You for standing by, ladies and gentlemen, and welcome to the Tsakos Energy Navigation Conference Call on the First Quarter 2017 Financial Results. We have with us Mr. Tsakos Arapoglou, Chairman of the Board Mr. Nicholas 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. I must advise you, the conference is being recorded today. I will now pass the floor to Mr.
Nikos Bonozis, 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. This is Nicolas Von Dojo, CastleLink, Investor Relations Advisor to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the Q1 of 2017. In case we do not have a copy of today's earnings release, please call us at 212-661-7566 or e mail us at 10 tencapitalinc.com, and we will e mail the offer 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.
Penn. Gr. The conference call will follow the presentation slides, so please, we urge you to access the presentation on the webcast on the website. Please note that the slides of the webcast presentation will be available as an archive on the company's website after the conference call. And please note that the slides are user controlled.
And that means that by clicking on the proper button, you can move to the next or to the previous slide on your own. At this time, I would like to read the Safe Harbor statement. This conference call and slide presentation of the webcast contains certain forward looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward looking statements involve risks and uncertainties, which may affect TEN's business prospects and results of operations. Such risks are more fully disclosed in TEN's filings with the Securities and Exchange Commission.
And ladies and gentlemen, at this point, I would like to turn the call over to Mr. Tejas Aracapoglou, the Chairman of the Board of Tsakos Energy Navigation. Mr. Aracapoglou, please go ahead, sir.
Thank you, Nicolas. Good morning, everyone. That's another profitable quarter, beating expectations in a challenging market. This is proof that management executes the strategy that we all agreed to. Our strategy, conservative to some, has helped us manage 24 years of profitable performance through 4 shipping crises.
So the new industrial model that the company represents, providing the full range of vessels to its very broad high quality customer base, The prudent way to commit vessels over time and given the good market early last year, we gradually started chartering a larger percentage of the fleet. Today, we are well over 70% time charter, benefiting from the high charter rates for an average period of about 3 years going forward. This guarantees that for the next few years, we have covered costs and any other obligations the company has leaving less than 30% of the fleet to take all the opportunities that come to the market to even more enhanced profitability and other benefits, value added to the investors. So this is a unique model. This is a model built on prudence, guarantees shareholder value.
And hopefully, we'll see the result of this reflected on the stock price because we believe in it and you'll see as the market evolves, there'll be more benefits coming out especially with the full program, a building program of the 50 vessels that we've had, which will be closing by the end of the year with all vessels delivered. And then this model will be at full throttle, flexible enough, yet predictable enough to reward the shareholders. So congratulations again to management and best wishes for another successful quarter coming up.
Chairman, thank you very much and over to Nikos Tsakos. Thank you and good morning from Athens, Greece. It's been a successful quarter, then in a difficult environment. And as the Chairman said, we are putting the final status of 10 of 21st century as we call it, which is the new model of our International business. We have always been a very conservative company.
We have always looked at long term relationships. I think at this stage, we are approaching almost 80%, we are 77% coverage. And with the interest that is coming out there from our major clients, I think we will be locking up much more business and more strategic relationships as we go forward. And this, it really has always been a conservative company, but this allows us to pay our dividend, make sure that we have a very low and conservative leverage, a very strong cash position and be ready for opportunities. We are all enjoying the challenging times that we're going through and we're looking forward to the end of this year by the time we will have taken the last of our 15 newbuilding vessels as we would create a split of the art split of 69, 65 vessels with a significant amount of forward fixed cash flow.
And we're very proud of this fact. We're looking always at the bottom line because we are aware that the time that you stop looking at your expenses, that's when you're down for starts. And this is something that we pride ourselves and our technical managers, the on hands management of our vessels. And right now, we have had another reduction of our operating expenses within this quarter. It's been a very exciting quarter.
A lot of things have gone forward and I will ask George Aron Glascio to talk to us about this quarter and the prospects. Thank you. Thank you, Nikos. The company reported today another profitable quarter. TEN embarked since last year in the biggest lift expansion program of its history with 15 newbuilding vessels in total.
