Thank 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. 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 this time, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. I must advise you, the conference is being recorded today. I would now pass the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relations Advisor of Tsakos Energy Navigation. Please go ahead, sir.
Thank you very much. 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 first quarter of 2017. 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 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. Please note that the slides 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 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.
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. That's another profitable quarter, beating expectations in a challenging market. This is proof that management executes the strategy that we all agree to. Our strategy, conservative to some, has helped us manage 24 years of profitable performance through four shipping crises. 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, 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 enhance profitability and other benefits value added to the investors. This is a unique model. This is a model built on prudence, guarantees shareholder value. Hopefully, we'll see the result of this reflected on the stock price because we believe in it. You will see as the market evolves, there'll be more benefits coming out, especially with the full program, building program of the 50 vessels that we've had, which will be closing by the end of the year with all vessels delivered. Then this model will be at full throttle, flexible enough, yet predictable enough to reward the shareholder.
Congratulations again to management and best wishes for another successful quarter coming up.
Chairman, thank you very much, over to Nikolas Tsakos.
Thank you, good morning from Athens, Greece. It's been a successful quarter, even in a difficult environment. As the Chairman said, we are putting the final touches of TEN of the 21st century, as we call it, which is the new model of our industrial 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 at 77% coverage. With the interest that is coming out there from our major
From our major clients, I think we will be locking up much more business and more strategic relationships as we go forward. This has always been a conservative company, but this allows us to pay our dividends, 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 new building vessels, that will create a state-of-the-art fleet of 65 vessels with a significant amount of forward fixed cash flow. We're very proud of this fact. We're looking always at our bottom line because we are aware that the time that you stop looking at your expenses, that's when your downfall starts.
This is something that we pride ourselves and our technical managers, the on-hand management of our vessels. 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, I will ask George Saroglou, COO, 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 fleet expansion program of its history with 15 new building vessels in total. Eight vessels were delivered last year. All 15 ordered vessels had medium to long-term employment attached to first-class charters, ranging from approximately 2 years to up to 11-12 years. Since the start of the year, TEN took delivery of four vessels, with three more expected in the next three quarters. For those who are connected to the internet and our website, there is an online slide presentation whose format we will follow during the call. Let's flip to slide number three with the key corporate highlights. As you can see, we have 65 vessels. This is the pro forma fleet, 62 currently in operation, and 25 vessels have ice class capabilities.
The average age of the fleet is 7.4 years versus 10.2 years for the World Tanker fleet. We have a very modern fleet that 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 tenor of two and a half years. Minimum contracted secured revenue of $1.4 billion with potential additional revenues from profit-sharing arrangements. The fleet is modern, diversified, covering clients' transportation requirements in crude, product, shuttle, and LNG, and has become the carrier of choice for many of the top oil majors, commodity traders, and refineries. We are a very high efficient operator with consistent high fleet utilization with over 97% as reported for the first quarter of 2017.
The next slide has the main financial highlights of our press release, which Paul will present in more detail, as thus would like to stress again the profitability and the company's strong financial position. The next slide has a snapshot of the pro forma fleet of the 65 vessels that we have for the moment, of which 62 are in the water earning money, and we operate in four market sectors in crude, product, shuttle tankers, and LNG. During the first quarter of the year, we took delivery of the VLCC Hercules I and of two Aframax tankers, Marathon TS and Sola TS, and of the company's third Suezmax shuttle tanker, Lisboa, all with employment ranging from approximately two years to up to 12 years. We expect three more Aframax tankers to be delivered in the next three quarters, which are fully financed and fixed also on long-term charters.
Their delivery will complete the current phase of our new building program. Slide six has the clients of TEN. 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 seven, you see that we have strong and secure 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 forma fleet vessels are fixed under secured 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 secure companies are needed to immediately capture the market upside.
During the third quarter, we initiated a strategic relationship with a major U.S. oil company for the employment of crude tankers. We have fixed three Suezmax tankers for three years and one VLCC for approximately two years. All of the three vessels are on arrangements that have profit sharing elements attached. We also extended the charter of two Panamax tankers for another one option one year, also with a formula that has a base rate and a profit-sharing arrangement. Next slide presents the fleet and all-in break-even cost for the various vessel types that we operate at TEN. 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 TEN 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 past trend growth levels. The average oil demand growth since 1990 has been around 1.1 million barrels per day.
