You for standing by, ladies and gentlemen, and welcome to Tsakos Energy Navigation Conference Call on the 4th Quarter and Year End 2020 Financial Results. We have with us Mr. Takis Aropoglou, Chairman of the Board Mr. Nicholas Zakos, President and CEO Mr. Paul Durham, Chief Financial Officer and Mr.
George Sorogou, 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. And wait for your name to be announced. I must advise you that this conference is being recorded today, Wednesday, March 24, 2021.
I now pass the floor to Mr. Nikolas Paunozis, President of Capital, Inc, Investor Relations Advisor of Taka's Energy Navigation. Please go ahead, sir.
Thank you
very much, and good morning to all of our participants. I am Nicolas, Bordenovis of Capital Link, Investor Relations Adviser to Trackus Energy Navigation. This morning, the company publicly released its financial results for the Q4 the year ended December 31, 2020. In case we do not have a copy of today's earnings release, Please call us at 212-6617-566 or email us at 10capitallink.com, and we will have a copy for you emailed 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.cenn.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 contain certain forward looking statements within the meaning of the Safe Harbor provision of Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward looking statements involve risks and uncertainties, which may affect 10
business process and results of operations. And at this
moment, I would like to pass the floor to Mr. Arafoglu, the Chairman of SACCO Energy Navigation. Mr. Arafoglu, Please go ahead.
Thank you, Nicolas. Good morning and good afternoon to all and thank you for joining us today. I hope you are all staying safe and healthy. Despite the challenging market conditions, 2020 proved to be a year of strong operating profitability for TEN. This allows us to continue paying dividends, repaying yet another issue of preferred stock, Reduce bank debt and meet all our other obligations.
In addition, we sold all the tonnage to maintain a young fleet and were able to take non cash corrective action on certain vessels. In essence, nothing new or different from what TEN has been consistently doing every year since inception. Today, with a substantial cash position, accelerated special surveys to best utilize poor market conditions and have the fleet on spot, 10 is perfectly positioned to benefit from the anticipated recovery in the global economy and the resulting release of better demand for oil and for oil products. The Board joins me in congratulating Nicholas Tsakos and his team for yet another year of best in class performance, which fully validates our strategy. And with this, I pass the floor to Nicholas Sapos.
Thank you, Chairman, and good morning to All of you on the other side of the Atlantic and good afternoon to you here in Europe and thank you for joining our call. It was exactly a year ago to the date where our Chief Operating Officer set the exact same date for our call. When we were talking back on the 24th March of 2020, we were in the beginning of this pandemic and everything looked very, very new, very strange and we were all at a loss. A lot has gone under the bridge since then. Unfortunately, huge loss of life worldwide.
So it is really a different world than we entered exactly a year ago on our call today. However, as the Chairman said, we were able To navigate these difficult times, maintaining as hard as it was a steady hand on the wheel And we are coming out of what has been a very turbulent period and Very choppy waters or stormy waters to say the least. In calmer waters helped a lot by the vaccinations that are happening all over the world. In my last call in November, When we announced the 9 months results, I was hoping that we would not have hit a third or whatever the number is, new wave of lockdowns around the world. Unfortunately, it has happened.
It's still happening in some parts of Western world. Things are becoming more difficult as far as the pandemic. However, at the end of the tunnel, we have the line, which are the vaccines. A big percentage of the population, hopefully, we will be vaccine by the end of this and the next the quarter. This miracle, this medical miracle that happened in a very short period of time has given the world a new go around and this is something we are seeing in the rates as of the beginning of the year.
2020 was a rollercoaster year. However, Things are looking more positive. The natural supply and demand Right now is very tight and we saw it even last night and this morning When the Suez Canal and this was not April's full day event, it was the real closure and it's still partially close of the Suez Canal that has put the market through the roof mainly in futures rate. So we have been able to renew a fleet as Mr. Rapopoglouc said, our Chairman.
We sold 7 vessels. We've got a new environmentally friendly 4 vessels and in the meantime added 2 new buildings, All of the 6 new vessels that we have already delivered or will be delivered are chartered with long accretive rates. In the last quarter, a lot of attention has been made to rechart 9 vessels, 3 of them being our LNGs. So In a different market environment, we are very proud that the LNGs And all our bankers keep on ticking without a loss, a day loss. And that has been a really remarkable achievement for the commercial and technical side, and I would like to thank them going forward.