8 vessels were delivered last year. All 15 ordered vessels had medium to long term employment attached to 1st class charters ranging from approximately 2 years to up to 11 to 12 years. Since the start of the year, we took delivery of 4 vessels with 3 more expected in the next 3 quarters. For those who are connected to the Internet and our website, there is an online slide presentation, which format we will follow during the call. Let's turn to Slide number 3 with the key corporate highlights.
As you can see, we have 65 vessels. This is a pro form a fleet, 62 currently in operation and 25 vessels with ice class capabilities. The average age of the fleet is 7.4 years versus 10.2 years for the World Tankers fleet. So we have a very modern fleet that is balanced has a balanced employment strategy that takes advantage of market peaks with profit sharing arrangements. Currently, we have 50 vessels on secured employment with average time charter tenure of 2.5 years.
Minimum contracted secured revenue of 1,400,000,000 with additional revenues from profit sharing arrangement. The fleet is modern, diversified, covering clients' transportation requirements in crude products, shuttles and LNG and has become the carrier of choice for many of the top oil majors, commodity traders and refineries. We are very high efficient operator with consistent high fleet utilization with over 97% as reported for the Q1 of 2017. The next slide has the main financial highlights of our press release, which Paul will present in more detail as us would like to stress again the profitability of the company's strong financial position. Next slide has a snapshot of the pro form a fleet of the 65 vessels that we have for the moment, of which 62 are in the water, earning money, and we operate in 4 market sectors in crude products, shuttle tankers and LNG.
During the Q1 of the year, we took delivery of the VLCC Hercules 1 and of 2 Aframax tankers, Marafone TS and Sola TS. And of the company's 3rd Suezmax Shuttle Tanker Lisboa, all with employment ranging from approximately 2 years to up to 12 years. We expect 3 more Aframax tankers to be delivered in the 3 quarters, which are fully financed and fixed also on long term charters. That delivery will complete the current phase of our new building program. Slide 6 has a client of 10, all of them are blue chip names with whom the company is doing repeat business over the years, thanks to the quality of service, fleet modernity and the safety record of the enterprise fleet.
Slide 7, we see that we have strong and secured coverage that has upside potential, thanks to the balanced employment strategy that we use for the enterprise fleet. 50 vessels out of the 65 pro form a fleet vessels are 600 secondured revenue contracts, the combination of time charters, time charters with profit sharing and COAs. We have 29 vessels that are market related charters, including spot and profit sharing, but includes company's ability to immediately capture the market upside. During the Q3, we initiated a strategic relationship with a major U. S.
Oil company for the employment of 2 tankers, and we have fixed 3 Suezmax tankers for 3 years and 1 VLCC for approximately 2 years. All of the 2 vessels are on arrangements that have profit sharing element of that. We also extended the charter of 2 Panamax bankers for another 1 option 1 year also with a formula that has a base rate and a profit sharing arrangement. Next slide presents the fleet and volume breakeven cost for the various vessel types that we operate in them. As you can see, the cost base is low.
In addition to the low shipbuilding cost, we must highlight the purchasing power of TCM and the stringent cost control by management in order to maintain a low OpEx average for the fleet while keeping a very high fleet utilization rate quarter after quarter. We can almost call it full employment. 77% of the fleet is on secured revenue contracts, good enough to cover the company's obligations. The revenues we expect to generate cover everything. In addition, we have a combination of vessels that are on time charter with profit sharing COAs and support charters that guarantee that then has a share in the market's upside every time it happens.
And of course, this enhances the company's annual profitability. On the market, global oil demand continues to grow above fast trend growth levels. The average oil demand growth since 1990 has been around $1,100,000 per day. The current forecast for 2017 is $1,200,000 per day, a number growth number above the trend line. Improving economic conditions in the OECD countries and the low oil price environment continue to support strong demand, especially in the United States and Europe and China, where we have a complication of consumer demand and stockpiling for strategic reserves.
And also India is a factor in the growth that we see in demand. In fact, the forecast for oil demand growth in the second half of the year is higher, approximately 1,800,000 barrels per day in comparison to net to growth rate for the first half of twenty seventeen and which was 400,000,000 barrels per day higher than the 2016 average. On the supply side, the tanker order book is coming down with the bulk of the orders being delivered during the first half of the year. We should note, however, that a big part of the existing tanker fleet is over 15 years and that the implementation of few environmental regulations with high compliance costs and charter discrimination against older tonnage could lead to an increase in scrapping. On the dividend, we announced today another dividend for the common shares, dollars 0.05 payable on July 14 to the shareholders of record on July 11.
