Thank you for standing by, ladies and gentlemen, and welcome to the Tsakos Energy Navigation conference call on the second quarter 2018 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 participant lines 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, and I now pass the floor to Mr. Nicolas Bornozis, Capital Link, Investor Relations Advisor and Tsakos Energy Navigation. Please go ahead, sir.
Thank you very much, and 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 second quarter 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@capitallink.com and 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, so please we urge you to access the presentation on 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. 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. Such risks are more fully disclosed in TEN's filings with the Securities and Exchange Commission.
Ladies and gentlemen, at this point, I would like to turn the call over 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, and thank you for dialing in today. Improving income by 23% from last quarter in this very poor market is quite an impressive achievement. Once again, congratulations are in order to Nikolas Tsakos and the team. Nikolas and his team will elaborate on the financials, but I'd like to underline that TEN's prudent and balanced strategy, well designed and perfectly executed over time, clearly not a fly-by-night exercise, allows our fleet to outperform the spot market by over 100%, while at the same time, a large proportion of our fleet, 80%, has secured more than a billion two USD of minimum contracted revenues for the next two and a half years. This allows us to cover most of our expenses and maintain a healthy dividend going forward.
Our strong balance sheet and ample liquidity allows us to operate comfortably in challenging markets. This underlines the broad recognition of TEN as an operator of the highest quality, governed, and I stress that, by best-in-class corporate governance practices. There should be absolutely no doubt about the quality of TEN's corporate governance, and this is something that the board and the company's controlling shareholders are fully committed to. This is the only way, after all, to attract and maintain our blue-chip client base. Rest assured that we will continue to play a very tight defense, which, as I say, is also the best form of offense when the time for this comes. Indeed, recently, there are increasing signs that we're getting closer to a more positive sentiment in the market, for which we are perfectly positioned to fully benefit from.
That's it from me for now, and I pass the floor on to Nikolas Tsakos.
Thank you, Chairman, thank you for your good words. However, it's still very painful to report losses, even diminishing ones. As we had predicted when we discussed on our last call, we could see that the market environment still very poor, but getting better. We believe that the first quarter, we were at the real bottom of the barrel. Things look to becoming a bit less bleak as we go forward, as far as the spot market is concerned. We have seen small but significant improvements also on spot rates since that period of time. The majority of the categories of our fleet is participating. We have seen the Suezmaxes averaging close to $12,000 in the first six months rather than seven in the previous period. The Aframaxes, where we have a very big presence as you know, with $11,000 up from almost $4,000 in the previous period.
Also the Panamax where again we have a presence tripled from three or doubling from $3,000 to $7,000. The rates are still very depressed. At least they are covering, and I am talking about the spot market, but at least they are starting to cover operating expenses which for many owners is very important. In our case, of course, we have a very different picture, having able to outperform significantly the spot rates, and I will get into exactly the analysis during my presentations and George, our COO's presentation later. There are signs that things are getting better. We are going to be entering the fourth quarter, which usually the market softens. We have the largest scrapping year so far, the largest or the biggest scrapping year so far since 2010 as tankers are concerned.
There are reasons to believe that we are getting out of this very long and dark tunnel. In our case, at TEN, we have been able to, as always, be counter-cycling. The company has a very strong balance sheet, I think significantly in excess of $250 million in cash. Looking to take any opportunities that arise either in our main business or on growing our LNG segment and the shuttle business. With this, I will ask George, our COO, to give us an overview of what has happened the first six months and be back with questions. Thank you.
Thank you, Nikos. We are beginning to see a gradual market improvement and hope as we move closer to the fourth quarter for this to be reflected in the rate as well. Global oil demand continues to grow in 2018, and the expectation for next year remains strong as well. OPEC has begun to pump more oil into the market. The global economy, despite recent headwinds from emerging market economies and trade disputes, continues to be strong and vessel supply is improving as new building ordering is manageable and scrapping at year-end 2018 is expected to be the highest year since 2010. In this environment, TEN's proven commercial strategy of fixing most of the vessels in the fleet on medium to long-term time charters paid dividends again, as it helped the company to outperform the average spot market indices by over 100% in all vessel categories the company operates.
