You for standing by, ladies and gentlemen, and welcome to Tsakos Energy Navigation Conference Call on the 4th Quarter 2016 Financial Results. We have with us 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 I must advise you that this conference is being recorded today. And I now pass the floor to Mr. Nicholas Spinozis, President of Capital Link, Investor Relations Advisor of Sakov Energy Navigation. Please go ahead, sir.
Thank you very much, and good morning to all of our participants. This is Nicolas Bornales of Capital Link, Investor Relations Advisor to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the Q4 and full year 2016. In case we do not have a copy of today's earnings release, please call us at 2126 617566 or e mail us at 10tencapitalinc.com, and we will e mail 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 website. Please note that the slides of the webcast will be available and archived on the company's website after the conference call. Also, please note that the slides of the webcast presentation are user controlled, and that means that by clicking on the proper button, you can move to the next or to the previous slide on your own. At this time, I would like to read the Safe Harbor statement.
The 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. Saks 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. Nikos Tsakos, President and CEO of Tsakos Energy Navigation, And Mr.
Tsakos is also Chairman of Intotanko. Mr. Tsakos, please go ahead, sir.
Thank you, Nicholas, and good morning or good afternoon to all of you. Happy St. Patrick's Day. Drive safely and drink responsibly. This is our logo in Intertango is build responsibly.
So I think it's a good day to be in the green today, and we would like to thank you for participating in our year end and Q4 results. Another year on our 24 year history, another year on building on success and profitability. We are looking to many more and to much more profitable going forward. 2016 has been a very exciting year for us. It's been the year that we have laid the foundation for TEN's new phase or next phase, which has to do with building a state of the art fleet, 15 new vessels, one option, and all of those ships on long term charters.
So far, we have taken delivery, including in the Q1 of 2017, 11 of those vessels with very accretive charters that are contributing significantly to our bottom line. Four more vessels to be delivered in April, July and then in September December. And after that, we will enter the next year, 2018, I would say, full force with our whole program as designed and all the vessels earning very accretive rates and making sure that the company can maintain its profitability. So with this, I would like to thank all of our onshore and offshore personnel and our design team, new building design team are chartering, our technical managers that have been able to achieve such a Herculean task of building in 2 different continents state of the art vessels and all of them being delivered without a single days of delay. And I think for those that are very involved in the nitty gritty of shipping, you understand how important that is to be able not to lose a single day of employment, not to risk any of your long and accretive charters because of delays.
We're very proud of that factor. And I think our continuous utilization in excess of 95%, I think the last for 2016, it was 98%, is another very important milestone to why this company has been able to maintain profitability for so long. And with that, I will ask George Saroglou to give us the developments of 2016 and recent developments for 20 17. Thank you, Nico.
The company reported today another profound quarter and year end results. 2016 was a landmark year for TEN as the company embarked in the largest growth program since inception in 1993 with 15 newbuilding vessels plus one option. We took delivery of 8 vessels during 2016. All delivered vessels had medium to long term employment attached to 1st class charters. Taking delivery of the remaining newbuilding vessels continues and updated during 2017.
All 7 2017 deliveries are also fixed on medium to long term time charters that range from minimum 1.5 years to up to 12 years for 6 of the 7 vessels. For those of you 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 turn to Slide number 3 that contains the key corporate highlights. TEN has currently a pro form a fleet of 65 vessels. We have 61 vessels currently in operation and 25 vessels from the fleet have ice class capabilities.
The average age of the corporate fleet is 7.5 years versus 10 years for the world tanker fleet. We have a balanced employment average time charter tenure of 2.7 years. We with average time charter tenure of 2.7 years. We have minimum as a result, we have minimum contracted secured revenue of EUR 1,400,000,000 with potential additional revenue from profit sharing arrangements. The fleet is modern, diversified, covering client transportation requirements in crude, products, shuttle and LNG.
We are a very high and efficient operator with consistent high fleet utilization and as has been reported today 98% for the last quarter. The next slide has the main financial highlights of the press release, which Paul will present in more detail. I would like to just highlight the profitability and the company's strong financial position. The next slide again is a picture of the fleet. We operate 61 vessels in 4 market sectors.
