Thank you for standing by, ladies and gentlemen, and welcome to the Tsakos Energy Navigation conference call on the fourth quarter and year-end financial results. We have with us Mr. Takis Arapoglou, Chairman of the Board, Mr. Nikolas 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 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 the conference is being recorded today. I now pass the floor to Mr. Nicolas Bornozis, President of Capital Link, investor relation advisor of Tsakos Energy Navigation. Please go ahead, sir.
Thank you very much. Good morning to all of our participants. This is Nicolas Bornozis of Capital Link, investor relations advisor to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the fourth quarter and full year 2018. 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. We will email a copy to you 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.tenn.gr. The conference call will follow the presentation slides. Please, we urge you to access the presentation of the webcast. Please note that the slides of the webcast will be available as an archive on the company's website after the conference call.
Also, please note that the slides of the webcast presentation are user controlled. 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. Such risks are more fully disclosed in TEN's filings with the Securities and Exchange Commission. Before turning the floor over to the company, I would like to mention two things.
First of all, on Monday, April 1st, 2019, next week, the company's management will be participating at the Capital Link International Shipping Forum in New York. On Wednesday, April 3rd, 2019, the company is hosting an investor and analyst day of its own in New York. Those of you interested to join the investor and analyst day, please contact us at Capital Link. We will be happy to have you. You can call us at 212-661-7566. Now I will turn over the call to Mr. Takis Arapoglou, the Chairman of the Board of Tsakos Energy Navigation. Mr. Arapoglou, please go ahead, sir.
Thank you, Nicolas. Good morning, everyone. Thank you for joining us today. Coming out of the longest bad market ever with positive operating performance, being able to pay obligations and a steady dividend is quite an achievement, confirming our operating model and our supreme industrial platform. It's important to note that we have managed to repay debt equivalent to $2 per share and to maintain a cash position of $2.50 per share equivalent. Now with a stronger market in the fourth quarter continuing at an admittedly lower pace in 2019, we're benefiting from our profit-sharing arrangements and look forward to a stronger year, positioning for growth and for renewing our fleet and further growing our platform. Once again, I'd like to congratulate on behalf of the board, Mr. Tsakos and his colleagues, his team, and wish them an equally successful 2019. That's it from me for now.
Over to you, Niko Tsakos. Thank you.
Thank you, Chairman. With your and the board's support, hopefully 2019 will be a much better year than 2018. 2018, to put it with a few words, was a rough year, as you said, with a happy ending at the latter part. The first three quarters, we experienced one of the worst spot tanker markets in recent memory. However, the last part of the year and spilling over in the first quarter has been much more rewarding. Since the beginning of the year, and we are very close to the end of the new quarter, the rates have normalized, but they have normalized at healthy and accretive levels. The VLCCs have averaged since the beginning of the year in the mid-30s, the Suezmaxes in the 20s, together with the Aframaxes, the LR2s have done even better than that. Our clean vessels have done significantly better than that.
Even the product carriers are enjoying a period of revival with levels in the mid-20s for the larger vessels, the 50,000 plus category, and upper 10s for the 37,000 tonners. All the levels that we are enjoying in the spot market are accretive levels. We are looking forward, even if we do not exactly believe, hopefully it's true, the forecast that Mr. Saroglou will take you from various brokers that show a very strong revival of the market in the second half, mainly due to the 2020 legislation taking ships out of competition for a significant period of time. I think the most important change that we have seen after a very tough year in 2018, where the company has been able again, to continue its positive operating cash flow, maintaining our dividend, continuously reducing our debt significantly.
As the chairman said, we have reduced $2 per share worth of debt. We are steadily maintaining always a strong liquidity of at least $2.50 per share. For those of you, just to put it, that we have about 90 million shares outstanding as a company. As I was saying, the most important part is that the psychology has changed, and a big number of our charterers are looking to take up to three years or even longer of accretive cover on existing tonnage. We are seeing the same with the LNG market. We have been fortunate to charter our ships out at accretive rates for the next couple of years. We are looking, I will talk later about this, to grow this business significantly.