In total, since 2002, we have paid $10.51 in cash dividends or approximately $450,000,000 and this compares with a listing price in our IPO of $7.50 For the average yield since the IPO, we have registered 5.25 per annum. That concludes the operational track of our presentation. Paul will walk you through the financial highlights for the Q1.
Paul? Thank you, George. As George said, team enjoyed another profitable quarter, albeit operating in a softer market than in quarter 1 2016, in a market that still provided enough demand to keep our fleet at full utilization. Our net income was $17,500,000 or $0.16 EPS, helped by a 9% increase in net revenue. Despite the spot market being weaker, our time charters alone generated adequate cash to cover the operating overhead and finance costs of the whole fleet, while our spot vessels were still able to contribute $30,000,000 to revenue.
All vessels had positive EBITDA apart from 2 in drydock. Average daily openings per vessel decreased by 4% to below $7,600 mainly due to continued tight cost controls by our affiliated ethical managers, TCM. Our daily overhead costs per vessel have also performed by 3% due to savings in office costs. Management fees per vessel have not increased for over 5 years. Finance costs increased $4,000,000 mainly because of the new loans related to the new vessels and due to lower capitalized interest as the new vessels were delivered.
In addition, although there have been increases in interest rates, this was offset in the quarter to an extent by gains from interest rate swap early terminations. We drew down $100,000,000 relating to the 3 newly delivered vessels in quarter 1 and paid down $44,000,000 in repayments. So at the end of quarter 1, we had $1,820,000,000 outstanding in debt. And net debt to capital was a comfortable 54%. Our rolling average cost of debt still remained under 3% for the quarter.
As at March 31, we had 4 Aframaxes with charters still to be delivered. We took delivery of solar in April and paid the final $33,000,000 accordingly, dollars 94,000,000 in debt and $9,000,000 in cash. We will pay $100,000,000 for the remaining 3 Aframaxes to be delivered this year, dollars 70,000,000 from debt and $30,000,000 from cash.
At that
stage, our new building program of 15 vessels will be complete and tailwinds will be in a strong position for 2018, generating a secure cash flow with most of its modern fleet employed on time charters to leading oil majors. And this concludes my comments. And now I'll hand the call back to Nippet.
Thank you, Paul, and I think we would like to open the floor for any questions. Thank you very much.
Your first question is from Gregory Lewis from Credit Suisse. Your line is open.
Good morning and good afternoon. This is Joe Nelson on for Greg today and thank you for taking the question.
Hi, thank you.
So just I guess thinking about the fleet, you guys are just coming out of a big growth program. And in your release, you sort of highlighted potentially maybe selling some non core assets later this year. How should we think about the sort of fleet mix going forward? Is it leaning more towards crude versus product or in particular size class within that framework?
Well, as I said, we do not have a specific type of vessel. We always want to renew our fleet. Of course, the older ladies, as we call them, because a ship is a sea, are really cash cows because they've been very well depreciated over the years. So they're kept in the bottom line, but we will be open at offers when the time is right for our older vessels regardless of price.
Okay, thanks. And maybe just one kind of follow-up to that. I mean, you've all seen the headlines, The newbuild prices are low. It seems to have maybe triggered some ordering over the last few months. Do you need the pricing factor at all in how you guys think about fleet growth?
Or is it really just going to be more of a customer led model on the path of long term charters and moving away from some of the speculative ordering we've seen lately?
Well, thank you for the opportunity. All our 15 vessels have long term or build on long term charters, as George said, ranging from a couple of years up to 11, 12 years. So if we do anything and at this stage we are not looking to do anything on any speculation. And I think one of the things that we should not forget is we are at the turning point and that's why we went through a very expensive new building program building modern, highly efficient vessels who all would include the ignitions of technologies because we are in a turning point of technological requirements and environmental requirements of shipping. So we must make sure that the ships we are building today if anybody is building and I hope they are not because the market does not need any more vessels, our vessels that will be there for the future.
And as we speak today, we do not know what the future holds. All the legislation that has been discussed for has not again the it's not yet solid. From our side, of course, we will not do anything without a long term employment and we don't have anything in the cards right now.