The current forecast for 2017 is 1.3 million barrels per day, a 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 combination 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 1.8 million barrels per day in comparison to the growth rate for the first half of 2017, which was 0.4 million 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 new environmental regulations with high compliance costs and charter discrimination against older tonnage could lead to an increase in scrapping. On the dividend, we announce today another dividend for the common shares, $0.05 payable on July 14th to the shareholders of record on July 11th. In total, since 2002, we have paid $10.51 in cash dividends, or approximately $450 million, and this compares with a listing price in our IPO of $7.50. For the average yield since the IPO, we have registered five and a quarter per annum. That concludes the operational part of our presentation. Paul will walk you through the financial highlights for the first quarter. Paul?
Thank you, George. As George just said, TEN enjoyed another profitable quarter, albeit operating in a softer market than in quarter one 2016. In a market that still provided enough demand to keep our fleet at full utilization. Our net income was $17.5 million, 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 million to revenue. All vessels had positive EBITDA, apart from two in dry dock. Average daily OPEX per vessel decreased by 4% to below $7,600, mainly due to continued tight cost controls by our affiliated technical managers, TCM. Our daily overhead costs per vessel have also fallen by 3% due to savings in office costs.
Management fees per vessel have not increased for over five years. Finance costs increased $4 million, 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 million relating to the three newly delivered vessels in quarter one and paid down $44 million in repayments. At the end of quarter one, we had $1.82 billion outstanding in debt, and net debt to capital was a comfortable 54%. Our all-in average cost of debt still remained under 3% for the quarter. As at March 31st, we had four Aframaxes with charters still to be delivered.
We took delivery of Sola in April and paid the final $33 million accordingly, $24 in debt and $9 million in cash. We will pay $100 million for the remaining three Aframaxes to be delivered this year, $70 million from debt and $30 million from cash. At that stage, our new building program of 15 vessels will be complete, and TEN 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. This concludes my comments. I'll hand the call back to Nikolas.
Thank you, Paul. I think I would like to open the floor for any questions. Thank you very much.
Thank you. Participants, as a reminder, if you would like to ask a question, you'll need to press the star followed by one on your telephone keypad and wait for your name to be announced. Your first question is from Gregory Lewis from Credit Suisse. Your line is open.
Good morning and good afternoon. This is Joe Nelson in for Greg today, thank you for taking the question.
Hi, thank you.
I guess, just thinking about the fleet, you guys are just coming out of a big growth program. In your release, you highlighted potentially maybe selling some non-core assets later this year. How should we think about the fleet mix going forward? Is it leaning more towards crude versus product or any 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 she, are really cash cows because they've been very well depreciated over the years, they're helping the bottom line. We will be open at offers when the time is right for our older vessels, regardless of type.
Okay, thanks. Maybe just one kind of follow-up to that. We've all seen the headlines, the new build prices are low. It seems to have maybe triggered some ordering over the last few months. Do new build prices 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 back of long-term charters and maybe 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. If we do anything, at this stage, we are not looking to do anything on any speculation. I think one of the things that we should not forget is we are at the turning point, that's why we went through a very extensive new building program, building modern and highly efficient vessels with all the new regulations and technologies because we are in a turning point of technological requirements and environmental requirements of shipping. We must make sure that the ships we are building today, if anybody's building, and I hope they are not, because the market does not need any more vessels, are vessels that will be there for the future.
As we speak today, we do not know what the future holds. All the legislation that has been discussed for has not, again, 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. Your line is open.
Hey, good morning, gentlemen. Thanks for taking the question. I just want to start off on the capital raise you guys did over the quarter. Raised a pretty decent amount of cash there. Really padded the balance sheet. I guess I'm just wondering if that was the motivation behind it, seeing a lot of your peers go out there and, I guess, sell vessels to boost 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? Are you raising capital more from an offensive standpoint to jump opportunities as they arise?
