Net revenues increases by 33.6% increase over same quarter last year
Company reports 55th consecutive profitable quarter
SECOND QUARTER 2007 HIGHLIGHTS - Revenues, net of $107.22 million versus
$80.26 million in Q2 2006, a 33.6% increase - Net income of $37.52 million
versus $33.03 million in Q2 2006, a 13.6% increase - EPS, diluted of $1.96
per share versus $1.73 in Q2 2006 - TCE (Time charter equivalent) of
$30,021 per day per ship as compared to $28,557 in Q2 2006 - Delivery and
charter of four newbuildings, two ice-class product tankers and two crude
oil transporters (one ice-class suezmax and one DNA design aframax) -
Semi-annual dividend of $1.50 per share paid in April 2007 (bringing the
total for fiscal 2006 to $2.75)
ATHENS, Greece, Aug. 3 /PRNewswire-FirstCall/ -- Tsakos Energy
Navigation Limited (TEN) (NYSE: TNP) reported today results (unaudited) for
the second quarter and first half of 2007.
SECOND QUARTER RESULTS
Revenues, net of voyage expenses and commissions, were $107.22 million
in the second quarter of 2007 up from $80.26 million in the 2006 period.
TEN deployed on average 42.3 vessels versus 33.9 vessels in the year
earlier quarter. Fleet utilization was 97.6% as compared with 96.8% in the
second quarter of 2006. TCE per day, per ship rose to $30,021 from $28,557.
Vessel operating costs were $7,266 per ship, per day, up from $6,659
primarily due to higher lubricant prices, crew costs and the impact of
further dollar weakness. In addition, the integration of the LNG carrier
Neo Energy contributed to this increase due to the higher expenses required
to operate such a high specification vessel.
Depreciation and dry-docking amortization costs rose to $21.65 million
from $16.14 million with the fleet at 44 vessels at June 30, 2007 as
compared with 37 vessels a year earlier. Management fees mainly reflected
the increased number of ships while overheads rose as a result of
professional fees and expenses related to a staff compensation program.
Interest and finance costs net of interest income rose sharply to
$12.54 million from $5.61 million reflecting additional borrowings related
to the expansion of the fleet. However, the impact was muted by the
benefits of interest rate swaps and capitalized interest.
Net income in the 2007 period was $37.52 million versus $33.03 million
in the second quarter of 2006. Diluted earnings per share were $1.96 versus
$1.73 in the 2006 quarter. There were no vessel sales this quarter.
On July 28, 2007 the 1991-built Aframax tanker Vergina II, recently
converted to double hull was delivered and time-chartered for two years to
a major South American oil concern. The gross revenue from this charter is
expected to reach $23 million. There are no profit sharing arrangements
from this charter.
FLEET STRATEGY
TEN's strategy of growing the fleet organically has continued in the
latest quarter with four vessels entering the fleet to join the four
delivered in the first quarter of this year. With nine more vessels still
to join the fleet, including three this year, TEN's further fleet
modernization and renewal remains on track. The deliveries this quarter
were one 1A ice-class suezmax (Antarctic), one DNA design aframax (Sakura
Princess) and one 1A and one 1B ice-class handysize product tankers
(Aegeas, Byzantion). The Sakura Princess, the Aegeas and the Byzantion all
entered long term time charters with profit sharing arrangements while the
Antarctic was strategically placed to operate in the spot market.
These newbuilding introductions, supported by various sale and purchase
activities that occurred since this quarter last year, have elevated TEN's
average fleet from 33.9 to 42.3 vessels. In terms of deadweight, TEN
experienced a 19.4% increase, reaching 4.8 million, while it achieved a
further reduction in the average age of its fleet from 6.0 years to 5.3
years, an 11.7% reduction.
Along with expanding the fleet through its newbuilding program, TEN
remains committed to exploring other opportunities that may become
available in the sectors it operates, which the Company expects will not
jeopardize the fleet's structure or age profile, nor place an excessive
burden on the Company's financial position. In addition, and in line with
previous practice, TEN will continue to explore opportunities in the
greater sales and purchase market and will occasionally entertain offers
for the timely disposal of certain tonnage. As in the past, TEN has used
the sales and purchase market to strategically profile its fleet in order
to safeguard its attractiveness to the chartering community. This exercise
has enabled TEN to not only renew the fleet in terms of type, size and age
but to also release cash for further reinvestment.
"Critical mass, balanced employment and caliber of charterer are
important components in strategy formulation," stated Mr. Nikolas P.
