Tsakos Energy Navigation Limited (NYSE:TNP) Q4 2023 Earnings Call Transcript

Tsakos Energy Navigation Limited (NYSE:TNP) Q4 2023 Earnings Call Transcript March 27, 2024

Tsakos Energy Navigation Limited  isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Tsakos Energy Navigation Conference Call on the Fourth Quarter 2023 Financial Results. We have with us Mr. Takis Arapoglou, Chairman of the Board; Dr. Nikolas Tsakos, Founder 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. [Operator Instructions] I must advise you that this conference is being recorded. And now, I will pass the floor to Mr. Nicolas Bornozis, President of Capital Link. Please go ahead, sir.

Nicolas Bornozis: Thank you very much, and good morning to all of our participants. I am Nicolas Bornozis of Capital Link, Investor Relations Advisor to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the fourth quarter and year ended December 31, 2023. In case, we do not have a copy of today’s earnings release, please call us at 212-661-7566 or email us at ten T-E-N @capitallink.com and we will have a copy for you e-mailed 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 slides on the company’s website.

Please note that the slides of the webcast presentation will be available and archived on the website of the company after the conference call. Also, please note that the slides 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. 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 with risks and uncertainties, which may affect TEN’s business prospects and results of operations.

And with that, at this moment, I would like to pass the floor to Mr. Arapoglou, the Chairman of Tsakos Energy Navigation. Mr. Arapoglou, please go ahead, sir.

Takis Arapoglou: Thank you, Nicolas. Good morning, everyone. Thank you for joining our call today. TEN continues to deliver very strong financial performance based on very positive market fundamentals and also best-in-class operational performance. At the same time, the company keeps renewing its fleet, selling all the tonnage at today’s high prices and acquiring eco-friendly vessels, increasing its grid footprint. And it also reinforces its leading position as a very successful operator of specialized modern dynamically positioned tankers. All these are highly accretive acquisitions. The results of which are not included in today’s results, but will definitely contribute very positively going forward, which will allow us to continue our strong growth, a strong growth that we have demonstrated quarter-after-quarter.

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Q&A Session

We’re also using this current positive market to increase the number of vessels on the time charter. But at the same time, we keep enough vessels to benefit from the very attractive current returns of the spot market and profit sharing arrangements, driven by the otherwise quite unfortunate geopolitical developments. In doing so, we continue to maintain a very healthy cash balance, which allows us to be flexible and capitalize on attracting acquisition opportunities as they arise. And to continue uninterruptedly to pay sizable dividends to reward our shareholders, we’re proposing as a first semiannual installment $0.60. So on behalf of the Board, I wish to once again congratulate Nikos Tsakos, and his team for the excellent performance and wish them continued success going forward.

So thank you for me, and over to Nikos Tsakos.

Nikolas Tsakos: Chairman, thank you very much. And first of all, we would like to express our support to the victims and all affected by the tragic events in Delaware. And we hope that very soon things will go back to normal with a minimum loss of life. As for TEN, we concluded our 30th year, milestone with another record year and we are looking forward to continue the trend. And I think as our Chairman said, the growth that has been embedded is not yet, is not portrayed in these results, but hopefully, it will be portrayed in the remaining of 2024. Since we will be taking a significant amount, we will grow our fleet almost by 10% by the time, by the middle of the coming year. In the meantime, our fundamentals of the industry, the long-term fundamentals still look very positive.

And they look positive not only because of the geopolitical events and the delays and closures in the canal. But I think long-term, we are still seeing a very small replacement of the fleet with less than 7%, and in some categories, much lesser than that, like the larger ships, the VLCCs. And on top of that, of course, you have a very aging fleet and the shadow fleet, which is close to 20% in the major in some of the major categories. So without trying to foresee the future, we are trying to, we believe that 2024 will be at least as good for us as the year, we are enjoying. So this is where we are. At this moment, it has been, I think, for us a springboard year, milestone year. We were able to renew our fleet in a very drastic. I think it is the largest growth in our history, which shows that already we are 30 years old.

We have not aged yet. And as our Chairman said, this year has seen us sell 9 vessels with an average age of 18.5 years and adding 18 vessels with an average age of 1.3 years, of which 8 of them will be contributing immediately to our bottom-line very soon. And on top of that, we are adding 1.5 million of deadweight tons in our fleet earning capacity and carrying capacity. So this has been really our 30th year, has been the springboard of a very significant growth and we have been able to continue this growth at the same time that we have been reducing our debt, increasing our dividend, as the Chairman kindly said, by doubling the dividend at least for the first six months of the year. And growing the fleet, modernizing the fleet, and with some surprising way that Paul and his team will tell us, maintain very strong cash reserves.

So, with that as an introduction, we would like to thank everyone for their support in our 30 years. And although this has been our second consecutive record year, we expect or we hope that next year, we will maintain the same momentum with the new acquisitions and, as the Chairman said, the very accretive transactions that we have secured with the company. And I will give now to our President, Mr. George Saroglou. Welcome, George, and to give us a little bit more of the picture and the nitty-gritty of what’s happening out there.

George Saroglou : Thank you, Nikos, and thank you for the whole team. Good morning to all of you joining our earnings call today. 2023 has been a banner year for TEN. We celebrated our 30th anniversary as a public company and posted another record year, the second record year in a row after 2022. Key takeaways for TEN during the fourth quarter and 2023, we took delivery of the Company’s first two dual fuel LNG powered Aframax tankers in a series of four new buildings of high spec, eco designed vessels built against long-term employment to a major oil concern. During the early part of January ’24, we took delivery of the remaining two. The delivery of these four vessels marks TEN’s entrance to greener vessels. We continued the sale of older first generational vessels.

During 2023 TEN sold eight tankers built between 2005 and 2007. In January ’24, we announced the sale of a 2005 built Suezmax tanker. The nine tankers that we sold since January 1, 2023 had an average age of 18.5 years. At the same time, we continue to grow the company and replace these first generation vessels with newbuilding orders that fit existing transportation requirements of term company clients. We announced today in the press release the signing of a newbuilding contract for one more shuttle tanker, the third newbuilding under construction against a long time charter with a major energy concern. This brings our current newbuilding order book to seven vessels. In addition, we recently announced the acquisitions of a high spec environmentally friendly 5 vessel fleet from Viken.

The Viken acquisition includes two 2023-built dual fuel LNG powered LR2 Aframax tankers, one 2019 built super-eco Suezmax and two 1A ice-class scrubber-fitted Aframax tankers, built in 2018 and 2019, respectively. We took delivery of the first vessel, the DF Montmartre yesterday. We expect to take delivery of the remaining four from April until June of this year. All five vessels are chartered to a major European energy concern. The freight market was strong last year and remains strong as we speak. We continue to renew time charters at higher tank charter rates. Oil majors continue to fix vessels forward, which is a testament to a market that is expected to sustain current freight levels. The order book continues to be low due to the uncertainty of availability and affordability of alternative fuels other than biofuel and LNG currently.