All right. Thank you very much. Appreciate the time today, guys. Thank you.
Your next question is from the line of Spiro Dounis from UBS.
Just want to start off on the capital raise you guys did over the quarter, raised a pretty decent amount of cash there and really padded the balance sheet. I guess I'm just wondering if that was the motivation behind it and a lot of your peers go out there and I guess sell vessels to the balance sheet to get through I guess what's expected to be some tough times here in the middle of the year. Is that how you're looking at it? Or are you raising capital more from an offensive standpoint to jump on opportunities as they arise?
I think we have always been criticized, perhaps not by you, Spiro, but other countries that we always hold a lot of cash on our balance sheet. So for sure, we're not planning to hold cash just to look at it. We are looking at opportunities and hopefully second hand opportunities. So it's more offensive than defensive at this stage, I would say.
Great. Okay. And then just as far as the strategic relationship goes, I know you said a press release out in April on it, the major U. S. Oil company, realize there's some commercial sensitivity there, I'm guessing.
But is this a new relationship? And is this something that could maybe turn into something bigger like what you've got with Statoil or is this kind of it for now?
It is not a new relationship, but it is something that it has only started, it started with 4 vessels and it certainly can get bigger significantly as big as oil appears.
Got it. All right. Appreciate the color. Thanks, everyone.
Okay. Your next question is from the line of Mike Webber from Wells Fargo. Your line is open.
Hey, good morning, guys. How are you?
Hi. Hi, Mike.
Hey, I wanted to follow-up a bit on Spiro's question around effectively around kind of forward kind of capital allocation. You're in pretty good shape from a balance sheet perspective and you get as always a decent amount of cash. And when you look at your core markets, it's pretty topped up on the crude side. But on the when you look at the LNG and the shuttle tanker side, there are counterparties in I guess competitors rather in both of those industries that might not be as well capitalized or free to deploy that cash as you all are now. So I'm curious as to what kind of opportunity set do you see within both of those relatively niche markets, but kind of points of diversification for you guys?
So if you think about allocating capital over the next year or 2, when do you see maybe a slightly better opportunity set within maybe these ancillary businesses?
Thank you. On that, I have to say that we are we have invested a lot in the LNG and the shuttle space. And as you rightly say, these are spaces where because they're so tough operationally, we face a smaller group in competition but that's a weaker group in competition. And I think the Board has identified that, and we are looking to expand in that segment. So I think you are correct.
Got you.
Okay. That's helpful. And Nicola, just to move back to crude maybe, and you touched on this in one of your earlier answers around kind of technology risk and making sure that you guys are basically owning the right tonnage going forward, which certainly seems like it makes sense. But just curious from an industry perspective, you've got kind of props or kind of resale VLCC prices that are at 10 year lows, but we've also seen things like every time we turn around, we're reading about a new order in the last month or so. So curious maybe from an industry perspective, how much does this rash of ordering dampen any optimism for the back end of this year or in or 2018 in the sense of an asset recovery, people bidding up secondhand assets and early trade there or just really future fundamentals?
Well, as you know, those ships that have been ordered and as I said, we do not need any more vessels in the market today. And for sure, we don't need any new vessels until the ball stops on technology and on the environmental legislations. And those ships will be most probably started being delivered in early 2019. So we're still very strong for the second half of this year or strong for this very strong for 2018. And if owners show some control, I think 2019 will be a better year.
But I think those ships are 2019 vessels and of course if owners continue ordering, it will not be as well balanced as we expect the market to be. I think one of the positive issues that has come out and there's not a lot of positive news coming out of Korea recently, But one of the positive news that has come up from Korea is that the new government there that was elected a couple of days ago, our first goal is planning to impose a significant one on any more expansion of nuclear power and also of course some of the older facilities there, which I think is good news for the gas market considering that there is huge importer of gas. And on top of that, he has ordered no more subsidized new building for the Korean yards. And I think that also is good news in the sense that there will be less capacity and the values are going to be less attractive for owners to order. We're always looking for a silver lining somewhere, that's
Well, they've got to stop subsidizing losses at some point, right? So that definitely makes sense. One more for Paul actually before the hop off is. On the average OpEx for vessel or DDOE, have you just started layering in the remaining Aframaxes? It seems like that number should naturally start to come down, although that is kind of counterbalanced with the fleet kind of naturally aging.