Well, I think we have always been criticized, perhaps not by you, Spiro, but other analysts. We always hold a lot of cash on our balance sheet. For sure, we're not planning to hold cash just to look at it. We are looking at opportunities and hopefully second-hand opportunities. It's more offensive than defensive at this stage, I would say.
Great. Okay. Just as far as the strategic relationship goes, I see the press release out in April on it with a 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 has only started. It started with four vessels, and it certainly can get bigger significantly, as big as Statoil, at least.
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, Mike.
Hey, I wanted to follow up a bit on Spiro's question around effectively kind of forward capital allocation. You guys are in pretty good shape from a balance sheet perspective, and you had, as always, a decent amount of cash. When you look at your core markets, you're pretty topped up on the crude side. When you look at the LNG and the shuttle tanker side there are counterparties in, or 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. 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.
As you think about allocating capital over the next year or two, do you see maybe a slightly better opportunity set within maybe these ancillary businesses?
Thank you. On that, I have to say that we have invested a lot in the LNG and the shuttle space. As you rightly say, these are spaces where, because they are so tough operationally, we face a smaller group in competition and perhaps a weaker group in competition. I think the board has identified that, and we are looking to expand in that segment. I think you are correct.
Got you. Okay. That's helpful. Nikolas, just to move back to crude, maybe, 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. Just curious from an industry perspective, you've got kind of prompts or kind of resale VLCC prices that are at 10-year lows. We've also seen things like every time we turn around, we are reading about a new order in the last month or so. Curious, maybe from an industry perspective, how much does this rash of ordering dampen any of the optimism for the back end of this year and/or 2018 in the sense of an asset recovery and people bidding up secondhand assets in early trade there, or just purely future fundamentals?
As you know, those ships that have been ordered, as I said, we do not need any more vessels in the market today, for sure, we don't need any new vessels until the ball stops on technology and on the environmental legislations. Those ships will be most probably started being delivered in early 2019. We are still very strong for the second half of this year, or strong for this half, very strong for 2018. If owners show some control, I think 2019 will be a better year. I think those ships are 2019 vessels. 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, there's not a lot of positive news coming out of Korea recently.
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, first of all, he is planning to impose a significant ban on any more expansion of nuclear power, also close some of the older facilities there, which I think is good news for the gas market, considering that they are a huge importer of gas. On top of that, he has ordered no more subsidized new buildings for the Korean yards. I think that also is good news in a sense that there will be less capacity and the values are going to be less attractive for owners to order.
Sure.
We're always looking for a silver lining somewhere, that's what we got right now.
Well, they've got to stop subsidizing losses at some point, right? That definitely makes sense. One more for Paul, actually, before I hand it off to you. On the average OpEx per vessel or DVOE, as you start 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 expect 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 effective eco ships and have lower running costs than the older vessels. Generally speaking, where do we expect it to go? Well, we're very pleased with where it is at the moment, to be honest. It's been held now for 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, we make sure that any variances in their original budgets are closely monitored, and if there is a problem, that they are corrected immediately. By putting pressure on our technical managers on a continuous basis, we feel that we are able to bring those costs down.
Of course, the very fact that they are associated with a good company like Columbia Shipmanagement has such a vast number of vessels. What are we talking about? We're talking about 400 or 500 vessels purchasing power. That's helped a lot. Another factor possibly is the dollar impact. Euro still accounts for about 25% of our expenditure. The more the dollar strengthens, the better it is for our results.
Okay, great. That's all. I'll turn it over. Thanks for the time, guys.
Thank you.
All right. Your next question is from Noah Parquette from JP Morgan. Your line is open.
Thanks. I wanted to ask, just following up from Joe's question, with all the newbuild prices, particularly for the larger ships, Paul, the last year or so. When you have your discussions with customers regarding potentially long-term contracts or needs, does that newbuild price factor in in any way? 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. What we try to do, and I think if you look at our breakeven when we talk to our customers, we try to agree with them a rate that allows us for a minimum rate that allows us a full breakeven with a very small return. Then an upside which sometimes we keep all to ourselves or we share with them. The icing of the cake is profitability. I think this is the model that we have discussed with the board. Mr. Arapoglou, I think this is the model that we feel comfortable with.