During the Q4 of 2016, we took delivery of the company's 2nd LNG carrier, the Maria Energy and 2 Aframax tankers, Leondios, H and Parthenon TS. Overall, in addition to the 8 newbuilding delivered vessel, 10 acquired 2 modern Suezmaxes during last year. All newbuilding vessels were delivered with long employment attached ranging from 3 to 12 years including charter renewal options. During the Q1 of 2017, we took delivery of VLCC Hercule S1, Aframax tanker Malafonte S and the company's 3rd shuttle tanker, Lisboa, which are also all employed under long time charters. We expect 4 more Aframax tankers to be delivered until the end of Q4 of this year.
Again, all these vessels are fully financed and fixed on long time charters. The next slide shows the clients of 10, all 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. Strong secured coverage, thanks to the mixed, the balanced employment strategy as 47 vessels out of the 65 vessels in the pro form a fleet are fixed under secured revenue contracts through a combination of time charters, time charters with profit savings and COH. Out of the 47 vessels, 29 are on market related charters including spot securing the company's ability to immediately capture the market upside. The breakeven cost for the various vessel types is on Slide 8.
And the cost as you can see is very low as we have built most of the fleet before the significant rise of new building prices. The purchasing power of Tsakos Columbia Ship Management and the stringent cost control by management is reducing the fleet operating expenses levels and this should also be highlighted. 63% of the remaining fleet available days of 2017 are unsecured revenue contract. And as you can see, in addition, thanks to the combination of spot, profit sharing arrangement and COAs then is guaranteed a share of the market upside when that thing takes place. What we see in the market, global oil demand continues to grow above past trend growth levels.
The average oil demand growth level since 1990 has been 1,100,000 barrels per day. In 2016, oil demand grew 1,600,000 barrels per day. The forecast for oil demand growth in 2017 is 1,400,000 barrels per day, again a growth number above the trend line. Lower oil prices continue to support strong demand, especially in the United States and China, a combination of consumer demand and stock piling for strategic reserves and obviously India. This led to upward revisions of global oil demand by various agencies including the International Energy Agency, while they reported the oil market during the year.
We hope and expect for these trends to continue during this year as well. The order book is coming down as we can see with the bulk of the new building orders expected to be delivered until the end of the first half of this year. However, a big part of the existing tanker fleet is over 15 years. The implementation of new regulations with high compliance course and hazardous discriminations against older tonnage could lead to an increase in scrapping. We should note that Far Eastern shipyards are restructuring and therefore reduce capacity, while available bank finance is very selective and shrinking.
We have seen no significant orders after 2018, which should be positive for freight rates and the start of another upcycle for tankers. We announced today our next dividend of $0.05 per share to be paid on April 28 to the shareholders of record on April 25. In total, since 2002, TEL paid $10.46 in cash dividends or approximately 445,000,000 dollars and this compares with the listing price in our IPO of $7.50 The average yield since the IPO is 5.25 per annum. That concludes the operational part of our presentation. Paul will walk you through the financial highlights of the Q4 and the year.
Paul? Well, thank you, George. I guess you all have in front of you or have seen the financial data sheet that came loose in our release. So I'll just go through a number of bullet points now. First of all, Ten achieved a Q4 net income of almost $12,000,000 in a market that was moderately better than Q3.
Net income for the year was a strong $56,000,000 An upturn in rates in quarter 4, although welcome, was too late and too small to impact total revenue. However, our vessels remain fully employed at a remarkable 98% productivity. And clearly, the addition of 9 new vessels before and during the quarter helped with the contribution of $15,000,000 to revenue. Tanker demand remained relatively buoyant, but excess tanker capacity squeezed rates. Nevertheless, the annual average rate was $20,400 a respectable rate given the overall lackluster market.
Our Paphromaxes achieved average daily TCE rates of $19,600 and our Suezmaxes $23,600 Product carrier rates fell, although Panamax rates were higher due to attractive time charters starting in the year. The quarter 4 revenue of the LNG carrier, Neo Energy, was $6,000,000 down from the previous 4th quarter due to charter expiring and repositioning. Both LNG carriers are now fixed on long term employment with earnings covering operating costs. Both are expected to secure more favorable contracts within the next 18 months. Daily average OpEx per vessel remained low at $7,600 in Q4.