Can you give us some color on where you stick that figure to go through the end of the year and what the right balance point is for it with the future fleet mix?
Well, clearly, the new vessels
do help in bringing down overall costs. They're decorative ships and have lower running costs than the older vessels. Generally speaking, where do we expect it to go? Well, we're very, very pleased with where it is at the moment, to be honest. It's been held now for several, several quarters.
We believe we can bring it lower. We have our eyes very closely on our affiliated TCM technical managers. We watch what they do very closely and we make sure that any variances in their original budgets are closely monitored. And if there is a problem, that they are corrected immediately. So by putting pressure on our technical managers on a continuous basis, we feel that we are able to bring costs down.
And of course, the very fact that they are associated with a big company like Columbia Ship Management, as such a vast number of vessels, what are we talking about? We're talking about 400 or 500 vessels purchasing power. So that's helped a lot. And another factor possibly is the dollar impact. And euros still accounts for about 25% of our expenditure.
So the more the dollars is strengthened, so the better it is.
Okay, great. That's helpful. I'll turn it over. Thanks for the time guys.
Thank you.
Your next question is from Noah Parquette from JPMorgan. Your line is open.
Thanks. I wanted to ask, since just following
up on Joe's question, it was all seen in new build prices, particularly for the larger ships fall last year or so. When you have your discussions with customers regarding potentially long term contracts or meetings, Does that build price factor in, in any way? I mean, are you guys looking at a breakeven plus a profit? Or is it not
a factor?
I would say this is a very significant factor and what we try to do and I think if you look at our pay given when we talk to our customers, we try to agree with a rate that allows us for a minimum rate that allows us a full dividend with a very small return. And then an upside, which sometimes we keep on to ourselves or we share with them, but it's the icing of the cake, it's profitability. And I think this is the model that we have discussed with the Board. I think this is the model that we feel comfortable with.
Yes. It provides you with a floor on the revenue plus any upside, especially when you take review the trade taking, that market will gradually improve from here. And it makes absolute sense.
It makes us not very greedy, which means that we are willing to share with our clients the upside. So I think it's a company strategy that we have had for decades now, and it has helped us work. And we feel strong that that's the way to go for an industrial shipping model. As we have said in the past, oil companies really do not the price of transportation is still a small part of the whole picture that as long as they do not pay more than their competitors, they are not so interested to bring the rates down. Of course, it's an open supply and demand.
So they are happy to share profits and so are we.
Okay. And then I wanted to ask, you spent your focus lately in expansion has been on the crude side and your product fleet is aging. Is there when you look at the different two markets, is there kind of a desire or demand for product exposure or is it still a different side?
We believe that you cannot have a strong crude trade without a significant product rate. And if you look at the slide that George has said before, you see that we are still quite overbalanced on the crude side. So products is a segment that we like to participate perhaps more, but again only through long term contracts with our clients.
And this is a very important point that if we were to decide that the product market would increase dramatically in the 12 months. We're not the type of company that will go order 50, 50 3 tankers. We would do it gradually in
a systematic way and not really go up
on a limb to order vessels without having long term contracts together with these orders.
I think this is very correct. If you look at Slide 5, you will see that we still have more than 10. We have more than 10, I think, 10 or 12 of our products. Right now, it's trading on the fuel and crude, which means that without having if the market really ramps on one side with a delay or perhaps a 2 week delay and a minimal cost of about $250,000 on average to clean it up per vessel to clean it up. We can turn those ships in products because they are built in very high quality and they are very modern and they can trade both ways.
So we have this flexibility and I think this is an important path to look on pace. We have the flexibility within fortnight to turn a significant number of our existing crude carriers or fuel carriers into
And your next question is from Fotis Giannakoulis from Morgan Stanley.
Nick, I want to ask you about
the impact of the better than expected U. S. Oil production to the tanker trade. On the one hand, we have the U. S.
Exports that is a new phenomenon, but on the other hand is the risk of continuing OpEx cuts. How in balance these 2 different dynamics impact the container markets?