In our strategic relationships, after taking delivery last year of 15 vessels growing the fleet by 30%, all of them with long-term charters, we are now building four ships, all of them against very long employment. We believe, as we always said, to build responsibly and not to bring tonnage in the market with no employment. The company right now has 14 vessels on the pure spot and 19 vessels on profit-sharing arrangements, which allows us to take advantage of the movements in the market, however, maintaining a very good protection to our bottom line. With this, I would ask Mr. Saroglou to give us his report on the 2018 operating performance of the company and the beginning of the year since June.
Thank you very much, Nikos, and good morning to all of you. In our last earnings call back in November, we talk about the brighter prospects of the tanker market that were starting to emerge after three challenging quarters in 2018. Today, we report the operating and financial results of the fourth quarter of 2018, which are positive again. We are happy to reiterate our belief that the prospects for the tanker market continue to be favorable. Main drivers behind the market strength since the start of the fourth quarter are strong global oil demand growing year-over-year in excess of 1.3 MMbpd - 1.4 MMbpd . Higher OPEC and Russian production during the seasonally strong fourth quarter of 2018. Strong crude oil exports from the U.S. with added ton miles and global fleet utilization.
Limited vessel supply as the global tanker fleet had very little growth in 2018, thanks to the highest scrapping levels since 2012. In this environment, we saw and continue to see strong appetite by oil majors to partner with our company in accretive long-term business projects, and also extend charters at improved and profitable for the bottom line rates on existing vessels of the fleet, as the company's recent announcements demonstrate. Moving to slide number two. The left side presents the all-in breakeven cost for the various vessel types that we operate in the company. As you can see, the cost base is low.
In addition to the low shipbuilding costs, we must highlight the purchasing power of Tsakos Columbia Shipmanagement, our technical managers, and the continuous cost control efforts to maintain a low OPEX average for the fleet while keeping a very high fleet utilization rate quarter after quarter. Again, we report a utilization in excess of 96% that we believe qualifies as full employment. Diversified fleet with the optionality it offers, combined with its flexible chartering strategy ensures that TEN continues to maintain an impeccable debt service record and meet all its obligations irrespective of where we are in the market cycle.
In addition, thanks to the profit-sharing element that is part in a big portion of our fleet, TEN benefits when market conditions improve like now. Based on the current market strength and the number of vessels operating in the spot market and in time charters with profit sharing, for every $1,000 increase in spot market rates, we have a positive $0.06 impact in annual earnings per share. Here we see in slide number three, the pro forma fleet. We have 33 vessels from fixed rate time charters and 35 vessels or 51% of the pro forma fleet with spot market exposure in a combination of pure spots, COAs and time charters with profit sharing and min-max formulas. On average, we have 2.3 years of employment fixed forward and a backlog of $1.2 billion in minimum contracted revenue. Global oil demand continues to be strong.
Last year, it grew by 1.3 MMbpd . The expectation for 2019 is another growth year, adding 1.4 MMbpd of additional growth. The fourth quarter of 2018, for the first time, global oil demand was above 100 MMbpd . The next two slides talk about the supply of the tankers. As we see on the supply, scrapping continues to be high. Fleet growth is low as the order book continues to decline. The introduction of new environmental regulations like the IMO 2020 sulfur cap from next year and the water ballast implementation from this year are expected to affect a big part of the tanker fleet that is approaching 20 years and have their next set scheduled special survey before 2020. Therefore, tanker fleet growth in the next two to three years is expected to remain below the 3% and declining.
Last slide number seven. The company announced today a $0.05 dividend. The dividend chart presents the annual dollar value of all the common share dividends the company paid since 2002, which total $475 million or $10.81 per share. Graph on the right side of the slide is a forecast from Fearnleys, a well-known shipbroker from Norway. As you can see, VLCC rates are expected to trend higher from the start of the second half of 2019 and reach multiyear highs. We are also positive about the market prospects and expect a strong market for all vessel categories. That concludes the operational part of our presentation. Paul will walk you through the financial highlights for the fourth quarter and full year. Paul?