And for the year, daily OpEx per vessel fell by 2% to $7,800 Increases in finance costs in the quarter and in the year were mainly due to new debt from newbuilding program, offset by positive bunker hedge evaluations. In Q4, outstanding debt increased by $177,000,000 mainly as a result of the new deliveries. Net debt to capital was 52.5%. At the end of 2016, there were 7 new vessels still to be delivered with $274,000,000 to be paid. 3 of these vessels have now been delivered.
For the remaining 4, dollars 95,000,000 is covered by arranged debt and $39,000,000 will be paid from cash. And finally, with about 40 vessels on time charter in quarter 1, with a secured cash flow and recent positive market indications, we all have a growing confidence for 10 in 2017 and in the following quarters and well beyond. And that concludes my comments. And now I'll turn the call back to Nicolas.
Thank you, Paul. And now I hope that the good news will continue to come. Thank you very much. Well, I think as Paul and George mentioned, 2016 has been a very formative year for the development of the company. A lot a new phase of the company, a much more industrial shipping.
As we speak today, we have 200 years of forward employment. And I hope we will be all around to enjoy those 200 years. That is a staggering figure, which is about close to 5 years for all our ships on long term employment on average and 2.7 years for the whole fleet. So if we decided to stop all our vessels from the spot market today, they would still operate or still have business for 2.5 years fixed with MR. But I think those 200 years is something that we are looking to grow.
We are a company that we look at ourselves as an industrial shipping company rather than we do not criticize any other Every company have their own strategies. Our strategy is to have a longer term business and actually to add on top of that by having a significant period of either profit sharing or spot exposure. We're looking at the Q1 that started bumpy. I would say it took a while for people to get over their New Year's our Western New Year's hangover, which was then added up to the Chinese New Year's period. But since then, the market started coming back.
And what we're seeing is, I would say, the sister market to tankers, which is a dry cargo market, has been bouncing on the bottom for a very long period of time. And in the recent month, we have seen values and that market turning a corner too. So things are looking more positive for shipping in general. The oversupply that I think we have self inflicted oversupply is being absorbed in the market. And we hope that 2017 will be a stronger year than 2016 and then 2018 where there's really very little supply of new ships coming in and a lot of regulation, as you all know, with the water ballast changes as of September and with SOX and the scrubber discussion about fuel oil, we're going to have again another reason for older ships to be out of the market.
So with this positive note, we would like to open the floor to any questions. Thank you very much.
Thank you very much, sir. And your first question comes from Jon Chappell from Evercore.
George or Nick, I wanted to ask about some of the commentary in the press release. So it sounds like you want to sign up more of the fleet that's not contracted already on some long term contracts. However, there's also a lot of optimism and also Nick's just recent comments too about 2018. Obviously, 'seventeen is going to be difficult. So how are you thinking about balancing too much fixed rate coverage at the bottom of the cycle versus keeping some of your exposure from when the market inevitably does turn up?
Well, I think this is a very good point, and it's a balance that we always try. And as you know, a significant amount, about 1 third of our chartered vessels today are in profit sharing arrangements. And just recently, 2 weeks ago, we chartered XTR or one of our new building VLCCs with that in mind. So the vessel has a minimum that covers its breakeven and then significant upside, 100% going to us as owners. But if the market skyrockets, then we will be happy to share the upside with our clients.
So these are the type of businesses we are looking. We are very proud of our utilization rate of always being in excess of 95%. I think if you go back to your records, you will see that even in the worst market conditions of 11%, 12% 13%, we still maintained a very high utilization rate because of this model. So whereas we want to secure the company's long term health and healthy balance sheet, we don't want to sacrifice the upside. That's why we would like to have profit sharing arrangements and still maintain a significant part of the fleet on the spot market.
Okay. And then also kind of along the same lines of the balance, you spoke in the balance in the press release about looking for opportunities, which we've heard from a lot of companies. Obviously, asset values are approaching multiyear lows and people want to be able to play offense at a time when the market is weak versus also you talked about selling some of your older vessels that may not fit into the core strategy longer term. So just do you need to dispose of some of the older assets to get the liquidity then to be aggressive on purchasing other ships? Or do you feel like you have the liquidity today to play offense in the market without any disposals?
