and I'm sure you've all seen that there are very concerned and distressed by the fact that their proven reserves are shrinking very rapidly. Their response is, we're going to do a lot more offshore, and we're going to do a lot more in developing gas resources. Both of these play very well into the future expansion of TEN, and we're very encouraged by that.

Thank you, Chairman. Thank you very much. Bye-bye.

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