Tsakos, President & CEO of TEN. "We believe the quality and size of our
fleet and our flexible chartering strategy in tandem with new vessel
deliveries and strategic vessel disposals, will continue to fuel our drive
for greater returns and enhanced shareholder value," Mr. Tsakos concluded.
TANKER INDUSTRY
The strong global economic expansion is continuing. On July 25, 2007,
the IMF (International Monetary Fund) revised its forecast of global
economic growth from 4.9% to 5.2% for both 2007 and 2008. This revision was
due to the continuing strength of emerging markets and developing
countries. GDP growth for China was revised to 11.2%, India to 9.0% and
Russia to 7.0%. Among the developed economies, GDP growth in the USA is
expected at 2.0% (0.2% lower than earlier projections) but forecast to grow
at 2.8% in 2008. Growth in the Euro-zone and Japan has been revised upward
by 0.3% and is expected to remain relatively strong at 2.6% for 2008.
Inflation remains, in general, well contained although some emerging
markets and developing economies are facing inflation pressures, especially
from rising prices in energy and food. Oil demand remains strong despite
oil prices creeping back to record highs. The IEA (International Energy
Agency) in its July report marginally revised downwards (by 0.10/mbpd) the
2007 global oil demand to 86.0/mbpd, due to minor baseline revisions to
OECD figures, which still represents a 1.8% growth in oil demand over the
previous year's figure of 84.5/mbpd. In 2008, world oil demand is expected
to rise by a robust 2.5% to 88.2/mbpd with the OECD contributing roughly a
third (0.8/mbpd) of this demand growth. The growth in non-OECD demand is
expected to derive primarily from China and the Middle East.
Year to date the freight rate environment for both crude and product
tankers is in line with 2006 levels despite the strong influx of
newbuilding tankers, which is above historical levels, and expected to
remain so until 2010. About 25% of the world tanker fleet is still of
single hull design with limited trading prospects as the 2010 IMO phase-out
deadline approaches. Conversion of these single hull tankers to FPSOs and
FSOs and dry bulk carriers could further restrict shipyard capacity for
building new tankers until 2011. Steel recycling could be another option
due to historically high scrap prices (currently over $500 per lightweight
ton). Forward fixing at healthy rates of crude and product tankers by oil
majors and commodity traders remains strong while the general landscape of
the energy and the tanker markets continues to be influenced by the same
variables that are responsible for the volatile nature of the markets.
These are: global refinery constraints and glitches, ton/mile demand
(expansion of trading routes), level of OECD stocks, arbitrage trade
opportunities, geopolitical and weather related risks and internationally
imposed regulations.
The set of challenges that owners and operators face include capital
commitments to fund newbuilding and second-hand vessels, potentially higher
interest rates and insurance premiums, personnel expenses, increases in
lubricant and bunker prices, maintenance needs and a weakening dollar.
These have not changed significantly nor are expected to change materially
in the third and fourth quarter of this year. Despite these challenges, TEN
expects 2007 to be another healthy year with high fleet utilization rates,
a freight market well above mid-cycle levels, and capital returns around
the levels of 2006.
OUTLOOK FOR TEN
With worldwide demand for crude and refined petroleum products on the
rise, chartering and other investment opportunities will abound. TEN's
fleet and overall condition of its balance sheet provide a solid base for
further growth while its versatile and balanced chartering strategy affords
the necessary buffer to counteract possible market imbalances.
In the second quarter, the Company was successful in fixing five
vessels, including its first LNG carrier, four with profit sharing
agreements, four charters stretching from 12-months to three years,
guaranteeing at least $81 million in gross revenues over that period. This
earnings visibility which is further enhanced when one considers the whole
time-chartered fleet under consideration, provides additional comfort for
the future. In particular, for the remaining half of the year 87% has been
fixed securing at least $160 million in gross revenues while for 2008 67%
of the available days have been fixed guaranteeing at least $226 million
for that year.
"Our results this quarter, placed in the context of the meandering
markets recently, is a prime indication that our operating model works,"
Mr. Tsakos continued. "It is a model designed for the long run and expected
to further solidify our foundations for further growth, both in terms of
size and returns. "With the market expected to remain healthy for the
foreseeable future, and with the continuous stream of newbuildings we
expect to join our fleet, in conjunction with our active involvement in the
sales and purchase markets, TEN's position to efficiently service its
clients and actively participate in world maritime trades remains strong."