It is not a matter of I think the older ships are actual cash cows. So they are ships that we build ourselves, they were maintained and they are ships that because they've been depreciated over a much longer period of time because their debt has been repaid to very low levels. They are, as we say, cash cow. So we love to have the older ships along. But of course, we are facing the fact that we would like the company to maintain its profile of 7 years.
I think that's what is our average date. We want to maintain a young profile. So that would be the only reason that would be selling their old older ships. The company has the capacity to participate. I mean, we are now in the final part of a huge expansion.
We are a company that we are completely against and were in mind that Tango had also speculative new buildings. So we are not looking to go and order any ships without employment. We are there to buy ships in the 2nd market if values are attractive. But I think right now we are quite full with the business that is coming.
Okay. That makes sense, Nik. Two quick ones for Paul. Paul, what's the debt amortization schedule look like for 2017?
2017, we have about $160,000,000 of scheduled repayments. We have balloons, but those balloons, we believe, will be refinanced 100%. So you can eliminate that
by the way. We are in discussion already. Already in discussion. And our banks, with whom we
have great relationships, are always knocking on our door, asking if they can participate in refinancing our debt. So we don't have a problem in that respect.
Okay. And then just to be clear, that 160, does that include any of the balloons? Or the 160 is amortization and there's balloons on top of that?
No, that's straight scheduled repayments of the before balloon.
Okay. And then finally, a quick one. You meant there was a press release last week or maybe earlier this week on the Hercules, but not a lot of detail surrounding that. Is there any way you can provide the rate associated with that ship?
As I said, we try to give you information without being criticized of industrial espionage, which is becoming very popular now around the world. So, yes, what I can say is that the vessel is covering here all in costs as a minimum rate. And this is I think this is a very responsible way to run industrial shipping because we often criticize our clients that they are not paying for quality and chartering ships that can cover their all in breakeven costs and then sharing the upside is something. So as you know, because we try to buy ships at the low side, things are all in breakevens are quite competitive. I think George has a slide in there where you see a it's a good range that keeps the company always operating in the blood and gives us an upside.
Okay. Thanks Nick. Thanks Paul.
Thank you. Your next question comes from Noah Parquette from JPMorgan. Noah, your line is open.
Thanks. Hey, I just wanted to ask, one thing that has been
that was brought up in
the past when drybulk was kind of more troubled was that private owners with mixed fleets were being hurt by the drybulk sector on the tanker side. Do you guys see any pass through from what's going on drybulk now as to the tanker side?
The dry bulk markets and the tanker markets are related. And we believe there is a lag usually of 6 to 9 months between the markets. Usually the dry dry cargo market being an inventory market is the one that starts moving first, creating increasing in the inventories and then the energies required there to develop this inventory. So that's why we believe that by the Q4, the tanker market will have even stronger signs. Although we see the market fluctuating from strength right now also.
Okay.
And then just really quick, if you've had any discussions on new orders, I know you say you don't want to do any speculative ones, but can you let us know when the earliest delivery date you could get on a hypothetical order would be?
I think we could see today you could see end of perhaps early 2019 orders.
Okay. That's all I have. Thanks.
Thank you.
Thank you. Your next question comes from Ben Nolan from Stifel. Ben, your line is open.
Yes, thanks. So with respect to sort of potential projects and orders, I was curious if it really maybe 2 things. At the moment, what is the appetite for these type of longer term contracts, industrial type situations? Is there much to be done in terms of new charters that do have long term 5 plus year durations? And then within that, could you maybe talk to what areas of the market, be it, I don't know, whatever, the shuttle tanker business or the regular tankers or LNG or whatever that where you guys are really focusing most of your incremental attention?
Well, I think today there is a significant amount of business, as you call it, and we call it industrial shipping. And it ranges from the product carriers to very large vessels, very, very large vessels. And so it is always client oriented. But the business is there for 7, 10, 12 years employment. I have to say, we're not trying to blow our own horn with this.
This business does not appear in the open market for every tanker company out there. I think there is a peer group of half a dozen companies that are out there, tanker companies with very good names, the majority of them public, that are shown this business. Many of those companies are not interested in this type of business because they want to focus on the spot market. But we are a long term traditional owner with a 50 year history within the group. So we're always interested in developing relationships.
So it's not something that you will call your broker up and you will find it out. It's by appointment to, I would say, handful or half a dozen or a dozen maximum companies that fit the profile of for long business.