We believe the tanker rates will recover from the low point of the current cycle and look forward to the fourth quarter of this year. For those of you who are connected to the internet and our website, there is an online slide presentation, the format of which we are going to follow during the call. Turning to slide number three, we have the key corporate highlights. After the sale of Millennium, the company's oldest vessel, TEN has now a pro forma fleet of 66 vessels, including six vessels in operation and two new building orders to an oil major against long time charters. 25 vessels in the fleet have ice class capabilities. The average fleet age is 7.9 years versus 10.3 years for the world tanker fleet. We have a balanced employment strategy that takes advantage of market peaks with profit-sharing arrangements.
Out of the 66 vessel pro forma fleet, 50 vessels are on secured employment contracts with an average duration of 2.5 years. The emphasis is on charters with profit-sharing arrangements that enable TEN to take advantage of spikes and stronger freight markets. We have secured minimum contracted revenue of $1.2 billion with potential additional revenues from profit-sharing arrangements. We have a modern, diversified fleet covering clients' transportation requirements in crude, products, shuttle, and LNG, and we have become the carrier of choice for many of the top oil majors, commodity traders, and refineries. LNG and shuttles remain the sectors where TEN is trying to grow its presence even more. Slide number four, we have a breakdown of the current 66 vessel pro forma fleet. As you can see, 48 vessels are engaged in crude trading, 13 in products, while we have three shuttle tankers and two LNG carriers.
Slide five is the clients of the company, all of which are blue-chip names with whom TEN is doing repeat business over the years, thanks to the modern fleet, the safety record, and the quality of service. The 10 names that you see listed on the left of the slide represent 72% of the revenues generated for the company. Slide six, strong secure coverage with upside potential. We have so far announced during this year new charters and charter extension for a total of 23 vessels in the fleet. The charter period for this vessel ranges from six months to up to 12 years if we include optional periods granted to charterers by the company. 50 vessels out of the 66 vessel pro forma fleet are fixed under secured revenue contracts, a combination of time charters, time charters with profit sharing, and COAs.
While 37 vessels are on market-related charters, including the vessels currently trading in the spot market, securing the company's ability to immediately capture the market upside. The revenues expected from the vessels in the fleet with secured employment cover the company's annual operating and financial obligations. On slide seven, the left side of the slide presents the all-in break-even cost for the various vessel types the company operates. As you can see, the cost base is low. In addition to the low shipbuilding cost, we must highlight the purchasing power of our technical managers, Tsakos Columbia Shipmanagement, and the continuous cost control efforts by management to maintain a low OPEX average for the fleet while keeping a very high fleet utilization rate quarter after quarter that we believe qualifies as full employment.
With almost 80% of the fleet on secured employment, the revenue these charters generate cover the company's operating and finance expenses, including the dividend. In addition, the combination of time charters with profit sharing, COAs, and spot charters guarantee for the company a share of the market upside every time we have a spike or a sustained strong freight market. Based on the current 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 $0.7 impact on annual earnings per share. The next few slides, from eight to 10, tell you basically what we see in the market today. We see solid global economic background, which translates to strong global oil demand growth.
2018 marks the fourth year in a row with global oil demand growing by at least 1.4 million barrels per day against the long-term demand growth figure of 1 million barrels per day. The trend appears to be holding strong as the International Energy Agency, in their latest report, forecast 2019 demand growth to slightly accelerate 1.5 million barrels per day, although the risks from escalating trade disputes are noted. With global oil stocks currently below the five-year average level and looming U.S.-led sanctions against Iran from next November, OPEC, in their last June meeting, decided to relax compliance with the agreed output cuts. The market is already seeing OPEC increase production, which historically has always been positive for tanker demand and the freight rates. U.S. continues to develop as a major crude oil exporter to the world.
During 2017, the average U.S. exports were in excess of 1.4 million barrels per day. The latest figures indicate that U.S. crude oil exports are closer to or at 2 million barrels per day, meaning that for 2018, the average growth is going to be higher. The growing U.S. exports have created new long distance trade routes, mainly to Asian destinations, adding to ton mile growth. High scrap prices and the weak market have resulted in a significant increase in tanker scrapping. The average age of the scrapped vessels is coming down to about 20 years.
With the upcoming regulations for the water ballast in 2019 and the global sulfur cap from 2020, we believe in the company that owners of older vessels will continue to prioritize and scrapping the older tonnage rather than passing them through an expensive port special survey, the effect of which will be lower net fleet growth for the next couple of years. That concludes the operation part of our presentation. Paul will walk you through the financial highlights for the second quarter and the third half. Paul?