Thank you, George. After three difficult quarters, 2018 at last ended with a strong quarter, generating $26.3 million operating income before impairment charges. Net income was $2.8 million before impairment. If we were allowed to exclude the unexpected end of year non-cash bunker hedge valuation, net income would have been $13.6 million. A positive turn in crude tanker rates helped revenues increase by 14%. Nine Aframaxes on the spot earned $20,000 a day. Three Suezmaxes on spot earned over $26,000 daily, and the two VLCCs averaged $34,000. Two LNG carriers also enjoyed higher daily rates, earning $10,000 to $13,000 more than in the prior quarter four, and since the year end, seeing rates increase further. We also saw meaningful profit share, especially from the Suezmaxes on profit share time charters, which resulted in a doubling of their minimum hire rate.
Fleet average daily TC per ship increased by 17% to over $21,400. Total OPEX fell by 2% due to tight cost control, as George has mentioned, and to a stronger dollar. Daily average OPEX per vessel was $7,715, with a similar figure for the year. Low levels by industry standards. Depreciation, amortization, and G&A costs all remained at similar levels to the prior quarter four and year. Five of our older vessels are earmarked for possible sale. This decision affects their future cash flow, resulting in impairment charges of $66 million, reducing future depreciation charges by $1 million per quarter. Finance costs increased due to higher interest rates, offset by the effect of lower outstanding debt and a surprise fall in oil prices, hitting year-end bunker hedges, hedge valuations by nearly $11 million.
Fortunately, valuations are already strongly back into positive territory as oil prices recover. In quarter four, there were also cash gains of $3.7 million received from bunker hedges. Bunker hedge cash gains for the year totaled $9.9 million. The overall impact of such hedges on 2018 net income was only $1 million. Total Q4 EBITDA was over $66 million, a 25% increase from the prior quarter four. Almost all vessels generating positive EBITDA. For the year, $190 million EBITDA, the year ending with a cash balance of $220 million. In quarter four, there were net repayments of $25 million, bringing total debt down to $1.61 billion at year-end, $156 million less than at the prior year-end, adding $2 to the value per share and leaving net debt to capital at 48%. Finally, we are building four vessels for charter.
$25 million cash has been paid in this respect to date. Most of the remainder will be paid by debt on excellent terms. More finally, we believe this will be a good year for the sector and especially for TEN. We expect sale of vessels will release cash for accretive projects under consideration. This concludes my comments, and now I'll pass the call back to Nikos.
Thank you. Thank you all very much. As we previously said, 2018, thank God, is behind us. It was a difficult year, but it has prepared the ground for an environment that I hope George's and Fearnleys' are right on the prediction. I have to tell you, we are not taking decisions based on this graph. I hope it is wrong, then we would all be very happy if this comes through. This is not influencing how we take our decisions. With this, I would like to open the floor for any questions. Thank you.
Hello?
Thank you. We will now take our first question. It comes from the line of Ben Nolan. Your line is open.
Great. You caught me a little off guard there. I had a couple of questions, actually. Number one is, as you look at, obviously with the Suezmaxes and the Aframaxes before, it seems like almost everything in terms of appetite for long-term charters from your customers has been on the crude tanker market. Was curious if there is any appetite at all on the smaller size vessels for long-term new builds, or is that not really something that is out there?
Thank you, Ben. Well, it is building up. You see companies like Exxon coming out and taking product $50,000 and $37,000 or $53,000 on employment. I think it starts with Suezmax and Aframax. For some reason, that's the flavor of this quarter. Then it trickles down to the smaller sizes. I would say the biggest interest that we are seeing today is Aframaxes, which means that with all these embargoes and protectionist measures that are taking, people or owners or charterers are looking for a more flexible size of vessel so they don't have to carry 1 million barrels or two on the ship. This is the biggest interest as we see today, it goes to the smaller sizes. Aframax is by far the biggest interest.
Oh, interesting. I have just a couple of financial questions, Paul, for you. Could you maybe tell me what is the debt amortization schedule as it stands today for this year and next?
What are we looking at?
Sorry. The debt amortization.
We're looking at scheduled repayments of $165 million.
Similar to 2018. Very similar.
Yeah. Going forward, similar kind of numbers. 2020, about $171 million. As debt starts coming down quite rapidly, we see in 2021, it's going down to about $147 million. Following year, $121 million. It is coming down quite rapidly. Of course, there are balloons as well. No more balloons this year, but in 2020, there will be, we reckon, about $40 million. 2021 is about $140 million.