Yes, thank you for the comments. I think we have a significant increase of ton miles, thanks to the U. S. Exports. And I think something that we will see increasing further.
I mean, we were one of the guinea pig vessels, I think, as sure as Max, the Arctic, when last year we took one of the first cargoes from the one of the first sizable cargoes for more than 1,000,000 barrels from the that came through the type of pipeline down to Wamsi terminal in Matinagal. And I mean we are in discussions now with major oil companies that are looking to create a VLCC trade for that. So as much and we actually brought that cargo into Italy. So that's a huge ton mile positive discrepancy here. So I think as you correctly said, yes, there is a significant increase.
So I think overall, we have had 3.5% increase of ton miles, mainly for PAGOs that are coming to Europe because of these factors. On the other hand, we are seeing that there is oil out there. Iran is trying to go back to its 4,000,000 barrels per day target, which was the pre sanction level that were out there. But Europe is importing more and more oil. We have already imported more oil in Europe than we did same time last year.
So there is, as you said, there is a balance. We think Libya trying to and Libya, as you know, for us here in Europe is the main it's the Venezuela of Europe, I will call it, for many reasons that is. And they usually they were down to 300,000 barrels and now they have doubled that, more so there is more action. So we have seen, I would say Suezmaxes and Aframaxes being positively affected by these changes. Thank you, Nick.
I hear once again your
concern or encouragement to your fellowship owners to constrain from additional building orders. I'm not sure if your this encouragement has been heard year to date. We have seen C1 VLCCs. Of course, based on the 1,300,000 barrels demand growth, it seems manageable. At that point, do we have to start worrying about
is it the 40, is it
the How many do you think that they will pose a threat to your anticipated recovery?
Well, our motto is that every single vessel regardless of which you see right now the market does not need any more tonnage and we do not need any more tonnage because first of all we do not know as I mentioned before what type of tonnage we need. I mean there is a lot of talk about vessels with scrubbers, there's a lot of talk about vessels that will be gas LNG, LNG fueled. So I mean to just order ships right now that will not be at the forefront, I don't think it's a good business decision. But as you rightly said, we are a fragmented industry. We love to I try to get all this all of the Intertango members in the room and we all agree that no one should do all the same in your building and as soon as lunch is over, they order on the phone ordering new ships.
So there's so much we can do. Joking apart, I believe that it is manageable. And the magic figure we have had in the past on VLCCs is if we see on an annual basis more than 2 VLCCs a week, I think that's a bad news.
I want to return to the previous questions about your expansion. I know that you've been in discussions for the with customers about new sub tanker deals you had talked about in your previous calls. But I want to focus a little bit more on the LNG market. What has gone wrong so far this year? Rates, they started very positively at the beginning of the year, but now they have come back to the 30s.
At what point do you see the market tightening? And are we expecting to see more opportunities for long term volume? You talked about a bit of Colligan opportunity. I was wondering if you see the possibility of a new final investment decisions this year or sometime next year that they will give you the chance to invest again into the LNG sector with long term contracts? Well,
I think first of all, I have to say that we are very glad, although we were thinking that we were leaving money on the table, we are very glad that about 6 months ago we charted our LNGs for the next 3 years. And this does not mean that we do not believe in cash, we certainly believe, but it seems that the postponement of the LNG's market recovery, I think it's in parallel with the postponement of the Greek economy recovery. And because you have big background, I think you understand we are looking every year seems to be the year that things will start to be moving to be moving possible or positive, but it has not happened. It was I have to say fair to be fair that it was the second half of 'seventeen and 'eighteen that all the major companies are expecting, I mean, large producers that are expecting the market to firm. I hope they are right.
Quite a few of them are out in the market with big orders for future business, which is a good sign. As you correctly said, it has been delayed for too long.
But it is true to say, Nikolas, that over and above when will the next cycle up or down be in LNG. The company takes a very long term view on LNG as an industrial part in our profile.
Thank you, both of you. I have a little bit higher expectations for the LNG market compared to the Greek economy. But I want to ask you about the demand for LNG. How do you view the demand for LNG? Where can be the surprises out from the upside or the downside?
And we have heard a lot of people talking about FSRUs, some companies are trying to enter this market. Is this a sector that you can potentially explore to handle?