We are seeing significant signs Well, that we are much closer to stronger rates. We're seeing the The beer markets, dry cargo and containers skyrocketing at at levels that we have not seen for at least 12 years back in 2007 and 2008. And we expect that the VSIP Tanker rate recovery is not far. We have kept our vessels And significantly in the spot market, we have 31 ships ready to take immediate advantage of that turnaround and another 12 vessels with profit sharing arrangement. So, the company is maintaining its profitability, is maintaining its dividend policy during very, very difficult times.
It's reducing debt Significantly, and we are looking at a much healthier picture by the next quarter. And with this, I will ask our COO, Mr. George Saroglou, to give us a little bit more details of what we have been seeing and what we are facing as we speak. And I will be there for answers if you need anything. Thank you.
Thank you
very much, Nikos, and good morning to
all of you joining our earnings calls. We report today a profitable year for the 2020 operations, in fact, a 40% increase in profitability from 2019. 2020 has been a rollercoaster year for the tanker industry and the world because of the COVID-nineteen pandemic and its economic, social and health related repercussions. We continue to successfully navigate the logistic Regulatory challenges of COVID-nineteen with no impact to our operations so far. This has been the biggest challenge of the last 12 Munson continues to be the number one priority.
Because of the pandemic, the lockdowns, border closures and reduced airline capacity, The shipping industry has experienced significant challenges with timely crew changes. We continue to safely form crude changes, but problems with restrictions and logistics remain as different parts of the world open and close their borders asynchronously following various developments. We want to take the opportunity to thank one more time all our seafarers and the onshore personnel for their hard work, patience, dedication and professionalism during this unprecedented time. We will continue to work hard to normalize crew changes and bring Seafarer's safety back home to their families without disrupting the operational readiness and efficiency of the fleet. This has been and will continue to be the number one priority until crew changes and crew repatriation return to the pre COVID normality.
Let us go to the slides of our presentation. In Slide 3, we see that since TEN's inceptions in 1993, we have faced 4 major crisis. At this time, the company, thanks to its operating model, which is built to be crisis resistant, has come out stronger. From 4 modern vessels in 1993 to a pro form a fleet of 70 vessels for an average 15% annual growth in terms of deadweight tons in the 4 decades we operate. This tank has not been an exception.
Last year, we sold 7 tankers with an average age of 14 years and replaced them with 4 eco designed environmentally friendly new buildings Built in South Korea, 2 Suezmax and 2 Aframax tankers that were chartered to an oil major on minimum 5 year contracts with or options that go up to 10 years. The rest of the 4 series order has been delivered to charterers last quarter. The company continues the current growth program with construction of 2 vessels in the specialized shipping sectors, namely the DP2 shuttle tankers and LNG that both have already been fixed with long term employment. In Slide 4, we see the pro form a fleet and its current fleet profile, Employment profile. We have a combination of vessels in fixed time charters and flexible employment contracts, Time chartered with profit sharing, COAs and spot trading that capture the market's upside.
All dark blue color vessels, 23 in the slides, are on fixed rate time charters, while the light blue and red color vessels or more than 2 thirds of the fleet currently in the water have exposure in the market subsides. This means that TEN is well positioned to capture the positive tanker market fundamentals and the expected recovery of freight rates that we expect to be seeing from the second half of this year. The left side presents on the next slide on Slide 5, the left side presents the all in breakeven cost of the various vessel types we operate. As you can see, the cost base is low. And in addition to the low shipbuilding cost, we must highlight the purchasing power of Tsakos Columbia's Chief Management, the continuous cost control efforts by management to maintain a low operating expense average for the fleet and the low general and administrative expenses, while keeping a very high fleet utilization rate quarter after quarter.
We almost had 95% utilization for the year after bringing forward a special survey of 9 vessels to take advantage of a weaker market. And thanks to the profit sharing element that is a big part of our fleet, we enjoy the benefits when the market conditions are strong like the freight markets that we have witnessed during the first half of the year. As demand For oil continues to recover from the lows of last year and oil inventories continue to fall, we expect the freight market to recover from current levels. And for every $1,000 increase in spot rates, we have a positive impact of $0.60 in annual EPS based on the number of 10 vessels that currently have exposure to spot rates. Debt reduction in Slide 6 is an integral part of the company's capital allocation strategy.
During last year, we have repaid $160,000,000 of debt and repurchased the successful 50,000,000 CVC preferred shares and so our net debt to capital ratio is currently below 50%. In addition to paying down debt, growing the company through timely sale and purchase and new building acquisitions, we have continue to reward our shareholders with dividend payments. We announced today a $0.10 per share dividend for common shareholders that will be paid in June. Since our listing in New York Stock Exchange in 2002, we have rewarded the company's shareholders with almost $500,000,000 in dividend payments and $113,000,000 in share buybacks. So besides debt repayments, cash dividends and buyback of common and preferred shares, which are the 3 main pillars of the company's capital allocation, fleet growth and renewal remains is the 4th pillar.