No, that's very detailed. Appreciate it, Paul. Lastly for me, sort of along those lines, obviously there was the $66 million impairment this quarter related to the five vessels which you might be selling. I was curious if you've done any of the math and if looking at the remainder of the fleet, particularly some of those older vessels that might be coming available to sale as you go forward, do you think that there are more of these pretty sizable impairments that might be coming down the line? If so, how does that, if at all, impact any of your loan covenants?
Well, as you know, we have always followed a very conservative debt to equity. I think we're under 50% as we speak today. We have a big number of banks competing for TEN's business because we might be one of the very few, at least publicly traded companies, that since 1993, when we have been established, we have not reorganized at all our structure. On any of our debt, we've been paying debt as scheduled initially from the beginning. As Paul said, 2017 and 2018 were the heavy years for our debt repayments. After, I think, 2019, as we go through 2019, debt becomes less. We do not expect to have any issues with our banks. I think they look at it as a healthy action to allow for transactions to take place.
As of your question, I think in the next couple of years, depending on market conditions, we might have a maximum of $50 million of impairment as the vessels grow older. This is something that depends on market conditions.
Okay. No.
Banks are more interested in any case on the fair market of the value, not so much the book value. Yeah, we've been pretty consistent with the banks. They kind of never effectively bother us with regards to potential non-compliance or impairment that might arise.
Yeah. That makes sense.
Particularly other points. Still a young fleet, we don't really anticipate much more. Bear in mind, however, that we are always looking to keep a youngish fleet and sell vessels once they've gone over 10, 12 years. As soon as we start making that kind of decision, you're obliged to really take that into account in your cash flow testing like we did this time. That creates a large impairment.
Okay. No, that all makes sense. I appreciate the time, guys. Thanks a lot.
Thank you. Our next question is from Fotis Giannakoulis from Morgan Stanley. Your line is open.
Yes, hello and thank you. Nick, you mentioned about the interest of charterers to provide long-term employment. Are you referring to your existing ships or the potential acquisition of additional ships? If the market is not so cooperative as George or the brokers and analysts predict for next year, which are the steps that you are willing to take to protect your liquidity? If you can give us an estimate, what is the minimum cash balance that you will accept to have?
Starting with your first question, I think both. Right now we have a lot of appetite for almost all of our charter free Aframaxes for three to five -year employment. At very interesting rates. We are pushing for profit sharing, and this is something that we always like to get to take advantage of the high market. Of course, for new building vessels. However, we do not consider a two or a three-year employment enough to build the vessel. We want to see something with five years and above that. As you know, we always want to maintain strong liquidity, and I think anything above $150 million is something that we want to continue to maintain. If you look historically, if you go back 10 years, I don't think we have been under $150 million ever in the recent 10 years.
Allow me to insist a little bit on that. I know that our outlook as analysts, and I assume for a lot of investors, is very positive. If things do not develop as we expect, how are you planning to protect this liquidity? Just to give you some examples, give up the growth or give up your dividend or raise new equity or raise additional capital somehow. Can you rank us your preferences of how you think of strengthening your liquidity position, especially given the anticipated repayment of the preferred that have escalating interest cost?
Yes. I think our first choice is by, and the reason we turned five or six of our assets is by sales of ships. That will release the sales of the ships we are talking about, will release in excess of $100 million to our cash. These are the ones that we are already in discussions for, and that's the reason we paid, I think, five or six of the vessels. That is the first way to maintain our liquidity. Our growth right now, we have four ships. After having a huge growth expansion in the last couple of years, now we are down to four vessels, of which, as Paul said, the majority of our investment as equity has been already made, and the remaining would be conservative debt finance. What we see, very good terms.
We're talking about interest rates under 150 basis points above LIBOR, in that neighborhood. You know that for us, dividend is an important part, and that's why the company continues to pay dividends. I think starting with sales of ships, and of course, all this if the market is not performing as we all hope it will finally perform.
One last question, a little bit of a strategic long-term thinking that you can share with us. A lot of people are concerned about the growing penetration of renewables and the potential decline in oil demand for transportation. I know this is not a one or two or five-year discussion, but when you buy assets, you buy for 20 or 25 years. How does this increase in renewables impact your decision to expand your fleet and buy or not buy any assets?
