Thank you for standing by, ladies and gentlemen, and welcome to the Tsakos Energy Navigation conference call on the fourth quarter of 2021 financial results. We have with us Mr. Efstratios Arapoglou, Chairman of the Board, Mr. Nikolas Tsakos, President and CEO, Mr. Paul Durham, Chief Financial Officer, and 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 wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. Now I pass it to Nicolas Bornozis , President of Capital Link and Investor Relations Adviser of.
Bravo, Paul.
Tsakos Energy Navigation. Please go ahead.
No. Because it is not on this one.
Thank you very much, and good morning to you all. This morning, the topic is the Company financial results for the.
Mute your phone.
For those of you who would like a copy of the press release, please call us at 212-661-7566 or email us at ten@capitallink.com. We will have a copy for you right away. We will send you a copy by email. 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 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 contains 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. At this moment, I would like to pass the floor on to Mr. Efstratios Arapoglou, the Chairman of the Board of Tsakos Energy Navigation. Please go ahead, sir. Mr. Arapoglou.
Thank you, Nikolas. Good morning and good afternoon to all. Thank you for joining our call today. The results we published today demonstrate the continued operating resilience of TEN in historically very weak markets that prevailed throughout 2021. An operating performance clearly far superior to our competition. This allows us to continue our confident path with great conviction and propose a dividend as we have done since inception in an uninterrupted fashion. We are currently experiencing very firm market conditions which are not based on fundamentals. This is clearly an event-driven situation generated by both a surging post-pandemic economy and its inflationary and supply chain repercussions, as well as by the admittedly quite sad war and humanitarian disaster in Ukraine, affecting the world in more ways than one.
It is still too early to say whether the current recovery is transitory and for how long or to any extent more permanent in nature. In any case, we consider it as a welcome bridge towards the long-awaited recovery in the tanker market, based on strong in-industry fundamentals. For this TEN, through its well-structured operating model, is perfectly positioned to benefit from, as it is indeed benefiting from already, reflected and acknowledged, as you are all aware, by the recent rise in the stock price. Congratulations once again for Nikolas Tsakos and his team, and best wishes for continued success in 2022. Thanks again. Over to you, Nikolas Tsakos. Thank you.
Chairman, thank you very much. Good morning to all of you from New York City, where actually we had the opportunity to be on the New York Stock Exchange and celebrate our 20th anniversary as a quoted company here. 20 years of continuous growth, as the Chairman said, and continuous dividend payments. However, looking back in 2021, which was the worst tanker rate year in recent memory, you know, more than 30 years ago, we had similar rates. We started the new year with enthusiasm, looking forward for a post-COVID opening up environment that makes transportation like other services flourish. Once we were starting feeling the positive changes, we had the unprecedented events of February, end of February with the Russian invasion.
We started the last two years, every morning, we were starting by making sure how to protect our seafarers and our crew and our vessels from the pandemic. I think in total we had a small break of a couple of weeks or over a couple of weeks, and now we're there trying to protect again our seafarers, our crew, our vessels from the difficult situations faced after the Russian invasion. As the Chairman said, TEN is a company built on difficult situations. We have a model that is able to pass through the hurdles and come out stronger. Counting this is since inception, this is our fifth crisis, starting with the Asian crisis in 1996.
The events following the 9/11, then, of course the Lehman crisis, COVID and, without interruption, the Russian invasion. We keep a steady hand on the wheel. We navigate the waves, and I think good seafarers are only becoming good when they have to go through storms. This is what we do. Right now, we are enjoying what we have prepared the company with 40 vessels out of our 71 on spot or profit-sharing arrangements. Every single $1,000 of spot market exposure increase is $0.07 to our bottom lines. We are experiencing the best rates since 2008 as we speak.
Although none of us is happy with what is happening, actually as our CEO, we all pray and hope that the atrocities will stop as fast as possible and the world will go to an open state, because shipping actually flourishes when we have open seas and open borders. We expect with the fundamentals that are out there, with less than 8% across the board of the world, a newbuilding replacement program with, you know, many vessels exceeding their 15th or 20th year anniversary and outnumbering for the first time vastly their issues to enjoy hopefully a prosperous and peaceful couple of years going forward. In the meantime, we have to navigate with difficulty, and that's what we do.
We feel confident to maintain our dividend and hopefully if things continue to have an increased dividend in the second half of the year. With that, I will ask George Saroglou to give us a quick wrap of 2021. It's very quick, George, because 2021 it's not a year we want to remember and talk about the future. Thank you.