As far as the market is concerned, it has been an unprecedented year for global oil demand last year because of the COVID pandemic and the measures to contain it. 2020 was the 1st year of negative growth since the period of the Great Recession in 2,008 and 2,009. Year end demand was down by approximately 8 point 8,000,000 barrels per day from the year end 2019 numbers or approximately 8% of demand. Most of the losses are in jet aviation fuel. The expectations for 2021 are for oil demand to grow back by 5,500,000 barrels per day.
We are on a growth trajectory for oil demand and full recovery to the pre COVID levels depends more or less on How quickly global jet fuel demand will return to the pre COVID levels and of course on how quickly and how well the world will manage the vaccine rollovers and the latest virus mutations. Barely all demand reductions are found in the OECD countries, While non OECD countries, the non OECD world continues to have strong demand growth The International Energy Agency continues to increase the demand expectation for China and India as the economy recovers and demand continues to grow. Non OECD countries continue to be the growth engine for oil demand. On the supply side, OPEC plus producers are gradually easing unprecedented production cuts. There is an additional 7,700,000 barrels per day of shut in production that OPEC Plans to gradually restore over the course of the next year.
Compliance with these cuts continues to be very high. Oil inventories in OECD countries continue to grow. The expected demand growth of 5,500,000 barrels per day of this year and OPEC plus gradual oil production increases should be very positive for tanker demand and tanker rates. While oil demand continues to grow, let us look at the forecast for the supply of tankers. The order book as of February stands at around 353 tankers or 7.5% of the fleet is expected to be delivered over the next year, which is the lowest that we have seen in almost 30 years.
However, we should notice that we have a big part of the fleet that is over 15 years. We're talking about 1410 vessels. And almost 8% of the fleet are currently at or above 20 years. With the upcoming environmental regulations, we expect to see a push for more tankers approaching or above 20 years to go for scrapping. 2018 was the highest capping year of records.
Last year was lower as expected. And so we expect to see a pickup, thanks to the big part of the fleet that continues to be over 15 years. We would expect a pickup in scrapping from this year as more environmental regulations are on the horizon and a weak market for the last 9 months creates an unfavorable trading environment for those vessels that approach or are currently at above 20 years. In summary, On the oil demand, the recovery continues to be strong and this strong recovery is going to be translated into 5,500,000 barrels per day growth in 2021. On the supply of oil, production increases we believe are on the horizon by both OPEC plus and other non OPEC producers.
On the vessel supply, the order book to the current fleet ratio is at historical low levels, which implies at minimum a balanced market for the next 18 to 24 months. Regarding TEN's Balance sheet, we have a crisis resistant proven operating model. We have a modern fleet well positioned to capture the positive market development, which we expect from the second half of twenty twenty one. We have a strong balance sheet and strong banking relationships that will allow the company to take advantage of the opportunities as they will be presented. To the expectation of better days ahead, we conclude the operational part of the presentation.
Paul will walk through the financial highlights for the Q4 and the full year.
Thank you, George. Well, as we've been emphasizing, TEN had a profitable year in 2020, generating in total net income of over 50 Revenue in 2020 rose to an annual record $644,000,000 for TEN, mainly due to the strong demand for floating storage in the year. We had 94% utilization in 2020 and even 91% in quarter 4, which are good signs given that we had 9 dry dockings in the year. Average daily TCE in the year was $23,600 a respectable average compared to market rates, boosted by profit share totaling $47,000,000 in the year. EBITDA increased $267,000,000 of which $33,000,000 was in quarter 4, both significantly contributing to cash reserves by the year end, despite the $50,000,000 redemption of the C Series preferred stock.
In quarter 4, revenue fell by $44,000,000 compared to the prior quarter 4, indicating a weakening of the market in the latter part of the year and contributing to a quarter 4 net loss for $10,000,000 of just over $14,000,000 before noncash impairments of over $15,000,000 in the quarter. However, even given these conditions, 10, with half the fleet on time charter successfully avoided potentially significant losses. Our time charter still provided the cash to cover nearly all OpEx, G and A and finance costs, with vessels on providing a further $12,000,000 to cover the shortfall. Generally, our costs were kept at stable levels, Expense categories being similar to the previous year quarter despite dry dockings, with average daily OpEx vessel for the quarter year up slightly to $7,800 partly due to dry dockings and a weaker dollar. Quarter 4 finance costs fell by $4,500,000 with interest falling nearly $5,000,000 mainly due to lower interest rates, Our cost of debt remaining below 3% and due to reduced loan margins and shrinking outstanding debt, while positive bunker hedge valuations rose by $4,000,000 We sold 5 vessels to 3rd parties in 2020, $94,000,000 and prepaid $54,000,000 of loans, freeing $40,000,000 of cash.