Well, I think this is a very valid point, because we have always been looking to see when is the peak oil period. Now we're talking about 2030, 2035. An answer to this is an increased investment on the gas side, which is something that we would like to be doing. You will see us balancing the fleet going forward also by increasing the investment in LNG.
Thank you very much, Nikos.
Thank you. Our final question is from George Berman from IFS Securities. Your line is open.
Good afternoon, gentlemen. Great report. Hello?
Yeah, we're here.
Okay. I have a couple of questions. The new contract announced for your LNG ships on March 15th, does that pencil out that you get a lower rate versus what they were on?
No, a much higher rate. Significantly higher. Paul mentioned this in his financial presentation. We have a significant increase of the rates.
You have fixed the rate basically for 36 months?
That's right.
Okay. The valuation charge, you took this in the fourth quarter for $66 million. In general, this would indicate that your depreciation over the years was not sufficient to cover the final proceed from when you sell those ships, right?
Yeah, I think depreciation in shipping is for all the companies. I guess, like perhaps aviation, it's similar. It's the residual value, which has to do with the-
Right.
divided by about 25-year economical life of an asset. I think if the market drops much more than that, your statement is correct. The market is very liquid, and it has a lot of fluctuation. The ships in the market, if we have a couple of good years, these vessels could double in value. The reason we're taking this action right now is because we are selling those vessels. We would not have been doing something like that out of the blue.
Yeah. For various reasons, at this point in time, the values are less than you anticipated them five or 10 years ago when you acquired those ships, right?
At this period of time, yes.
Yeah. Okay. It would be fair to state that if rates as expected rise in the VLCC, Suez and Aframax area, the values of those ships would then increase simply because people say, "Well, if I can get $75,000 for a VLCC voyage, I pay more for the vessel."
Exactly. It's a liquid market.
Okay. General questions to your company stock. I've been involved as shareholder of the company for the last three, four years. There's been a consistent drop-down in the value. You have a number of preferred issues. I don't know if they are redeemable or perpetual preferred. You as the management team cannot be very happy with the stock price performance. What would you tell an investor why they should invest today in Tsakos? Taking the $66 million impairment charge out, you would have probably earned close to $0.13 a share above all estimates. You seem to run the company very well. You have a very good handle on the marketplace, a mixture of fixed and spot rates and profit share. What do you think needs to happen for the shipping companies in general and yours in particular to receive a stronger valuation in the market?
Well, I think you hit the point. I think what has happened is that a lot of investors, mainly in other companies, have been disappointed, and there is not enough interest in the energy and tanker sector. As we said, the value of the company, and we are the management and the largest shareholder. I would say the pain and the disappointment is twice as big because we own in excess of 40% of the company. Now we've been buying during the periods that we can buy almost on a daily basis as investors-
Yeah.
in the company.
Yeah.
We are looking forward to go through an environment of at least six to nine months positive years. In 2016, our company was at $10 a share.
I know.
Not only ourselves. Nothing really has changed. We have navigated the company, grown it at the same time. My aim is to see the company back at $10 a share that we were only three years ago.
Yeah.
We actually used the shares at that time to purchase vessels because when you are at net asset value or above, you can use shares as a tool to grow your company. Something, of course, we cannot do right now because the share price is very low. We hope.
Right.
We will have a sustainable environment in the tanker market for the next six to nine months that would allow at least the share price to double from what it is today.
Okay. One last thing. With the upcoming IMO 2020, could you remind us briefly on how you're positioned for the upcoming low sulfur situation there?
Yes. We are not one of these companies. We are not selling scrubbers. We are not selling the scrubber dream to anybody. Personally, I believe that the open loop scrubber is something very negative for the environment and for the future of our children. This is not a conversation about scrubbers, and this is the reason we have not invested in scrubbers in any of the ships other than the ones that our charterers are paying for and they're insisting. We will end up to have perhaps a 10% of our fleet, more or less, that will have scrubbers, that will be run with scrubbers, but that would be all paid by the charterers, and also all the downtime would be paid by the charterers.
The rest of your fleet would essentially utilize the low sulfur fuel as it becomes available worldwide.
Yes. I think this is true, having the majority of our fleet in excess of 70% on long-term charters, we are fixing all our vessels on charter to go way well after the 2020 deadlines or 2021, 2022.
