Thank you for standing by, ladies and gentlemen, and welcome to the Tsakos Energy Navigation conference call on the Q2 2020 financial results. We have with us Mr. Takis Arapoglou, Chairman of the Board, Mr. Nicolas Tsakos, President and CEO, Mr. Paul Durham, Chief Financial Officer, and Mr. George Saroglou, Chief Operating Officer of the company. At this time, all participants are on 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 and one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, Wednesday the 23rd of September 2020. Now I pass the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relations Advisor of Tsakos Energy Navigation. Please go ahead, sir.
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 Q2 and six-month period of 2020. In case you 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 sent to you right away. Please note that parallel to today's conference call, there's also a live audio and slide webcast, which can be accessed on the company's website on the front page at www.ten.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 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. Arapoglou, the Chairman of Tsakos Energy Navigation, to kick off the conference call to what has been a record performance this period. Please go ahead, sir.
Thank you very much, Nicolas. Hello, good morning, and good afternoon to all. Thank you for joining our call today, and I hope you're all keeping safe and healthy. Our press release today with the Q2 and first half results, I think ticks all the boxes of an impressive performance. It includes high profitability, substantial historical debt reduction, continuous fleet renewal, highly accretive new business, repayments of preferred issues, an active buyback program, ample cash, and impressive cost containment. Congratulations once again to Nikos Tsakos and his team, and we all look forward to answering your questions and to hearing your constructive comments as always. Thank you, and I now pass the floor to Nikos Tsakos.
Thank you, Chairman. As I said, it has been a very interesting, to say the least, enlightening, educational period for all of us. We are navigating in uncharted waters for the last more than six months now. However, we have been able to maintain the company on course, at least. We have been able to, first of all, secure the safety of our people on board, which has been a huge concern if you are in an operation with 2,000 seafarers on board the ships at one time, and 2,000 seafarers waiting to board the ships on the other hand. That's a huge effort that is being made. I think that's where a big part of our top priority has been focused. As the chairman said, we were able to navigate these uncharted waters successfully and not lose track of the company's targets.
The target has always been profitability. It has been a record quarter and a record six months. Other than that, also the growth and modernization of our fleet. We sold four vessels within the quarter, in the six months. We reduced debt, we put cash aside, and we replaced then those four vessels with an average age of 14 years with four new vessels, three of them already delivered, in spite of the very difficult circumstances that shipyards have been operating. I need, first of all, to thank our associated shipyards for their efforts, the people there, but also our new building team and operation team for making sure that we were able to deliver the ships on time, maintain our very accretive charters. In all this, we were able to replace four older ladies on target at 14 years.
This is our goal to try avoiding passing the usually a bit more onerous third special survey, and we replace them with four new vessels, of which at the minimum earning capacity will add $180 million over their five years' employment as a minimum to our revenue. All this took a lot of effort from the whole team. We maintained 96% utilization, which has not been easy, mainly because of the unprecedented circumstances we're facing with crew changes. We started this year in 2020 with optimism, I would say, but a lot of concerns. All of us remembers that our biggest issue was supposed to be the progression from the three and a half sulfur content to the 0.5. Within six weeks of the beginning of the year, all this went to the back of the queue, and we have been dealing with the effects of the virus since.
however, so far so good. We increased our dividend in June. We hope to maintain a strong dividend in our next dividend payment in December. again, I would like to thank the board, the management, the technical management for their efforts to keep the boat on track in these very, very rough waters. We are seeing a third quarter which has been seasonally slow, and also we are facing the issues of the coronavirus in crew changes. there are very good signs that the remaining of the year, the market is returning to some sort of stronger normality. we are hoping to have a record year going forward. with this, I will ask George to give everything in much more detail, and we will be here with the chairman and call for the answers.