We shall be looking for further sales to consider over the next 18 months. We have an LNG carrier and Shuttle Tanker being built for a total of over $280,000,000 of which we have paid $65,000,000 to date and have arranged related pre delivery financing at excellent terms for the ships as both have charters that will generate lucrative cash flow from delivery. Another $384,000,000 net in scheduled repayment and loan prepayments were made in the year, while new debt for delivered vessels in 2020 and recent pre delivery debt and loan refinancing amounted to over $340,000,000 in all bringing total debt down to $1,510,000,000 with net debt remaining at 48%.
Given the current state of
the tanker market, it may seem difficult to expect any major recovery in the near term. But there are, in our opinion, some strengthening positive stirrings, as both George and Nikos have said, on the horizon. So we do The outlook
to be positive from midyear on. And in
the meantime, our time charters will hold the fort just as they did in quarter 4 and are doing in quarter 1. And this concludes my comments. So I'll pass the call back to Nikolas.
Thank you, Paul, for your detailed analysis of the results. And as we said, we are Happy to have this is going to be our next year. It's going to be our 20th year as a public company on the New York Stock Exchange, and We hope we will maintain our continuous dividend payment and profitability with as we have always done. And it seems that the prospects going forward are quite positive for a very strong recovery, similar to what we are seeing in other segments of the industry. And usually, the tankers So I followed the iTargo and the container market, and this is happening as we speak, where we see unprecedented high levels for demand as infrastructure building is going back and it's happening.
The same is evident A lot on the product carriers, a lot of refineries are shutting down in the Western world and more Demand for products is required around the world. A lot of coal mines are being reduced in places like China and that helps our LNG and fuel imports in these vast markets. India, at the same time, is importing more and more from the West or at least from places like West Africa and not It's not so dependent anymore on the Middle East increasing ton miles as we speak as we go forward. And the normal contenders like Livia, who has been a big participant of the Mediterranean market, It has increased since our last presentation in November, another 16% is out. So Everything helps and more importantly than anything else is the supply, Very small single digit supply coming in over the next 2 years as we speak.
So I think we are looking at a significant super cycle happening here sooner rather than later. At the same time, We are seeing large conglomerates like Equinor, which is one of our largest also clients Coming in and starting to work on what they say is the largest so far Field oil field in the North Sea, the front field, which is another sign that product is going to be there for the foreseeable future for the limited amount of vessels that are also low inventories. As we speak, people have been burning their cheap inventories. And I think that we'll need a significant uplift as we go forward. And with this and hopefully safety for everybody, we will be seeing better times.
We have not lost a single day in our renewal program. I think as Paul mentioned, we replaced 7 vessels, So are taking in 6 brand new vessels, 4 already earning accretive rates for us, 2 are already chartered and fixed, Our shuttle tanker and our LNG. So we have tried to keep a tight ship. The security of our first Our seafarers comes first. Their mental health, their physical health, we had within 3,000 seafarers around the world, We had, I would say, less than 1% COVID cases, and we have been Successful in containing those.
It is a struggle every day. It is a struggle to make sure that Our people are safe on board and we're not creating a COVID bubble. And it is very important, I think for all the authorities around the world to make sure that seafarers are considered first line Receivers of the vaccines. We have people having to wait for a month To get their vaccines before they go on board, then this should not be the case. They should be able to go on board, provide the service to the global economy without having to be penalized or put themselves or their colleagues at risk.
It's a very big issue and we are trying to support various authorities and governments to make sure that this will go on and it will make our life and the life of our seafarers much, much easier, healthier and it will significantly reduce operating expenses because in order for us to be able to repatriate Many times, our long serving shipers, we have to navigate the vessels physically into places like South Africa or the Philippines, where there are open borders for them and they are received in a humane manner. And with this, I would like to open the floor for any questions. Thank you very much.
Thank Your first question today comes from Randy Giveans from Jefferies. Please go ahead. Your line is open.
Ladies and gentlemen, how's it going?
Hello, Randy. Very well. Looking very forward to see you face to face one day soon with or without a mask, at least.