Right.
This means that all the responsibility for the vast majority of possibility for bunkers will be supplied by the charterers, by our clients.
In other words, if low sulfur fuel is $200 a ton more than the old type, you are not responsible for it. Your profit margins are not going to be crimped. You have a built-in contract.
Yes, exactly. We will be affected if this is the case, which I don't believe. I think we will be seeing a very quick normalization of the prices. I think perhaps, on average for 2020, it will be perhaps even under $100 of difference, then it will normalize. Our exposure is very minimal because we have a very small amount of our ships, less than 30% in the spot market.
In the spot market, you would contract that the additional fuel costs would be absorbed by the actual charterer.
In the spot market at the end, yes. The end user would be absorbing the cost. We will have in the spot market to pay the bunkers, the charterer would pay in the freight.
Right. If the charterer wants to pay for your scrubbers, you say, "Go ahead."
Yes. The client is always right, as we say in the service business, yes.
Right. In the overall shipping market, who would you think are your most immediate competitors? Who do you compete on day-to-day the most?
Well, this is a huge market. It's a huge global market. Competition, of course, is there. I would not call them competitors. We can call them our peer group. I think our peer group are well-run companies like Euronav, which is a very good company. Teekay Shipping, which is very on the large ships, Frontline-
Yeah.
double hull. Of course, not forget NAT, which is a very dynamic and colorful also company.
Yeah. Okay. You had mentioned that primarily when you sell the older ships, you would utilize funds received there to possibly renew or add to your fleet, particularly in the LNG sector. Do you think that there are any opportunities to acquire an existing company, an existing fleet? You just mentioned a few names, some of which are trading at similar to yourself at very distant values. In general, I've seen reports where all shipping companies trade significantly below their net asset value. What do you think about availability of one or the other acquisition of an existing shipping line?
Well, I think consolidation, it's positive. However, unless you are there to buy a company and immediately liquidate the company, in shipping I'm talking.
Right.
You don't really have the same effect of consolidation as you have in other businesses. Regardless who owns the ships, the ships are in the water and are competing in the same market. Really, you can have an easier consolidation, I would say, a more effective consolidation by pooling arrangements. The synergies really in shipping are not so huge. We are a part of a larger group that manages about 500 ships.
Right.
want to believe that our running expenses are low, and okay, we try to make them lower. Even if we bought Frontline or if we merge with another company, I don't think this would have changed that much. The model of huge consolidation, you can achieve it only if you pool, which means you don't have to buy each other ships, but you can pool your commercial activities, you don't-
Yeah.
undercut each other.
Okay. All right. Thanks very much for your time today, and good luck for the future.
Thank you very much. Thank you for your support. Again, we're looking very forward, like every year when we announce our end of the year results. Every quarter, parts of the management is coming, I'll be the CEO, and big part of the management. We will be in New York next week for Capital Link, the CMA, the Connecticut Maritime Association, and various others events that are happening there. We are arranging a get together around noon on Wednesday with our shareholders and analysts, who we would love to see as many of you as you would like there, and you can ask any more questions. We want to thank you for your support, and all the hope that 2019, we can see at least our share price double to what it is. Let's not forget that we repaid debt of $2 a share.
We have cash of $2.50 a share, and that's $4.50, and our share is just about three. We have all to work to the right to correct this. Thank you very much.
Niko, we have more questions from-
We have one more question from Randy Giveans from Jefferies. Your line is open.
Hello? Hey, thanks for squeezing me in, guys. How are y'all?
Randy, we're seeing you on Tuesday. You could ask your question then. I was joking. Go ahead, Randy. Thank you.
Looking kind of bigger picture, just market related, obviously, there's been a lot of news of increasing U.S. crude exports. With the vast majority of these on some VLCCs to Asia, have you also seen some increased demand for the Aframaxes?
Yes. We have a combined effect of embargo measures.
Right.