Thank you, Nikos, and good morning to all of you joining our earnings call today. Let's go to the slides of our presentation. Starting with slide three, we see that in TEN since inception in 1993, we have faced four major crises, fifth now with the war. Each time the company, thanks to its tested counter-cyclical operating model that targets growth at market lows, has come out stronger. Of course, it's no exception this time. While we navigated the company through the challenges the COVID pandemic has created, we have managed to grow and prepare the company for its next phase. We announced newbuilding contracts for four dual fuel LNG powered Aframax tankers against long-term employment to a major oil concern.
Factoring the latest orders and considering the company start in 1993 with four modern tankers, we currently have a pro forma fleet of 71 vessels for an annual growth of 15% in terms of deadweight tons. In the next slide, we see the pro forma fleet and its current employment profile. We have a combination of vessels in fixed time charters and in flexible employment contracts, which means time charters with profit sharing, contracts of affreightment, and spot trading vessels that capture the market's upside. All dark blue color vessels, 26 in the slide, are on fixed rate time charters, while the light blue and red color vessels or about 61% of the fleet currently in the water have exposure in the market's upside. This means that TEN is well positioned to capture the positive tanker market fundamentals.
In fact, we already witnessed better spot rates as the invasion of Russia and Ukraine, a tragic event, and the trade dislocation that it created has fueled spot rates to high levels. We took advantage of the low freight market environment in the last quarter and last year to bring forward a number of scheduled special surveys repairs to have these vessels ready once the freight market for tankers rebounds. Out of 21 special surveys last year, 12 were for vessels that were brought forward. Fleet modernity is a key element of our operating model. During last year, we sold three of our older tankers. As we mentioned, we replaced them with a new building order for four dual fuel Aframax tankers that will enhance the company's environmental footprints, as these LNG dual fuel-powered vessels are the first such investments in the company's history.
We are also building one more DP2 shuttle tanker for delivery at the end of the second quarter of this year. All remaining new buildings are coming with long-term employment attached. We also took delivery in January of our latest newest LNG Tenergy vessel. The vessel entered immediately a five-year time charter that's expected to make contribution to our bottom line as the LNG sector is currently very strong. Inclusive of the above charters, TEN's minimum fixed revenue has a backlog that exceeds $1 billion. Moving into slide five, we see that the left side presents the all-in break-even cost for the various vessel types that we operate in TEN. As you can see, we continue to have a low-cost base.
During the year, the revenue generated from the time charter contracts was again sufficient to cover the company's cash expenses, paying for the vessel's OpEx, overheads, chartering costs, and loan interest. We must also highlight the purchasing power of Tsakos Columbia Shipmanagement and the continuous cost control efforts by management to maintain a low OpEx average for the fleet while keeping the high fleet utilization rate quarter after quarter. Despite 21 special surveys during last year, we achieved an overall 92.6% utilization for the fleet. Thanks to the profit-sharing element, a cornerstone of TEN's chartering strategy, for every $1,000 per day increase in spot rates, we have a positive $0.33 impact in annual EPS based on the number of TEN vessels that currently have exposure to spot rates.
Debt reduction is an integral part of the company's capital allocation, as we see in slide six. The company's debt peaked in December of 2016. Since then, we have repaid $380 million of debt and repurchased $100 million in two series of step-up preferred shares we had outstanding. In slide seven, we see that in addition to paying down debt, dividend continuity is important for common shareholders and management. TEN has always paid a dividend irrespective of the market cyclicality. About $500 million in dividend payments have been distributed since the New York Stock Exchange listing in 2002. The next dividend of $0.10 per share will be paid in June. Exact details of the payment will be announced during the company's first quarter 2022 earnings call. Slide eight, global oil demand continues to recover.
We had a 6.8 million barrels per day increase last year as a result of the vaccination rollouts and gradual return of mobility and economic activity to levels close to the pre-pandemic demand, oil demand levels. Despite current headwinds, oil demand is expected to rise by another 2 million barrels in 2022, which means that based on the current forecast, we will be at the pre-pandemic oil demand levels sometime during the second half of the year or latest by year-end. On the global supply front, OPEC+ producers continue to manage supply with discipline. Some countries have not been able to meet their monthly quotas and underproducing. Global oil stocks continue to fall and are now 300 million barrels below the five-year average. Non-OPEC production is set to rise in 2022.