It is something that we are looking at. And as far as one of our clients does not request us to do something like this, we are not going to invest a significant amount of money to order these very expensive vessels. One of our you might recall from our last talk is actually acting as an FSU right now, which is a very good learning curve for us and an experience. I think India is a place where gas is going to be very important as we go forward. I think China is working to reduce significantly its coal, so at least they can breathe in Beijing and Shanghai.
And it's not so much the demand. It's so much where gas is going to be produced. And right now there are gas finding in places like in Africa, East and West Africa, in Mozambique, in Nigeria that I think when the infrastructure is there are going to be increasing in ton miles for that. It is a slower process than we ever dreamed back in 2007 when we ordered or took delivery of our first vessel. And that's why we have not over expanded, although as the Chairman said, we have very strong believers on the long term.
And perhaps during my son's period, we have a significant, more balanced LNG and
Thank you, Nick. One last question for Paul. I saw in this quarter your interest expense was quite low. If I calculate well, it's around 2.5% of your loan at the end of the quarter. Is this a number that we should look forward?
Why is this so low? Also if you can also comment about your ATM program, if it's still in place and if you plan to continue using it?
Yes. I'll talk about the
interest then first. There are a lot of factors that go to make up that number. As far as this particular quarter was concerned, it's the final number about $12,000,000 It did benefit from the termination of some interest rate swaps. If we extract that and going forward, given that there's going to be an extra $100,000,000 or so of debt, we would anticipate that on a quarterly basis, the number would be between $14,000,000 $15,000,000 for interest in finance costs.
Thank you, Paul. Can you also comment about the ATM group?
Is it still in place? It's been suspended temporarily. It's Is it still
in place? And it's been suspended temporarily. It's better than being killed if there is a kind of reserve tool, if
we require. But it's there. We haven't been in action very much over the past
Your next question is from the line of James Chang. Your line is open.
Hey, guys. So I have a couple of quick ones. So on the release with the strategic relations, you guys mentioned chartering VLs and Suezmaxes. And are you looking to expand in that in the VL sector since you only have I guess 3 already charted out, right?
Yes, I mean, we do not as you know, we just took delivery of our last 2 deals earlier this year. So the recent acquisitions, but against long term contracts. So we are not looking of course to order or build any of those vessels. And we are not specific on the type of ships. If we have printers from clients, we will participate and this is hopefully secondhand deals.
There is a big number of very good vessels that are 5 years and they are at this at very good prices as we might look to get interest from charters. However, we are looking at more specialized vessels like shuttle tankers and ice class vessels.
Okay, great. Thanks. And for the I know you mentioned the fleet renewal, selling some of the older tonnage. So if you were to sell, let's say, the 3 Suezmaxes that you have, 12 to 15 years, would you look to replace that with the same segment or would that just open up the possibility to build out like you mentioned ice class or more shuttle tankers?
Suezmaxes are the work together with the Aframaxes are the workhorses of our industry. And I think we will be looking at Suezmaxes because there are an integral part. As we said, jokingly, we are the like the we are the herds of shifting. I mean, we actually rent out to our clients whatever, if they want the fresh limo, we give them a VLCC. If they want a compact car, we'll give them an MR.
So we have all the vessels on the assets out there for our clients, but a lot, I would say, the sweet spot of our clients are Swiss matches and Aframaxes. So we might be replacing them with Swiss Great.
Thank you. And one final one. So just your thoughts on the MR1 segment. Do you think that's going to be a focus of yours moving forward? Or are you guys kind of planning to move towards the MR2s?
There is because the Mediterranean market is the Mediterranean market is and kind of the MR1s we call them I would say handysize vessels. It is a handysize vessel market. We might be looking to continue our presence in that market. Okay. So
you haven't seen any expansion there where that's kind of been is that even in the Mediterranean
for larger
in the Mediterranean and the Far East. Those are the markets that those ships are trading in their corporate. The MR2s as you call them which are the medium range ships are Atlantic. They are more popular in the Atlantic. So they all have their own position.
There are no further questions at this time. Speaker, please continue.
Well, thank you very much for and hopefully we will be able to present our reported results very soon to you for the following quarter. Thank you. All the best. Bye.
Thank you. That does conclude the conference for today. Thank you all for participating. You may now disconnect.