Okay. But there is those conversations are happening even today, correct?
They're happening yes, they're happening more and more, I would say, in the last year, yes.
Okay. And getting back to the other part, any areas of specific focus for you? I mean, other than putting contracts on maybe finding long term contracts on some of your existing vessels incrementally, are people looking for more whatever shuttle tankers, LNG, anything specifically that you would need to add?
There is a demand there's a huge demand for LNG, as you know, because it's an immature business. Sucking tankers is not so popular in the last 2 years just because it's considered part of the offshore market and people are not oil companies are not interested in shuttle in the shuttle business that much because there's a lot, as you know, a lot of the fields in the world has been laid up and there's a lot of shuttle tankers running around. So I would say shuttle tankers is not a very popular situation. But then anything from ice class, super ice class vessels, etcetera, etcetera.
Okay. All right. Very good. Thank you.
Thank you. And your next question comes from Mike Webber from Wells Fargo. Mike, your line is open.
Hey, guys. This is Donald Boggins stepping in for Mike. How are you? I just wanted to ask a question on shipyard capacity. I mean obviously there's been a theme on a general rationalization in capacity for the past couple of quarters, but I'm trying to dig into whether the current offering price for shipyards and whether it's VLC or MR is competitive compared to the resale market, especially given some of the recent very low resale prints we've seen in the last month or so?
This is Joris. Well, I mean, we have seen a lot from the extremes of
the previous upcycle. We have seen
a lot of these shipyard startups, greenfields or even established yards going through significant restructuring. And at the end of the day, the reduction in the slots, the availability of slots. As we also said, the lack of finance is also helping reduce the speculative appetite of owners that could looking at opportunities with steel prices and asset prices
being down.
They have come down asset prices, But as we said, the lack of mainly of ship finance has really killed any appetite to put any speculative orders out there, especially in, let's say, the levels that we have seen in the previous upcycle.
Okay. And then just a follow-up, do you think there's sort of a is there a spread there between a resale and a new order that could potentially prevent incremental orders in the near term, especially given sort of that $77,500,000 data point we saw on the VLCC recently? Can yards where do you think the breakeven level for some of these yard large Korean yards is on a VLCC? And how low can that fall, so to speak?
Well, I mean, we don't think that there is prices can be pressed significantly from the current levels that we see. Also, let's not forget that we have seen the recent peak of the market has been in 2015. We have had 2016 has been a good year, but rates have come down from the peaks of 2016. 2017 because of the additional orders, the bulk of the order book that will be delivered throughout the year is expected to be even a little bit softer than last year unless again global oil demand surprises pleasantly. Therefore, I don't think that people have the appetite to go out and just on speculation to either embark in newbuilding orders or also on secondhand vessels.
So as I'm sure to say, we are looking at the majority of the Korean yards, which are the bulk of the new building capacity, are now owned by the banks. The banks are not doing business to lose money, well, not for a very long time. So they're not there to subsidize loss making transactions. We will see some resales going for a low for the low prices that you mentioned, but we expect the prices to turn around because the majority of the Korean barge or all the Korean yards are not going to be subsidized.
Okay. Thank you for that color, guys. Take care.
Thank you. Your next question comes from Spiro Dounis from UBS Securities. Spiro, your line is open.
Hey, good morning and happy to say, guys. Just wanted to follow-up on that last question response. I guess we have seen a flurry of new ordering lately, specifically in the larger vessel classes. Just wondering what do you think is actually driving that sudden surge? It seems odd just given the spread between secondhand tonnage pricing and newbuild pricing that people will be placing orders right now.
Is there anything specific that you're seeing that would explain why suddenly we're seeing these orders again? Well,
I think there might be owners. 1st of all, it's not a huge amount of ordering. And there is a big difference between a letter of intent and actual ordering. So I'm sure that there are a lot of letter of intents that have been presented around the market, which usually takes really gives a yard and an owner a 3 month engagement, dating engagement dating period before they decide to tie the knot. So I think the majority of what you're seeing is engagements rather than actual tying the knot situations.
And that's what I understand. We had a clarity for sales in the beginning of the year. Ships that were built by others were bought. But I'm not sure we have seen really any actual final contract newbuilding orders. The lowest new building year, 2,007 in recent memory so far.
