current tanker market is "very favourable to tanker owners" on both the
supply and demand side, said Harrys Kosmatos, Corporate Development
Officer, speaking at a management presentation organised by Capital
Market Conditions Bullish Due to Favorable Supply, Demand Conditions
The current market is “very favorable” for tanker owners on both the
supply and demand side, Harrys Kosmatos, Corporate Development Officer,
said expressing his confidence, particularly in terms of demand. “Global
oil demand has recovered” in the wake of the pandemic, and has even
exceeded pre-pandemic levels, Harrys Kosmatos pointed out. China’s
reopening will likely propel this demand even further, he noted, as the
country could become, once again, a “major oil importer”.
Kosmatos argued that Russia’s invasion of the Ukraine has created “a
new and possibly lasting trend” in oil markets, namely the creation of
new trading patterns and the elongation of shipping routes as a result
of Europe’s ban on Russian oil imports. Due to these regulations, Europe
now has to import oil from further distances, particularly the US, West
Africa, and the Arabian Gulf. “The short-term voyages from Russia have
been replaced by longer haul trades and the emerging ‘new’ Russian
trades, particularly to India and China as it reopens, are performed by
older vessels, acquired by “non-western” entities, that up until
recently competed in the international commercial arena with everybody
else,” Kosmatos noted. This pattern, which effectively removes supply
from the “western” markets, is a trend that TEN expects “could last for
the foreseeable future,” he continued.
Additionally, the sector is facing one of the lowest orderbooks in
recent memory, under 4%, while nearly 10% of the current global fleet is
over 20 years old, and 24% over 15 years old. “As a result, we could be
faced with a situation where some segments in the tanker market could
experience negative growth. Negative growth against an increasing global
oil demand…should translate to a sustainable strong market
environment.” Kosmatos asserted.
Capital Link hosted a presentation by the senior management of TEN Ltd.
(NYSE: TNP) on Thursday, January 12, 2023. During the 45-minute
session, Dr. Nikolas P. Tsakos, Founder, President & CEO, Paul
Durham, CFO, George Saroglou, Chief Operating Officer and Harrys
Kosmatos, Corporate Development Officer, described the strong tanker
market, the current state of the company’s fleet, and its dividend
policy as part of Capital Link’s Company Presentation Series.
A replay of the full session of the presentation and the extensive Q&A can be accessed at:
TEN Ltd. is one of the largest and most well-established independent
energy transporters in the world. With a diverse fleet of 73 modern
vessels, including both crude oil and oil-product as well as LNG
transportation. This includes 7 newbuilds. TEN Ltd maintains a customer
base consisting of major global energy companies.
Dr. Nikolas P. Tsakos, CEO, stressed that TEN is focused on
capitalizing not only on periods when the market is strong, but also
when it lags. He stated that the company’s current strategy includes
chartering its vessels in the spot market, for short term periods, when
the market is very strong.
The company has “taken advantage of the difficult times” to order its
first four green, dual-fuel ships, Dr. Tsakos said, with the order
backed by long time charters from one of the company’s main clients.
In terms of chartering, 40 of TEN’s 66 vessels on the water, or 61%,
have market exposure, or a combination of spot and time charter, along
with profit sharing.
A total of 44 of 66 vessels on the water, or 67%, are in secure revenue
contracts, or fixed time charters and time charters with profit
sharing. “This means that TEN is capturing the positive tanker market
fundamentals that prevail today, George Saroglou, COO, stated.
“We have a simple operating model—we try to have our time charter
vessels generate revenue to cover the company’s cash needs, the vessel
operating expenses, finance expenses, overheads, chartering costs and
commissions,” explained George Saroglou.
“We let the revenue from spot rating vessels opportunistically contribute to the profitability of the company,” he continued.
George Saroglou stressed the company’s commitment to keeping operating
costs low and utilization rates high. Currently, TEN’s fleet utilization
sits at nearly 94%. This figure is quite high, considering that a
number of dry dockings for ship surveys that have taken place.
The company is also expecting a total of six newbuilds to be delivered
from 3Q23 until 2Q25. Of these new vessels, four will be dual-fuel LNG,
and “represent the company’s entrance into green shipping,” Saroglou
TEN has traditionally been active in the S&P market focusing on
fleet renewal. “We’re looking to sell 7 or 8 of our older generation
ships,” Dr. Tsakos stated. “That would give us a very big capital gain
and boost for the year 2023.”
Posed to Reduce Debt at “Accelerated Pace”
“Based on the positive quarterly results through the past year, it’s
clear that the annual numbers will be strong,” Paul Durham, CFO stated
In the nine-month period of 2022, the company’s net income amounted to
over $100 million. This growth has resulted in healthier cash reserves
for the company, which have grown by over $200 million compared to the
previous year. This could help the company to reduce outstanding debt
“at an accelerated pace,” Durham stated. “Already, in the past six
years, outstanding debt has fallen by about $500 million…and it
continues to shrink” he noted. “We still expect our revenue to grow into
2023 as the market continues to remain firm,” he said.
When asked about the company’s dividend policy, Tsakos highlighted that
TEN has “never stopped paying a dividend, even in very, very difficult
times when the company could “legitimately” put a stop on such payments
as some of its peers did. When times are good, our policy has always
been to distribute between 25 and 50% of our net income, depending on
capital needs at the time, and I think we will not change that policy,”
he continued. The company is not looking at this stage, to buy back
shares. Instead, Dr. Tsakos said, a preference would be for dividend
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