Thank you, Nikos, and good morning to you all. We report today a profitable second quarter and first half of 2020. It has been a roller coaster year for the tanker industry and the world as a result of the COVID-19 pandemic and its economic, social, and health-related effects. We continue to successfully navigate the logistical and regulatory challenges of COVID-19 with minimal impact to our operation so far, thank God. It's a big effort. The industry, as a result of the pandemic and the lockdowns, the border closures, and reduced airline capacity, has experienced significant challenges in crew changes. We are pleased to report that we have safely changed out a number of crew members in our fleet.
We want to take this opportunity to thank one more time and tell how proud we are for all our seafarers and onshore personnel for their hard work, patience, perseverance, and professionalism during this time of crisis. We will continue to work hard with all of them to bring the remaining overdue seafarers safely back home and to their families without disrupting the operational readiness and efficiency of the fleet. This has been and will continue to be our number one priority until the virus is eradicated and we return to normal industry practices for crew changes. Let's go to the slides of our presentation. In slide number three, we see that since TEN's inception in 1993, we have faced four major crises: Far East, 9/11, credit crisis, and COVID-19.
Each time, the company, thanks to its operating model, which is built to be crisis resistant, has come out growing stronger and bigger in size. From four modern vessels in 1993 to a pro forma fleet of 70 vessels today, for an average 15% annual growth in terms of deadweight in the four decades we operate. This time has not been an exception. Since the start of the year, we have sold four tankers with an average age of 15 years and replaced them with new building orders for four conventional tankers and plus option one shuttle tanker. All vessels have long employment attached of minimum five years. We have already taken delivery of three conventional tankers and expect to take delivery of the last one during the Q4 of 2020. Slide four, we see the pro forma fleet and its current employment profile.
We have a combination of fixed-time charters and flexible employment contracts, time charter with profit-sharing, COAs, and spot trading that capture the market's upside. All blue-collar vessels, 30 in number, are on fixed-rate time charters. While the red and dark red colored vessels, 40% or 60% of the fleet, have exposure in the market's upside. In slide five, we see in the left side the all-in breakeven cost for the various vessel types we operate. As you can see, the cost base is low.
In addition to the low shipbuilding cost, we must highlight the purchasing power of Tsakos Columbia Shipmanagement, the continued cost control efforts by management to maintain a low OPEX average for the fleet, and the low general and administrative expenses while keeping at the same time a very high fleet utilization rate quarter after quarter, in excess of 96% for the first six months of the year. Thanks to the profit-sharing element that is a big portion of our fleet, TEN benefits further when market conditions are strong, like the freight market environment over the first half of the year. For every $1,000 increase in spot rates, we have a $0.48 impact in the annual EPS based on the number of TEN vessels that currently have exposure in the spot market. Debt reduction is an integral part of our strategy.
Since the end of 2016, when debt level peaked, we have reduced debt by almost $300 million. We have repaid in full the $50 million preferred Series B shares in 2019 and intend to initiate at par the repayment of the $50 million series preferred shares in October 2020. Net debt to cap ratio at the end of June 2020 is 45.5%. In addition to paying down debt, growing the company through timely sale and purchase and new building acquisitions, we continue to reward shareholders through dividend payments. The last common share dividend in June, with a payment of $0.375 per share split adjusted, included a special dividend of $0.125 to the regular semi-annual dividend of $0.25 per share split adjusted. Since our New York Stock Exchange listing in 2002, the company distributed almost $487 million in common share dividends or $25.70 split adjusted.
In addition, as part of its share buyback program, we have repurchased approximately $8 million worth of common stock, and we expect to buy back the $50 million preferred Series C by its due date at the end of October. Black April appears to be the month where oil prices and global oil demand bottomed. Since then, demand picked up as more economies came out of the lockdown and the low oil price environment incentivized stockpiling. The various agencies monitoring the oil market expect oil demand to reach the pre-COVID-19 levels of 100 million barrels sometime next year, subject to not going through another synchronized global lockdown and on how quickly vaccines will be widely available.