As a result of the war in Ukraine, we had a second coordinated effort to release, in total, approximately another 240 million barrels from the strategic petroleum reserves of the United States and OECD member countries for the next six months in an effort to lower energy prices and counterbalance the effect the war has created in the energy markets. With oil demand recovering, let us look at the forecast for supply of tankers in slide nine. The order book stands at around 5.6% or 285 tankers over the next three years, the lowest it has been in over 20 years. At the same time, a big part of the fleet is over 15 years, 30% of the fleet or in excess of 1,500 tankers.
Almost 400 tankers or 7% of the fleet are currently over 20 years. Slide 10, as the next slide shows, 2018 was one of the highest scrapping years on record since, with 22 million deadweight tons removed from the market. Last year, we've seen acceleration of scrapping from the second half and ended with almost 15 million deadweight tons removed. Scrap prices continue to be at very high levels. With more environmental regulations coming, discussions for alternative fuels, and 7.2% of the global fleet above 20 years, we expect scrapping activity to remain high and act as a balancing factor for fleet supply going forward. To summarize oil demand, the recovery continues. Oil supply, we see month-over-month production increases by OPEC.
Non-OPEC production is set to increase in 2022, bringing more cargoes to the market at the time when global oil stocks are below the five-year levels and demand is increasing towards the pre-COVID levels. Recent geopolitical events in Ukraine and the sanctions that followed forced the large numbers of Russian state oil and privately held tankers to be excluded from the market as oil majors and oil traders boycotted these vessels, creating a supply squeeze in the Aframax and Suezmax sectors. As rates firm, we are seeing increased activity across the tanker board. Order book supply of tankers, the order book to current fleet ratio is at historical low levels. A big part of the fleet is reaching phase out stage, pointing to a tighter supply of tankers for the next 18-24 months.
If you look generally at TEN, we have a modern fleet which is well positioned to capture the expected recovery of the market. We continue to reduce debt. We have a strong balance sheet, strong banking relationships that allows the company to take advantage of the opportunities that will be presented. With that, I will ask Paul to walk you through the financial highlights of the fourth quarter and the year. Paul? Paul?
Yeah. Hi, this is Paul. Can you hear me?
Yes, Paul, we can hear you. Go ahead.
Okay. Well, I'll continue from where I was. We lost George. There were several aspects to quarter four that contributed to a positive change in fortunes in the tanker market, including higher TCE and a 6% increase in revenue. Also in quarter four, management of TEN concluded, based on cash flow projections, that seven of its oldest vessels had incurred non-cash impairment charges despite their excellent condition. This is also to our benefit. These charges totaled $86.4 million, a significant amount. By incurring these charges, the vessel values will more accurately reflect current fair market values. In addition, quarterly depreciation charges henceforth will be reduced by $2.3 million in each of the following quarters.
The quarter four financials were actually much in line with the three recent quarters, and excluding the impairments, resulted in a modest loss of just $14.9 million. In a difficult market, there was a 6% increase, as I have said, in revenue compared to the previous quarter four, with total revenue reaching $139 million. Although annual revenue dipped from the prior year, TEN still achieved over half a billion dollars revenue in the year with almost full vessel employment, strongly indicating an improving market that we now see gathering pace. While tankers operating in the spot market struggled to cover daily OpEx, our average TCE was nearly $17,000 per day, despite six vessels dry docking in quarter four.
Even with dry dockings and soaring bunker prices, total expenses increased by a manageable 9% after excluding current and prior year impairments. Vessel operating expenses fell by 3%, keeping daily operating expenses per ship at $7,900, helped by a stronger dollar. While G&A remained at $7.2 million, our daily overheads remaining at a low $1,200 per vessel. Other expenses remained relatively stable compared to the prior fourth quarter, including interest and finance costs, remaining at about $9 million in both fourth quarters, as interest rates declined and positive bunker hedges helped provide some balance against the higher bunker costs. Generating adequate EBITDA and preserving cash reserves over the past year, and especially in recent quarters, has been a challenge given market conditions.
Although we managed to reduce debt in the year by $130 million and ensured financing for the LNG carrier and for the forthcoming shuttle tanker and recent Aframax orders. All of these activities have put extra pressure on our liquidity. However, thanks to our time charter strategy and to refinancing by our banks, we successfully managed to manage our operational cash flow and fully met our debt service obligations. To date this year, we have bolstered our cash reserves to more healthy levels, helped by a promising market takeoff, soon to be reinforced by a tanker sale with the prospect of further sales. At this point, I've finished my comments. Go back to Nikos.