Thank you, George. As the chairman mentioned, in quarter two, TEN improved on quarter one results with a loss smaller by 23% than in quarter one. Given the market, the loss of $9.6 million or $9.2 million before loss on vessel sale, which equates to minus $0.18 earnings per share, is at least encouraging in direction and is mainly due to reduced costs. For the half year, there was a loss before vessel sale of $21 million. In such a market, losses were also contained due to our time charter coverage and full employment. Our average daily TCE rate for quarter two was a respectable $17,200 per vessel, and for the half year, $17,500, well above average market rates. In quarter two, we still had 18 vessels on spot, mainly Aframaxes and product carriers, which mostly operated at below break even, but at least covering operating costs.
Fortunately, the dry docking schedule was lighter in quarter two with just two vessels in dock. Average daily OPEX at $7,570 per vessel was 4% down from the prior quarter two and 7% down from the high level incurred in quarter one. Daily overhead costs per vessel remained stable at $1,200. Finance costs fell by over $1 million as bunker hedges generated cash gains of $2 million and positive valuations of $3 million. This was partly offset by increased interest of $3 million, mainly due to the new vessel loan in 2017 at a higher interest rate. While our time charters did again generate cash to cover most operating overhead and finance costs, our expectations for a recovery in the spot market within 2018 remain cautious.
Therefore, concentrated in the half year on ensuring adequate liquidity to meet all eventualities with confidence that conditions will begin to improve going into 2019. In this respect, TEN issued a new series of preferred stocks, raising $150 million. Total cash at June 30 was therefore $280 million. TEN started Q2 with $1.72 billion outstanding loans. We refinanced loans on 12 vessels, repaying $244 million and obtaining new loans at more favorable terms, totaling $255 million. $10 million debt was repaid from proceeds on the sale of VLCC Millennium. A further $37 million was paid in scheduled repayments. At June 30, the outstanding balance was $1.68 billion, and net debt to capital was down to 47%, indicating total indebtedness is now declining. Negotiations to finance the two new building Aframaxes at very competitive terms are now in their final stage.
This concludes my comments, except to add that obviously we will strive to ensure that the promising trend in results continues through the year-end, hoping, of course, that the market will help. Now I hand the call back to Nikos.
Thank you, Paul, From your mouth to God's ear, as we say. Hopefully, we can see a continuous turnaround in the last two quarters. As I said, we are fortifying the company by getting long-term business. This long-term business allows us to maintain very strong liquidity, allows us to maintain our conservative dividend payment, which is somewhere around a 6% yield as we speak today. Our industrial approach in chartering our ships long term gives us the chance to always significantly outperform the market. In the previous quarters, we have so far averaged approximately $23,000 for our VLCCs against a market of $11,000. Our Suezmax is at $15,000 against a spot market of $7,000. Our Aframax is $18,000 against the market of less than $8,000. Our Panamax is where we still have quite a significant fleet at $14,000 against the market of $8,000.
We are, I think, at market with our Handysize vessels. This policy has fortified the company. As the Chairman said, it is playing defense, which sometimes is a very offensive way to proceed. We hope that we are able to take advantage of the upside, which looks to be approaching more and more as we speak. We get a feeling also from the appetite of the major oil companies that are there to charter our ships for long periods of time. With that, I will not take any more of your time from me speaking. I would like to see if you have any questions for us to answer. Thank you very much.
Thank you, participants. As a reminder, if you wish to ask a question, it will be star and one on your telephone keypad. That's star and one if you wish to ask a question. Your first question is from the line of Max Yaras. Your line is open.
Hi, yes.
Hello.
Hi, yes. Thank you for taking the question. If I could start off with the Series F refinancing, what is the priority for that? I mean, is it on the Series B and C refinancing, or what are the proceeds intended for?
Yes. Being a conservative company and being, as I said, proactive, we want to secure that our future obligations, and we say future, we're talking about an average of two years going forward, can be dealt with. This is the priority. Of course, funds for further growth. As I said, we are seeing opportunities. The LNG, we have never kept a secret that we are always looking at business in the LNG sector. We participate in every single tender. As you might recall, we are one of the first that started in this business from this second wave. We ordered our first ship in 2004. However, we have kept a small fleet, mainly because of the changes in technology. I think we have not regretted it because that market has gone through a lot of cyclicalities, and the tickets are quite large.