The order book stands at around 7.3% or 367 tankers over the next three years, the lowest it has been in more than 30 years. At the same time, a big part of the fleet is over 15 years, 1,307 vessels, or in excess of 20% of the current fleet. Environmental regulations could push more tankers approaching or above 20 years to go for scrapping. 2018 was one of the highest scrapping years of records. Last year, scrapping was low as expected. The strong market that we have faced in the first half and the pandemic has put scrapping to a standstill. With a lot of tankers, with more than 1,000 tankers in excess of 20 years, we could see a pickup in scrapping as more environmental regulations on the horizon create an unfavorable trading environment for those vessels that have reached or are above 20 years.
As oil demand recovers and hopefully the world will come out of the pandemic soon, supply of tankers remain in check, at least for the next two years, if not longer. We expect the freight market going forward to continue to be favorable for a modern tanker owner like TEN. That concludes the operational part of our presentation. Paul will walk you through the financial highlights for the Q2 and the first half of the year. Paul?
Thank you, George. Well, quarter two was very rewarding for TEN. Operating income reached $65 million and net income $50 million before impairment charges of $13.5 million on two tankers and a $4.7 million loss on the vessel sale. In the six-month period, operating income was $118 million and net income $69 million before these non-cash items.
Q2 revenue increased $47 million to $191 million, much of the increase due to the demand for floating storage that benefited those charters with profit share by $21 million and $41 million in the six months. TEN had 96% utilization and more than half of the fleet operating days on spot or variable rate charters. Daily TCE per vessel in Q2 averaged $28,800, the highest achieved since 2008. Our two LNG carriers generated a combined daily average that was significantly higher than the average spot rates for such vessels in the period.
Quarter two operating costs fell by $3.5 million in total, partly due to one less vessel, while average daily OPEX per vessel fell six percent, mainly due to the strengthening of the dollar against the euro pushing down crew costs. The 2005 product carrier sold in June released $2.7 million cash after repayment of a $6.2 million loan. Another $17.6 million was prepaid regarding two product carriers transferred to our joint venture. Q2 net debt repayments were $34 million and outstanding debt stood at $1.47 billion. Net debt to capital fell to 45% and the cost of debt fell to three percent, indeed below three percent , likely to remain at this level for the foreseeable future. Q2 finance costs fell by $7.4 million, mainly due to reduced debt, reduced margins, and falling interest rates, and positive movements of over $2 million in bunker hedge valuations.
Q2 EBITDA totaled $98 million, up 76%, boosting our cash reserves and allowing us to comfortably redeem Series C preferred stock for $50 million in October, and to continue our share buyback and to contribute to our CapEx commitments. We currently have one Suezmax with charter under construction to be delivered in November with $47 million to be paid. We also have a new building LNG carrier under construction for delivery in late 2021, on which we have paid $19 million to date. We have also recently contracted to build a series of up to three DP2 shuttle tankers with charter to be delivered in 2022. We have paid $9.3 million cash as a first installment. Debt arrangements have been made or are under discussion for our new buildings on highly competitive terms, including financing pre-delivery yard installments.
We actively continue to seek opportunities to sell vessels and have earmarked certain vessels for disposal to maintain a modern fleet with lower running costs and to reduce debt. Quarter three has been a challenge due to seasonal factors, global fleet destocking, and flattening demand. Again, we expect our time charter hire alone to cover all cash expenses. We believe that there are various factors that George has mentioned and in the press release to indicate that a recovery is not too far off as we enter the Q4 . I now hand the call back to Nikos.
Thank you, Paul, for the good, solid news, and may this continue as we go forward. It is in a situation that we find ourselves to have a record quarter in a period of unprecedented turmoil, and I think congratulations to all involved in that. There's a lot of work that has to be done going forward. With this, as you said, we expect that the Q2 has been a seasonally lower quarter, a quarter where we have to take a lot of operational and logistical risks, mainly associated with our seafarers. There are signs that demand has been normalized as we look forward. Good signs coming out of demand from China. Even in the Mediterranean, we see some more barrels coming out of Libya, creating a bigger market.