The brokers are not very happy, but what can we do?
Fair enough. And then just wanted to ask you for your updated views on the dividend here. You like to keep it at $0.05 again. And understandably, the market didn't get that much better from last quarter. But wondering if you could remind us again maybe what you're looking whether or not be that expanded charter coverage or if you actually see rates go higher to start bringing the dividend back on?
And just along those lines, maybe what that looks like, can you bring it right back to $0.08 You just phase it in?
Well, I think we are waiting, first of all, for our new building to have the company in full force. I think that will happen by the end of this year that we will have the whole company with all 65 vessels performing. And I think that's the time we're going to be hopefully, that will coincide as we hope with a very strong market. And it is all our intention to be able to make the dividend great again, as Mr. Trump would say.
Very nice. Last one, just obviously you mentioned divesting from your older tonnage. Just to follow-up on John's question, 2 of the avenues mentioned in the release were direct sales and other related structured transactions. Just wondering if we could focus on that second part. What exactly do you mean by that?
Is that we're talking about block deals or are you talking about maybe doing a sale leaseback?
We do not exclude sales and leasebacks if they make sense. As I said, those are cash cows that are well depreciated. So if we I mean, we are looking at all the other uses that are available. So yes, sales and list blocks are an avenue that we are looking at on the plate.
Got it. And actually, I just have one more. I apologize. So you highlighted the drop in OpEx. And I'm just wondering how should we think about that going forward?
There a lot of juice left to squeeze there to get that OpEx number lower? And to some degree, are you fighting the oil price higher on a lubrication cost go higher? Is there any sort countermount there as we look forward on OpEx? Thanks.
Well, we always I think Paul would answer this. We are always on the case of our technical managers, which are, in our case, not very far from where we sit. It's a couple of floors down, so we can be on the case continuously. But I think with economies of scale and we are able to control costs because the worst thing you would like to do is be in a falling market and not controlling your costs. In our case, we'd rather control our costs and be in a high market.
And of course, the dollar has helped, and we reckon it will continue to help. I mean, this time last year and earlier, we were suffering from the high euro against the dollar. That's turned around, and it's quite possible that the dollar will strengthen further in the future against the euro. So that's one up the sleeve, if you like, for keeping costs down. Otherwise, as Nikos was saying, we think that our technical managers are doing an amazing job in keeping costs down.
And as Nikos said, it's us keeping them behind from time to time, but it seems to have worked.
Got it. Appreciate the color, guys. Thanks again. Thank you.
Thank you. And your next question comes from Fotis Giannakoulis from Morgan Stanley. Fotis, your line is open.
Yes. Hi gentlemen and thank you. Nick, a couple of questions. First of all, about your plan or your strategy to build a large industrialized shipping company. I was wondering, you mentioned earlier about the fact that the shuttle tanker market is unloved.
A lot of people, they are they associated it with the offshore sector. So I assume that this might be a sector that you could try to expand even further after the latest new building? And particularly, I want to ask about a potential that you might see in the divestment or the joint venture partners that PKU Offshore is looking at. Is this something that might be of interest for you?
Hi, Fotis. Yes. Well, I'll tell you all this in secret when I see you next week in New York. No, I mean, as I said, our aim is to grow our term business with good partners, but we can have the same goals of running a profitable and safe ship. We are not segment particular because we allow the clients to choose whichever segment they think.
I was saying that as you see from the PK experience, shuttle tankers are associated with the offshore market and they're not very popular. And that's why this is a market, of course, that we have looked in the past, so we will not stop in looking at it, but this is the case. But we are looking at all businesses that provide this industrial flavor. We will finish with the first phase of it within this year. I think what our and as I mentioned before, we have secured 200 years of employment for our vessels combined, which is quite a formidable task to risk to reach.
And we are looking to increase on that. And regardless of if it's going to be shuttle tankers or ice class vessels or LNG, which of course we are very fond of also.
The reason I ask is because I know that you like kinds of cyclical investments and things that other people do not like at any given time. But what I want to understand is, if you I know that you are one of the best operators in this market and you want to operate your assets. I wonder if you would ever consider taking The answer is that if the chemistry and the
The answer is that if the chemistry and the chemistry with whoever is there, we would not exclude it. We are there to consider and combine forces, which is very important for us. So I think as an industry, we are fragmented the way we are and in my intertanko hat, we try to make it as less fragmented as possible.