Talking about approximately around the $180 million-$200 million per vessel. Our aspiration is to increase the size. A combination of conservative preparations for our step-up preference and fleet growth.
Okay. Last quarter you talked about a possible transition time for IMO 2020 implementation. Do you have any updates there?
This is the $10 billion question, because now through inflation, the $8 million has gone out of fashion. It is a battle which is happening as we speak. There is a very strong preference from all of us, I would say, to be able to have 0.5 safe sulfur burning on our ships by January 1st, 2020. However, the way that things look today and what we are experiencing is that if there is no transition period, we're going to be seeing a big number of ships having actual navigational problems and breakdowns because of the quality of bunkers and distillates that are being produced. Right now there's no standard available. It's really very strange that we are less than 18 months from the due date. I think I mentioned this last time, it reminds me very much of the Brexit negotiations.
There is a date and there's no plan how to achieve it. That's where we are. However, any disruption of business will be positive for rates.
Sure. You have a unique advantage that you get to see it for, I guess you get to see how it affects crude tankers, product tankers and LNG. Which segment do you think it's most beneficial for?
Come again. You're talking about the 2020 or
Yeah, 2020. I mean, is it best for crude tankers because it maybe slows down the fleet? Is it best for product tankers because it creates additional demand, maybe new routes? Is it best for LNG bunkering? What does it benefit most?
That's a very good philosophical question. I think if I would say, I think it will be product carriers, of which we have about 50% of our fleet is product carriers. I believe would be the first in taking advantage because they will actually have to move this product that can be distillate and refined, let's say, in the modern refineries of India and the Arabian Gulf to Europe and the U.S. They would have, in addition to disruption, more trade. I think then it will be the crude carriers because of what you mentioned. LNG is a much longer-term prospect. They would be the last to be benefiting from something like this.
Makes sense. All right, thank you.
Thank you.
Thank you. Your next question is from the line of James Jang from Maxim Group. Your line is open.
Hello. This is James from Maxim.
Hi, James.
Hey, guys. Just talking about IMO again. Nikos, have you seen or do you think there'll be any waivers granted for IMO 2020?
It depends what you mean waivers. I think what the industry is trying right now is for a transition period to allow for the right type of bunkers to be available. Today, people are experimenting. They take something which used to have a 3.5% sulfur content, and they throw some sort of liquid inside, and they hope for the best. However, all these things destroy the engines of the ships. You have breakdowns with engines. We're fighting right now, our COO spending most of his days fighting claims for people in order not to get our engines damaged. I hope that people will see the light, and they will grant a two-year transition period. When I say two years, it doesn't have to have a specific date. When the actual bunkers are there and are available, then we can start burning them.
Is this something that Intertanko as a group is pushing for? Or is this just
Not only Intertanko, all the other associations which we call the Round Table.
Yeah.
Which is, we represent tankers and gas, INTERCARGO, all the gas cargo ships in the world. Then you have associations like BIMCO, where you have most of the containers. You have the largest container mover in the world, which is Maersk Line, have very clearly stated that they're not planning to spend a single penny on, I think, this hypocritical and bad for the environment scrubber idea.
For Tsakos, would it be fair to say that you guys would not be looking to install scrubbers ahead of 2020?
What we are saying is, as you know, the majority of our fleet is chartered long-term. We have cases where we have five, 10, 15-year contracts that the end users, our clients, might decide to at their time and expense, to install scrubbers. I mean, it's like if we have rented a car out on a long lease, we cannot stop the end user doing whatever they want to do with it. We cannot stop them. We will allow them to, at their time and expense, put scrubbers. I do not exclude the chance for us out of a fleet of 66 vessels to have in a dozen ships scrubbers, but those will be paid by the charterers and not speculatively by us.
Okay. Just to follow up on that, have you had any discussions with charterers yet?
Of course.
Have they expressed interest in installing scrubbers?
Yes. We have charterers that have approached us. They have decided in a very small amount of vessels to install, at their time and expense, scrubbers.
Okay.