A lot of product carriers coming out of India to help the clean trade, the product trade. On top of all that, and I think George said it very correctly, this is the lowest new building order book for 30 years, which means since the '90s. This is always what hurts any shipping market, the tanker market also. To have such a low new building order book gives us a very good future going forward. As we see, the world fleet is getting older. There are out of almost 830 VLs, 200 of them are 15 years or older. More than 60 are 20 years or older, and the order book stands as we speak today at 75, and we do not know how many of those are actually going to be delivered.
all this goes in every segment of the market that we are involved in. We are looking. It has been a very difficult year. A lot of effort has been put by our technical managers and the whole team operationally to make sure that we maintain our course. Hopefully, the worst is over, and I wish this to everybody. With that, I would like to open the floor for any questions. Thank you.
Thank you, ladies and gentlemen. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. That's star and one for any questions. Your first question comes to the line of Randy Giveans from Jefferies. Please ask your question.
Howdy, gentlemen. How's it going?
Hi, Randy.
Hey. yeah, obviously congrats on the Q2 . I think it's been pretty well documented that 2Q was strong. now that basically the Q3 is over, can you give a little more insight in terms of how the market's been more recently in terms of floating storage, U.S. exports, cargoes out of the Middle East, West Africa, and kind of what you're seeing on trade routes more recently?
Well, I'll give it first a go, and then if George wants to add. As I said, I think up to really the Q3 has been a quarter of adjustment. Less storage, significantly less storage. The vessels that were on storage came in the market. Of course, a lot of repositioning of vessels also for non-commercial reasons, but mainly for crew changes. The way the company is structured with 40 vessels on time charters and 27 in the spot market, as Paul said, we were able to charter a number of our ships in the first and Q2 long-term, and we expect to have another positive quarter. Following the beginning of the Q4 , we see the market becoming stronger in the Far East, on the crude side and the clean side.
Okay. Did George have anything to add?
Not really.
Okay.
Everything is very well put by Mr. Tsakos.
All right. Didn't want to cut you off there. All right, kind of looking at use of the past, obviously, we're seeing the preferred, the Series C getting repurchased. I think you said some common shares being repurchased. Also obviously, debt de-levering continues to be the focus. you've also done this shuttle tanker new building order, right? just kind of looking ahead, say there is a free cash flow boost in the Q4 , say you do some sales of some older tonnage to get a little more kind of discretionary cash, let's call it. What are the kind of priorities in terms of using that relative to debt de-leveraging or return of capital to shareholders, do additional repurchases or further new building orders? Can you kind of rank those?
Yeah. Always a combination. I think we are repurchasing debt. We must be one of the very few companies in our peer group who have maintained a continuous clean sheet with our banks, never having any discussions on our repayment schedules, to say the least. That's why, as Paul said, we are seeing right now, I think we are discussing now we're getting our debt very close to the all-time lows of just above 100 basis points, between 100 and 150. This is our priority, dividend to our shareholder and growth of the company. As we were able to portray during the first six months, we were able to sell the older ships, and from the cash that we took out of those ships, we were able to order the new vessels.
I think that has been a very good arrangement and very straight to the company's strategy about how to replenish and modernize the fleet. I mean, we generated $30 million of free cash. We repaid debt out of the sales, and we used part of this cash for the new acquisitions.
Got it. Well, that's it for me. I'll turn it over. You all have a safe day over there.
Thank you.
Thank you. I'd now like to hand the call back to the speakers.
If there are no other questions, thank you all. We look forward to these results filtering through our stock price eventually and look forward to equally good results in next quarter. Niko?
Well, thank you, Takis. First, best wishes for everybody to stay safe. We are running a very tight ship as we said here, and looking forward to speak to you in the next quarter. All the best. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.