Thank you. Thank you, Paul. Thank you for giving us a very, I would say, a rosy for the future, financial position that we always maintain. As you know, TEN has always kept a strong balance sheet through thick and thin. We will. If you go
Over the last 20 years. We are very proud of it, very proud of our banking relationships, very proud of the very low spread that we are charged for our debt when we grow the company with accretive transactions. This has been done by consistency, by as we have continued dividend payments. Perhaps we are one of the very few companies in our peer group that has never ever approached our banks for any sort of renegotiation. I think this is appreciated in a huge way.
When we hear that spreads are going higher, when we hear that people, other colleagues of ours are facing difficulties in finding finance, our treasury and finance department out of London has a view of very supportive associate banks to help us in our growth and in our projects. Thank you for acknowledging this. Hopefully, as we go forward since we have navigated the worst part of the storm, I think we will be able now to pay more dividend for our common shareholders also. Together, of course, with our preferreds, which have outperformed the market in a very big way.
With this, I would like to open the floor for any questions that we could be helpful to answer.
Thank you. We will now begin the question-and-answer session. If you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. If you want to withdraw your question, please press star and two. The first question comes from Christopher Robertson from Jefferies. Please go ahead, sir. Your line is now open.
Hello, gentlemen. Thanks for taking our questions.
Thank you, and congratulations.
Thank you. I wanted to ask about the ATM activity during 4Q. I guess, can you comment on how much was raised from the common share issuance and versus the preferred? Any issuances done year -to -date, what remains under the ATM, and what would trigger any further issuances there?
Well, yes. From what you see from the records, I think we had about $20 million in amount raised in the fourth quarter. I think the majority of that is from the common shares. A very small part of it has gone with the preferred.
Right. Okay. Any issuance is done year -to -date during 2022?
I think, yes, similar issuance, which we will be reporting in a couple of weeks with our results.
Okay. In terms of the four dual fuel Aframax new builds on order, can you talk about either the contract duration against those expected EBITDA contribution? Those are still scheduled for delivery in 2023 through 2024. Can you talk about kind of the cadence of delivery there?
Yes. I mean, thank you for posing this question because it's a very important part of our strategy going forward. Back in 1993, when we were, I mean, almost 30 years ago when we started then, our aim was to end up the then century by the beginning of 2000 to be able to have a full WW fleet. That was, if you remember, a double hull fleet at the time, the new legislation following the OPA 90. We were able to accomplish this on time, you know. When we entered the New York Stock Exchange in March of 2002, we came with 24 WW vessels.
Well, now we are undergoing a very similar exercise, although we're a bit older, but I think wiser, I hope. What we would like to do is by the end of this decade, by 2030, to have the vast majority, if not all of our vessels of the future technology of energy carriers. Which right now seems to be the dual fuel, which could be either the alternative fuel could be gas or ethanol going forward. And of course, hydrogen is on the way, part of our mind. And our technical and environmental committees are working on designs like that together with our long-term charterers.
We look at this initial five- to 10-year contracts as a start with a very predominant and very experienced end user, the Equinor, to build those ships and start our process that we would like by 2030 to have a complete fleet. We are looking at returns. We look at it as a return on equity in all these. We look at them on the high teens. I mean, our main always target is in excess of 15%, but when we're doing new high-quality projects, we will do anything between 10% and 15%.
Okay, got it. You mentioned controlling OpEx cost inflation. Last year, you know, the OpEx story was negatively impacted throughout the industry from COVID-related cost pressures. Do you see that aspect improving this year? If so, where are the current cost pressures coming from in terms of expenses?
As George, our COO mentioned, we would like to thank starting from all our seafarers on board because they went through a very difficult 2021 and 2020 having to spend numerous months extending their sea service to help the company on board the ships. In such a different environment, we were able to reduce operating expenses. I think this is really something that the Tsakos operating team we would have to thank them because they really were able to achieve a task of reducing expenses in an environment of increased as you see inflation by almost in excess of 33% over the year.
By bringing up we also included there half a dozen at least of special surveys that we brought forward in order to have those ships ready today to earn the very high rates that we are earning and also many of dislocation expenses in which we had actually to navigate vessels, even VLCCs, to places like the Philippines to change the crew. With all that in mind, we were able to reduce expenses, and we, you know, we want to thank the seafarers and the management of Tsakos technical team for achieving this for us. Going forward, of course, we are looking at an inflationary environment. However, looking at a weak euro, I think this balances out this for us.
As you know, the majority of our expenses are for seafarers who are European who are paid in euro, and having a weak euro and a stronger dollar will help balance the inflationary trends. I do not foresee other than the bunker expenses in which we are hedging a significant part of them, an immediate negative effect, at least for the first six months.