That would be good. Come to Houston, no math required. But if I make it happen, so I'll let you know. Question around your charters. Can you provide some color on the 9 vessels recently triggered both the rates and the tenor?
Yes. I We have renewed 4 of our product carriers for another 3 years to their existing charter, which is a major state oil company based on our typical Accretive minimum and profit selling arrangements. Then of course, So, we have taken we have used this period of time to charter out and I was very happy to make sure that we chartered out our LNGs This from anywhere between from up to 10 years at without direct leader from the shipyard or from the last Delivery call. So that as you know, on an LNG, it could if you have a vessel on the spot, it could cost 1,000,000 and 1,000,000 to your bottom line, and we're happy that we do not have to spend any of that. Exactly the opposite, the ships are earning immediately after their current deliveries accretive rates.
And on top of that, So we have a conventional Suezmax and Aframax on yearly charters, extension of charters and our shuttle tanker for a very long period of time. So I think that's A very quick rundown of the 9 vessels that we have renewed in the first Quarter because we have seen the signs of the charterers looking to take over.
Got it. Okay. And then next question, if you turn to Slide 7, Just looking at kind of the dividend payouts, we've seen this kind of semiannual dividend bounce around lately. How do you
do this how do you
view the dividend going forward, right? I know you kind of trended now to $0.10 a share. What was the thought process behind that and kind of outlook from here?
Well, as you know, we are in A very we are very much dividend driven as an organization or The management and the family involved owns A very large part of the stock. So dividend for us is very, very important. And so So we're always pro dividend and we try not to miss any of our dividend payments. We believe this is the best way to reward. And I think as George, Our COO mentioned, in the 20 years of our being 20 years next year on the stock exchange, We will have paid hopefully by then in excess of $500,000,000 in dividend.
And if you add another $160,000,000 of buybacks, we would have returned between dividends and buybacks It's more than $650,000,000 to the shareholders.
Got it. And then I guess lastly, with 1Q largely older, right, how are rates compared to 4Q? And where do you expect rates to go from here? Obviously, the forward curve is pricing in some strength, time charter rates are well above spot rates. Can you give some kind of thoughts on the outlook for the next 3, 6, 9 months?
I have to Jay, I think we spoke together in November and I mentioned that we are hoping to see a much better first half depending of Any additional lockdowns. So in one hand, unfortunately, in places like Europe, We are seeing severe lockdowns happening again that are putting a delay to the full recovery of our rates. On the other hand, we have the positive miracle of the vaccines that I think that came out in a very timely manner. Big percentages of the populations are being We are hoping to have at least an open summer around Europe and I'm sure the United States, the case is the same. We are glad that the majority of the Far East has been able to control the virus In the last couple of quarters, much, much better.
So although we are facing another hopefully, the last Actually, battle with the lockdown. So I think we could turn the corner as early as next quarter, which is next in a couple of weeks. And we saw this happening with all this happening today With and I have to say, we did not organize for the closure of the Suez Canal just because it was our call. It was An incident which is not it will have some delays, but we show how the futures and the spot market rose just in that. So The market is well balanced April, May for sure by June when our annual meeting is and hopefully we will see you to face, we will be celebrating in a much better market environment.
I'll take your time. Thanks so much.
Thank you. Well, if there are no more questions, I will ask our Chairman to give his wise words I will close after that. No wise words, Nico. Thank you.
Thank you all again for joining.
And we all look forward to 2021 being a great year as well for the company and the stock. Thanks again. And from my side, I would like to wish everybody a very healthy, safe and Prosperous 2021. All of us going back to normality and with all the lessons that we were told, as I said, Exactly a year ago, our CEO gathered us here for last year's end of the year results. Exactly a year ago, things were very, very different.
We have all grown Through this, we navigated a steady ship in very turbulent waters. We have maintained and I'm very proud of Our renewal program with the new ships showed on time the 7 assets, took delivery of 4 Without losing almost a day in a very difficult environment, those vessels have already been earning accretive rates, which you see to the bottom line Right now, 2 more vessels are being built for us. Hopefully, they will be delivered within this year, 1 in 'twenty one and the next one in We took both of them on long term charters, and we're also looking at the opportunities out there. I would like to thank all in the Trappers Group For keeping a flawless operation regarding the safety of our seafarers. And I think this is A priority for us, everybody in the group is to make sure that we have we wake up every morning with on a healthy ship.
And with that, looking forward to speak to you next quarter in a very, very much better and environment. All the best from all of us here in Greece, and happy Easter holidays to all. Thank you very
much. Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.