The majority of our charterers, be it the top-tier major world companies because they are environmentally responsible, have decided that it's their responsibility to provide the right fuels for us to burn without installing scrubbers. I would say two-thirds are not looking at scrubbers, one-third might consider scrubbers.
Got you. Okay. All right. That's all I had. Thank you very much.
Thank you.
Your next question is from Magnus Fyhr from Seaport Global. Your line is open.
Good afternoon. This is Magnus Fyhr, Seaport Global. Just a question on your fleet renewal strategy. You have a very modern fleet, but you also mentioned that you think the product tankers are best positioned for IMO 2020. Your product tanker fleet has been shrinking here over the last few years. Should we expect a focus on that segment going forward, or where do you see the best opportunities?
I think we are always looking at vessels that are able to have dual capabilities, which means product and crude. Whereas if you look at our fleet is balanced. I mean, today we're only having 13 of our vessels working in the product segment. However, we have a very large amount, so about 28 of our vessels are coated ships, so they could actually carry products if they have to. We're almost in the middle between crude and products, but we have decided because of our clients requirements and time charters that they want more dirty trading. Otherwise, we have a large number of products ourselves.
What's the process there of taking them from dirty to clean if you wanted to, ahead of the 2020?
From all the costs that are associated in shipping today, water ballast treatment and the scrubbers, et cetera. This is the least of the costs. I think you will need on average, one week cleaning for the big ships and three or four days for the smaller ships, at a cost of about $200,000 for the large ships and half of it for the smaller ships. It can be done, and we do it all the time when we have to.
As far as the vetting process with the major oil to go from dirty to clean.
Well, the major oil companies, they do not have a problem with it at all. What your charterers would like, of course, is to make sure that the vessel is clean enough. They usually give you a fuel cargo and a gas oil cargo as your first cargo after cleaning, before you go into the naphthas and to the heavy oils and the more sensitive cargoes.
Okay. Just one last question. With your balanced chartering strategy, I just realized you have $282 million of cash in the balance sheet, and your market cap today is $282 million. Any thoughts there of buying back stocks going forward?
Yeah. I think as I said, right now as our chairman said, we are in the defense, and I think the way we play defense is to make sure that we will never need to dig deep into our cash reserves by fortifying the company with not burning cash sort of thing. I think when we see the market is turning, we will do this in a big way. We need a little sign that we are out of the woods. As long as we are in the woods, we're keeping fortified.
All right. Thank you, Nikos, for your time.
Thank you.
Thank you. Your next question is from the line of Randy Giveans from Jefferies. Your line is now open.
Hey, thanks, guys. Yeah, it is Randy Giveans from Jefferies. Regarding dry docking, I know you strategically pulled forward some dry docking as a result of the weak market to get ahead of some of the regulations. What is your expectation for dry docking in the back half of this year in 2019?
Well, this year for the balance of the year, we have only one, which is happening right now as we speak.
Currently-
Next year, we have on a big fleet with 60 vessels plus, you have on average something like eight, nine vessels per year that you have to go through special survey.
Okay.
Last year we did quite a few. We put forward quite a few. Also in the first quarter we took advantage of a slower market and we put forward vessels. Not all of the five vessels had their special survey due falling in the first quarter, so we took advantage of the slower market to accelerate the repairs. Right now we are ready and in position to take advantage of the market when the market will improve without disrupting and taking them out of service.
Perfect. Okay. Lastly, can you just give some guidance on quarter to date, or I guess current even spot rates for some of your open Suezmax and Aframax tankers? Have you seen the market improving since 2Q?
We have seen the market improving. The majority of the Suezmaxes that we have right now are on profit sharing. They have a base rate, with the base rates being between $12,000-$14,000 for most of these vessels. Right now, the spot market is around $10,000. The two vessels that are in this spot market, and they don't have a base rate with profit-sharing arrangements, they are earning currently rates closer to this $10,000.
The Aframax on the [crude side]?
Yeah. We have a big part of the Aframaxes that are on time charters. We told you, I think that the average is around $10,000, we have done 18, this is something that you should put forward in your calculations.
Okay. All right, that's it for me. Thanks again.
Welcome.
Thank you. Your next question is from Michael Webber from Wells Fargo. Your line is now open.
Hey, guys. This is Greg on for Mike. How's it going?
Hello.