Yeah. It provides you with a floor on your revenue plus any upside, especially when you take with you the twitch thinking that markets will gradually improve from here. It makes absolute sense.
It makes us not very greedy, which means that we are willing to share with our clients the upside. I think it's a company strategy that we have had for decades now, and it has served us well. We feel strong that that's the way to go for an industrial shipping model. The price of transportation is still such 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. They are happy to share profits, and so are we.
Okay. I wanted to ask, your focus lately in expansion has been on the crude side, and your product fleet is aging. When you look at the difference of two markets, is there a desire or demand for product exposure, or is it still a different side?
Well, we believe that you cannot have a strong crude trade without a significant product rate. If you look within the slide that George presented before, you see that we are still quite overbalanced on the crude side. Product is a segment that we would like to participate perhaps more. Again, only through long-term contracts with our clients.
This is a very important point, that if we were to decide that the product market would increase dramatically in the next 12 months, we're not the type of company that will go order 50 clean tankers. We would do it gradually in a systematic way, not really go off 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 five, you will see that we still have more than 10. We have more than 10 or 12 of our products right now trading on the fuel and crude, which means that without having, if the market really erupts on that side, with a delay of perhaps a two-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 into products because they are built in very high quality, they are very modern, and they can trade both ways. We have this flexibility, and I think this is an important factor if you look on trade. We have the flexibility within a fortnight to turn a significant number of our existing crude carriers or fuel carriers into clean traders.
Okay. That's helpful. Thank you for that.
Your next question is from Fotis Giannakoulis from Morgan Stanley. Your line is open.
Yes. Hello, gentlemen, and thank you for taking my questions. 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 OPEC cuts. How in balance these two different dynamics impact the tanker markets?
Yes. Thank you. Thank you for that, Fotis. I think we have a significant increase of ton-miles thanks to the U.S. exports, I think something that we will see increasing further. We were one of the guinea pig vessels, I think our Suezmax, the Arctic, when last year we took one of the first sizable cargos of more than 1 million barrels that came through the Cactus Pipeline down to the Oxy terminal in the Gulf. We are in discussions now with major oil companies that are looking to create a VLCC trade for that. Our Suezmax, we actually brought that cargo into Italy. That's a huge ton-mile positive discrepancy here. I think as you correctly said, yes, there is a significant increase.
I think overall, we have had a 3.5% increase of ton-miles, mainly for cargos 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 four-million-barrel-per-day target, which was the pre-sanction level that they were out there. Europe is importing more and more oil. We have already imported more oil in Europe than we did same time last year. There is, as you said, there is a balance. We see Libya trying to Libya, as you know, for us here in Europe is the The main, it's the Venezuela of Europe, we call it, for many reasons, that is. They were down to 300,000 barrels, now they have doubled that or more, there is more action.
We have seen, I would say, Suezmaxes and Aframaxes being positively affected by these changes.
Thank you, Nik. I hear once again your concern or encouragement to your fellow ship owners to restrain from additional building orders. I'm not sure if these encouragements have been heard. Year-to-date, we have seen 51 VLCCs. Of course, based on the 1.3 million barrels demand growth, it seems manageable. At what point do we have to start worrying about it? Is it at 40? Is it at 50 VLCCs? How many do you think that they will pose a threat to your anticipated recovery?
Well, Fotis, our motto is that every single vessel, regardless if it's a VLCC, right now the market does not need any more tonnage. 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. There is a lot of talk about vessels with scrubbers. There is a lot of talk about vessels that will be gas LNG-fueled. To just order ships right now that will not be at the forefront, I don't think it's a good business decision. As you rightly said, we are a fragmented industry. I try to get all of the INTERTANKO members in the room, we all agree that no one should order a single new building, as soon as lunch is over, they're all on the phone ordering new ships.
There's only so much we can do. Joking apart, I believe that it is manageable. 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 bad news.