I think we have a lot of the big vessels, as you said, bringing or taking a lot of exports from the U.S. As you know, the U.S. harbors are not all of them made for VLCCs, the Aframaxes are doing a lot of the lightering. There is demand on the Aframaxes for that. We are also seeing a lot of, due to the embargo, India and China. In some cases, are taking more cargo from West Africa, this is more ton miles. There are quite a few ships blocked in Venezuela, which is a question mark. Of course, we had the unfortunate event in Houston, we also have ships being blocked there, this creates more miles. It's a little bit more than the usual discrepancies happening.
Of course, as the year goes on, we have the discrepancy of the 2020 with some ships already been scheduled to get out of the market to be scrubberized.
Got it. All right, a few more rapid fire questions for me here. Looking at dry docking, I know you strategically pulled forward some to get ahead of maybe ballast water treatment regulations and whatnot. What is your expectation now for dry docking in 2019 and 2020?
In this first quarter in 2019, we've done the Fellini and Salamina. In quarter two, we have another two vessels, World Harmony and Chantal. Quarter three, we'll do Etie Princess and Centaurus, and Asahi will probably have couple in quarter four.
I think a well-measured year for dry docks.
Kind of similar cadence in 2020, or will most of it be done this year?
2020 will be-
A few more.
will probably be similar kind of pattern. We try to spread them evenly over the year. Obviously, when we get towards the end of the year, we'll decide whether to push it one side or the other. Generally, it's evenly spread. You can count on an average about two to three per quarter.
All right. I noticed two things in your slides. Looking at slide five first. You show only nine VLCCs to be delivered in 2019, and 60 in 2020. Do you expect that much, a kind of significant slippage this year and a record number of deliveries next year?
There is quite a number of ships that because of 2020 and being scrubberized, they are delaying their deliveries. I'm not.
Okay.
sure that effect would be so, let me check. Yeah, I think there is a numerical discrepancy. It would be like, I think here on the slide.
Okay. Yeah, I wasn't sure if you were just expecting that many back half vessels just to all get pushed into 2020 or because there's already been about 14, I think, delivered, 14 or 16 in 2019, that's fine. Looking at slide seven.
No, this is the remaining order book that I see.
Sure. Okay.
Okay.
One more presentation question. Slide seven. It shows here you paid $13 million in dividends in 2018, that's basically three quarterly payments of $0.05 a share, $4.4 million each. I guess, what happened? Was it a timing issue for the fourth dividend payment? Going forward, any plans on increasing it? Obviously, your coverage ratios are extremely high in this market.
Well, as I said, we are very interested in increasing the dividends. I think this dividend coincides with the fourth actual dividend for 2018. It's the fourth quarter. Our intention, if Ioannis is arrived, we would like very much to increase the dividend because this is something that affects us directly as a company and of course, as shareholders.
Okay. Last question just to follow up on the previous question. You mentioned 10% of your fleet will likely have scrubbers. Now, would those be installed this year? Would the charterer pay for the scrubber upfront, or will they pay you back over time via an increase in your daily charter rate?
That's a very good question. It's a mixed basket. I think 50%, they will pay for everything up front. A couple of ships, we are negotiating with them to increase the rate for the next and extend the charter so they will repay. I would say a mixed bag. The majority will be there to cover the total cost up front.
Okay. Just the timing on that, it looks like you have maybe, you tell me if you've yet to kind of formalize the order. If so, will you be able to formalize an order in April and still get it installed by 4Q 2019, 1Q 2020?
Yeah, I think we are looking to have two scrubberized vessels for our clients within the third quarter.
Okay.
The remaining starting in 2020. I have to say that their enthusiasm also for because those are ships that have five and 10-year employment. Their enthusiasm has been dropping. Six months ago, they were on the phone every day making calculations with their technical department, pushing us to order everything. I think they tend to feel that perhaps the spread might not be as aggressive as they initially thought. They are not calling us to get scrubberized as much right now. No news, good news.
Sure. All right. Well, hey, that's a great color. Thank you again, yeah, I'll see you next week.
Thank you. Hopefully we'll see you, and you'll join us for our shareholders event on Wednesday.
Sounds good. You all have a good one.
Thank you. Nico?
I think we are at the end.
Thank you. Well, again, thank you very much for your support. Looking forward to see as many of you. I think Nick is keeping some slots there in his pocket for Capital Link on Monday. If anybody wants to come closer personal, please talk to Nick, and we're looking forward to see you all next week. All the best. Thank you.