Hey, just going back to the bunker contamination that you touched on earlier, I just wanted to get your full take on it, see if there was any updates on the regulatory side, and then see how you think it affects IMO 2020.
Well, first of all, we have a large-scale contamination that started at the beginning of the year out of the Houston area, which affected in excess of 120 vessels. From a point of time, a lot of these contaminated cargoes have been sold to other parts of the world, in essence, contaminating almost the full global bunker chain. In excess of 120 incidents, it's a little bit disappointing that as we speak right now, we have not seen anybody taking responsibility. This is not a random event. This is something that as bunker buyers, we have seen happening every three or five years. We need to take corrective action to make sure that we don't take unnecessary risk for which we pay because the bunkers are not given to us for free. We are paying for the bunkers.
Yes.
We need to make sure that we use these bunkers to move from A to B, and we would like to do it in a safe way. We think that the bunker industry is responsible in making sure that they will provide the right fuel, which is fit for purpose, and we will not have to deal with the difficulties that we have been dealing, and in the large scale that the latest incidents the industry has faced. Of course, with 2020 ahead of us, where the majority of the fuels appear to be blended fuels, and without having standards for these 2020 fuels, we feel that this thing is only going to get worse.
Okay. That's helpful. Going back to the product tanker trade routes, have you seen this developing already as some of the majors have started to test trials on the compliant fuel? Have you seen the trade routes start to change and develop and that fuel start to get carried around, or is that something that you see more of a H1 '19 or H2 '19 event?
I think this is more of a second half 2019 event. Most probably a fourth quarter 2019 event. There are some suppliers who are selling today 0.1% fuel oil that is more or less a gas oil type. We have been using these fuels in the SECA zone instead of burning pure 0.1% gas oil.
The expectation is, as we are going to have price assessment for the 0.5% fuel oil from the start of next year, to gradually see almost everybody put out in the market a 0.5% fuel oil.
Okay. Last one for me. It looks like delays for IMO 2020 are highly unlikely, but given your comments earlier about the scrubbers, what kind of regulatory risk do you think there is? What is the likelihood that the hammer comes down on open-loop scrubbers dumping this into the ocean and, either in 2021 or 2022 or even in 2025, that something could happen and open-loops could be outlawed?
I believe that there's a very good chance that the open-loop will be dropped. I think, and rightly so, because now what we're trying to do is protect the air emissions, and reduce the air emissions, but at the same time, we're killing the source of oxygen, which is the sea. This is very short-term. It's a very short-term fix, and we as INTERTANKO have been, and as owners, have always been very critical. As I say, it's like inventing a new drug that perhaps will cure one of the illnesses, but will kill the patient through another illness. It's not something we're looking forward to have, and I believe it's going to be a very short-term fix. Some owners out there are ordering or preparing their ships for scrubbers, but still it's a minute amount.
There are 40,000 vessels out there that have to follow the legislation of the .5. Right now, less than 1,000, 800 ships have scrubbers, the majority of them cruise vessels up in the ECA zones, which are in Alaska or the West Coast and in Scandinavia. If everybody tried to fit a scrubber from now until the end of the year, you could not achieve more, I would say, than 2,000 vessels. I think it is going to be interesting to see the results. The industry is, a bit late, but is starting to focus and come together in this. Through my participation as chairman of INTERTANKO, we are going to be having a very, I would say, exciting and heated September in various IMO discussions and hoping that March, which is the last deadline of any transition period, something can be done.
Okay. Thanks for your time, guys.
At this time, speaker, please continue. There is a question. Speaker, please continue.
Well, if there are no more other questions?
No further questions at this time.
We would like, again, to thank you for trusting the company. I have to say that we are, being the largest shareholders, the most disappointed from anybody with not being able to have a positive result, which we have prided ourselves in our 25-year history. We hope to be able to reverse this trend for sure in 2019 and 2020 and make it less painful for all of us by preparing the company in this low environment to take advantage of the opportunities that will come. In the meantime, we'll try and, I think as Paul said, maintain expenses to the minimum, utilization to its highest degree, 96.2%, way above the industry average of 85%. Make sure that we are there to provide a healthy, efficient, environmental friendly, and hopefully very profitable service for us to our clients. With that, thank you very much.
Thank you. That does conclude the conference for today. Thank you all for participating, and you may now disconnect.