Great. Thanks for that color there. I'll hop back in the queue. Appreciate the time.
Thank you.
Thank you. The next question comes from the line of Magnus Fyhr from H.C. Wainwright. Please ask your question. Your line is now open. We have just lost the line. The next question comes from the line of Magnus Fyhr . One second, please.
Yes. Good morning, Nick and team Tsakos. Can you hear me?
Morning to history.
Very good. Just a curious question on the Green Fleet initiative. It sounds like you're defining the Green Fleet as dual fuel. I mean, you do have some eco ships in your fleet, but you know, it's about 42 vessels that are built before 2013 which you know some significant fleet replacement over the next couple of years here to have a fully dual fuel fleet. How do you, from a capital allocation standpoint, go about financing this? Should we assume long-term contracts or just selling old assets and replacing them given that your stock, you know, is trading at below NAV?
Well, well, we hope by the time we finish the roadshow to the U.S. to be at NAV. I'm only joking, but, thank you for your question. I think, we are doing these transactions because it sounds for us sitting around the table and just talking about green ships and, it sounds more simple. It's a huge technical task. You very rightly say that we have at least half of our fleet is already of the eco design.
Our technical team and environmental committee is doing a lot to actually implement from January 2023 the new legislation that will reduce the footprint even of our older ships and bring them to a much more environmentally friendly circumstances to be able to navigate way under the legislative tasks that we are facing. By replacing our fleet, we would only do it together with end users, at least for the first part. After we have a target fleet of the dual fuel technology, 12 vessels, and that will make us comfortable operating them, then we will be able to start building ships even without employment.
It's not so much the risk, the financial risk is what we want also to take care of is the technical risk that we are together with our, you know, big major oil companies are building the right ship for the right period and for the years to come.
You know, Equinor seemed to be on the forefront of this. Are you having other conversations, you know, with other oil companies? Have you seen some change here over the last year as far as an appetite for, you know, financing these through long-term contracts?
Yes. I think we're seeing also European and American companies. At least we have offers to build another 10 vessels for two similar companies with seven-15-year employment profiles.
All right. Very good. Just one last question. You know, rates have been, you know, very volatile here over the last month. Can you talk a little bit about the first quarter, what you've seen so far versus end of March vis-à-vis the fourth quarter? Maybe just talk about maybe Suezmaxes and Aframaxes on the crude and perhaps for once.
Well, I think for a change, I think, with us taking care of all the, I would say all the issues, impairments and non-cash items in 2021, I think, we'll be returning to a significant profit in the first quarter. If things continue the way they are today in an even better profit, for the first six months. Of course, you know, we're still in the middle, of course, for the beginning of the second quarter. Things, I mean rates as you know the rates it's not a secret are quite significant from the Aframaxes to the product carriers, and the Suezmaxes all over, you know.
Regardless of the Russian crisis, regardless of Russian location rate, the whole market is reacting very positive. We believe that this could be the game changer that you know you and I and the rest of the analysts we've been talking and the rest of our peer group for the last 18 months.
Right. I mean, the spot rates have moved up here. Would this be a time where your clients or the oil companies would try to lock in some vessels maybe at higher rates, but maybe just secure tonnage? I mean, we still have some you know some tonnage out there, you know, but we see an appetite for time charters improving.
There is, I have to say, a very large appetite for first class charters and of course traders and they're trying not to lose the boat literally in this case. So, they're you know they were offering different rates in January and 15% higher in February, higher in March, even higher now. I think it is getting to a level that if we see the significant returns, we might lock a couple of ships. We have a very large portfolio to be able to take some on the spot and some on longer term protection.
Right. All right. Very good.
Thank you.
Yeah, that's all I had. Thanks for taking my questions.
Thank you. Over to you.
Thank you. May I just remind you, if you wish to ask a question, please press star and one on your telephone keypad.
I don't see we have any more questions, and I would ask if our chairman will give us his closing remarks. We want to wish everybody a Happy Easter from here from New York. Looking forward to for all of us to enjoy a peaceful holiday period this weekend, the next weekend for us in Greece. Hopefully we'll be able to be reporting higher dividends and higher returns in our pre-Posidonia call. Hopefully all is going to be settled in a peaceful way. With that, I will ask our chairman, Takis Arapoglou for his closing remarks.
Thank you, Nikos. I have nothing else to say. Just wish you good luck and safe travels and hope you have a very productive road show in New York. Goodbye from me.
Thank you very much. Thank you, sir. Thank you.
Thank you. That does conclude our conference today. Thank you for participating. You may all disconnect.