Thank you, Nick. One more about the new regulations NOx, SOx seems that they might come into effect in 2020. Can you give us, as Chairman of Interscanto, your view of if this is going to be implemented or there is a chance that it will take any extension? And second, what kind of implications it's going to have both for the industry and also for your growth plans? I want to ask what kind of options your company has.
I mean, if you would consider LNG fuel vessels, we just read about a new order from Sovcomflot. What are the alternatives for the ship owners?
Yes. Well, just all our new all our current phase new building program, which we're coming it's coming to fruition within this year is LNG capable. So we have made the all we have made the investment, we have taken all the steps to be able with a small additional investment to run the vessels with gas if we decide so. So that is something that we preemptively asked our design team, our new building department to make sure that that is there for us. As an industry, we are as an industry, we would be ready and to take over new legislation when the actual fuels are there for us to burn that create this.
We will not want to see our ships ending up being mini refineries. We believe that it's not the correct it's not the role of a ship owner to be a refiner at the same time unless we get paid for both processes, the refining and transportation part of it. However, if it doesn't change, there's a silver lining, which it's not our preferred, but a lot of older ships, anything which is approaching a special or third special survey, most probably will have to be recycled, which is a polite word, going forward, which will create an instability in the market, which will be positive. But we would rather not have to reach that scenario.
Can you explain? You think that if it is implemented, you think that the vessels above 15 years old are coming obsolete and they are scrubbing? Did they understand well?
No. I said many vessels that we do not have because the technological, the space and the technology to become to they will either have to accept paying very expensive bunkers or accept the scrubber technology. And I think many of those ships or a number of those ships might decide it's not worth it. It's in the economics of every company and how well depreciated those assets are.
Thank you very much, Nick.
Thank you. Your next question comes from Gregory Lewis from Credit Suisse. Gregory, your line is open, sir.
Good afternoon. This is Joe Nelson on for Greg. And thanks for taking my question.
Hi.
Just one quick one to start, maybe just a follow-up on some of the others asked. As you think about tanker asset prices being kind of near their lows at this point, is there any relative value in your opinion? Does any one particular class or is it crude versus product look more attractive than any other in your opinion?
Well, we have not invented the right, I would say, the right recipe for those we are client driven. We have we can turn our product colors into cutting dirty products and crude if it is required. So we're completely client driven in what we do. We have companies out there that have found the successful formula and they either buy only VLCCs, they either buy Suezmaxes or own product carriers. We are diversified because we follow what our clients require us to do.
And then just one maybe on the market. OPEC's production cuts seem to be real, and they seem to be impacting the tanker market the last couple of months. But we've also had a surge in new build deliveries. And meanwhile, demand for oil still seems pretty healthy. So in your opinion, I mean, as you think about the pressure in the spot market, is it more from a supply angle, that is to say, an over delivery?
Or is it maybe just the fact that there's less oil being moved on the market on the water, say, as opposed to
the back half of last year?
We have not really felt the lack of we have not felt the lack of demand for our services since the beginning of the year. So I think if there are you might have a couple of more ships, let's say, calling new deliveries from the old backlog that are coming in from the shipyards in the east that might bring the VLCC market down from 60 to 50 or 55. Saudi Arabia, I think they have made it very obvious that they need to export in order to meet their goals. And don't forget, they have a very, very low breakeven in what they're doing. There is a lot of I think more and more production from the United States.
So I think it has to do more with supplier vessels. So we have not felt that the lack of cargoes really in the day to day business that we do.
And don't forget, in the
Q1, the majority the majority of the Western in the Western world, the refiners go through maintenance period. And that's where they cannot import as much crude as they would. So we're expecting this to change in the next couple of quarters also.
Thanks, Nick. Appreciate the color. Thanks, guys.
There are no further questions at this time, sir. Please do continue.
Very good. Well, again, thank you very much for your time. Happy enjoy St. Patrick's Day. And the management of the company is going to be at the Capital Link and various other events next week.
I'm looking forward to meet many of you face to face and continue the exciting dialogue. Thank you very much.
Thank you, ladies and gentlemen. That does conclude your conference for today. Thank you all for participating. You may all disconnect.