Thank you, Nik. I want to return to the previous questions about your expansion. I know that you've been in discussions with the customers about new sub-target deals you had talked about in your previous calls. 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, are we expecting to see more opportunities for long-term volume? You talked about Korean opportunity. I was wondering if you see the possibility of 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, Fotis, 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 six months ago, we chartered our LNGs for the next three years. This does not mean that we do not believe in gas. 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. Because you are of Greek background, I think you understand we are looking. Every year seems to be the year that things will start to be moving positive, but it has not happened. I have to say, to be fair, that it was the second half of 2017 and 2018 that all the major companies, gas producers, 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.
it is true to say, Nikos, that
Yes, Chairman
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 had a little bit higher expectations for the LNG market compared to the Greek economy. I want to ask you about demand for LNG. How do you view the demand for LNG? Where can the surprises be from the upside or the downside? We have heard a lot of people talking about FSRUs, some companies trying to enter this market. Is this a sector that you can potentially explore to expand into?
It is something that we are looking at. 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 ships, you might recall from our last call, 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. It's not so much the demand, it's so much where gas is going to be produced.
Right now there are gas findings 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. That's why we have not over-expanded. Although, as the chairman said, we are very strong believers on the long term. Perhaps during my son's period, we have a significant, more balanced LNG and time fleet.
Thank you, Nik. 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.
Yeah. I'll talk about the interest first. There are a lot of factors that go to make up that number. As far as this particular quarter was concerned, the final number, about $12 million, it did benefit from the termination of some interest rate swaps. If we extract that and going forward with giving that there's going to be an extra $100 million or so of debt, we would anticipate that on a quarterly basis, the number would be between $14 million and $15 million for interest and finance costs.
Thank you, Paul. Can you also comment about the ATM? Is it still in place?
It's been suspended temporarily. It's there, it's not being killed. It's there as a kind of reserve tool if we require, but we haven't been in action very much over the past few months.
Thank you very much, gentlemen. That's been helpful.
Thank you.
Participants, once again, as a final reminder, if you wish to ask a question or make a comment, please press the star followed by one on your telephone keypad and wait for your name to be announced. The next question is from the line of James Jang. Your line is open.
Hey, guys. I have a couple of quick ones. On the release with the strategic relations you guys mentioned, chartering VLs and Suezmaxes. Are you looking to expand in the VL sector since you only have, I guess, three already chartered out, right?
Yeah. As you know, we just took delivery of our last two VLs earlier this year. There is an acquisition but against long-term contracts. We are not looking, of course, to order or build any of those vessels. We are not specific on the type of ships. If we have interest from clients, we will purchase VLCCs, hopefully secondhand VLCCs. There's a big number of very good vessels that are five years and they are at very good prices that we might look at interest from charterers. However, we are looking at more specialized vessels like shuttle tankers and ice class vessels.
Okay, great. Thanks. I know you mentioned the fleet renewal, selling some of the older tonnage. If you were to sell, let's say, the three Suezmaxes that you have that are 12-15 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, together with the Aframaxes, are the workhorses of our industry. I think we will be looking at Suezmaxes because they are an integral part. As we said jokingly, we are the herds of shipping. We actually rent out to our clients whatever. If they want a stretch limo, we give them a VLCC. If they want a compact car, we give them an MR. We have all the vessels, all the assets are there for our clients. A lot, I would say, the sweet spot of our clients are Suezmaxes and Aframaxes, we might be replacing them with Suezmaxes.
Great, thank you. One final one. 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?
Because the Mediterranean market is I think it is in European waters. The Mediterranean market is, the MR1s, we call them, I would say, handy size vessels. It is a handy size vessel market. We might be looking to continue our presence in that market.
Okay. You haven't seen any expansion there where that's kind of being phased out even in the Mediterranean for larger MRs?
No, not at all. Actually, I would say there is a lot of interest for the 40,000 ton vessels in the Mediterranean and the Far East. Those are the markets that those ships are trading, and they're popular. The MR2s, as you call them, which are the medium-range ships, are Atlantic. They are more popular in the Atlantic.
Okay.
They all have their own position.
Got you. Okay. Thank you, guys.
There are no further questions at this time. Speaker, please continue.
Well, thank you very much. Hopefully, we will be able to present our positive results very soon to you for the following quarter. Thank you.
All the best.
Bye-bye.
Bye.
Thank you. That does conclude the conference call today. Thank you all for participating and you may now disconnect.