Thank you for standing by, ladies and gentlemen, and welcome to TACOS Energy Navigation Conference Call on the First Quarter 2016 Financial Results. We have with us Mr. Takisadopoglou, 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 that the conference is being recorded today. I now pass the floor to Mr.
Nicholas Bornosas, 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 Bonnouris of Capital Link, Investor Relations Advisor to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the Q1 of 2016. In case we do not have a copy of today's earnings release, please call us at 212-661
7566
or email us at 10tencapitalinc.com and we will email a copy to you right away. Please note that parallel to today's conference call, there is also a live audio and slide webcast, which can be accessed on the company's website on the front page at www.tenn.gr. The conference call will follow the presentation slides, so please, we urge you to access our presentation on the webcast. Please note that the slides of the webcast presentation will be available as an archive on the company's website after the conference call. Also, please note that the slides of the webcast presentation are user controlled, 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 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 Trakos Energy Navigation. Mr. Arapoglou, please go ahead, sir.
Thank you, Nicholas. Good morning, everyone. Another quarter of healthy revenues and profitability, As we continue to shift our ship employment policy towards longer term charters to lock in high longer returns and offset market cyclicality, we are creating a strong and sustainable revenue flow. This will be further boosted by the additional accretive revenue from our record newbuilding program in the forthcoming months expected to contribute $100,000,000 in EBITDA. I'd also like here to highlight and congratulate management and our anchor shareholder for their effective and continued focus on expenses.
Operating expenses for the quarter declined despite the addition of 1 extra vessel during the challenging surroundings in the shipping landscape right now, 10 is clearly a rare outstanding success. So once again, congratulations to the team and we all look forward to more good news going forward. Over to you now Nikos Tsakos.
[SPEAKER MIHAEL POLYMEROPOULOS:] Thank you, Chairman, and good morning to everybody. We have the great pleasure to have here not only our Chairman but our honorary Chairman and our Deputy Chairman, Mr. Joliff and Mr. Stavropoulos. So it's very nice to host all of you today on our results, in our Q1 results.
Again, we are looking at the market that is comfortable, it is positive. And for the companies who are playing in the upper tier of the Premier League, to put it in football terms, I think it is business is ample business is there to be taking also for long term. This has been a quarter where the market has been very supportive. We have seen some cyclicality on the rates in the market. Our results actually were affected more because we decided to be preemptive and take out some of our largest ships, our Suezmaxes into complete the dry dockings and special surveys in order to fulfill some regularity obligations that we have to do before the end of the Q2 in Q1.
Our results are still positive, but as Paul would say, there would have been much more positive if we had not taken some off hire. And of course, I think because of our very high utilization which ranges between 99% 100% usually, 95.5% still is much higher than the market than the market usual, the market more. However, for us, so then this 95.5% makes Paul a difference that you will talk us about. But looking forward, the Q2 has started positively. We have the first of our as the Chairman mentioned, the first of our 15 deliveries.
We had the pleasure to see this beautiful vessel being the resale, being taking delivery at Hyundai and she has been chartered at a very accretive spot rate right now with significant chances to have a very accretive long term charter going forward when the time is right. But before I take more of your time, I will ask our COO, George Arounian, to give us a quick, I think, story of what happened in the up to now. And then Paul will continue with the financials, and I will be back with the team to answer any questions. And again, thank you for your support and we're looking for another exciting period of growth going forward. I mean this is our biggest period of growth with 15 ships we're going to be contribute or adding to our already quite high EBITDA another $100,000,000 in the next 5 or 6 quarters.
So we're very excited. George? Thank you.
Thank you, Nikos. We reported today another profitable quarter following strong performance in a tanker market that remains robust following 3 week years 2010 to 2013. The operating performance year to date and the organic growth that is coming as a result of the company's new building program that gets delivered, we believe we produce another profitable year in 2016. For those of you who are connected to the Internet and our website, there is an online slide presentation, the format we will follow during the call. Let's turn to Slide number 3 with the key operating highlights.
In early February, we took delivery of a 2012 built Suezmax tanker, sister vessel to a 2,009 built Suezmax we took delivery late last year. Both vessels upon delivery started operating in the spot market taking advantage of strong freight market environment. In May, we also took delivery of our new building VLCC U leases which immediately entered into a short term time charter before waiting for this to be committed to a longer period charter. This year marks the busiest growth year since 2007 for the company with 9 newbuilding vessels expected to enter the fleet. With the exception of the LNG vessel Maria Energy or other newbuilding vessels have committed long term charters at accretive rates.
During the Q1 of 2016, 10 operated on average 49.6 vessels. On a pro form a basis, we have a fleet of 65 vessels excluding the option for a 4th shuttle tanker. Thanks to the modernity of the fleet and the balanced employment strategy, we continue to operate the fleet at a very high utilization rate. 95.3% for the quarter which is almost full utilization considering that this number incorporates rescheduled drydockings. As you know, all vessels in the fleet have to periodically undergo scheduled repairs.
We would also like to highlight that in order to capture the healthy rates that are currently available for time charter business as a result of a sustained strong spot market, then has gradually fixed more vessels on time charters with or without profit sharing or renewed terminating charters at higher rates. 5 Panamax tankers had their charters extended for 2 more years between minimum 18,500 and maximum $28,500 per day with the starting rate for the 1st 6 months at $22,000 per day. The increase in the 5 vessels combined annual revenue compensates for the low income, the neo energy that is expected to have during 2016 compensating, competing in a challenging LNG market after completing a very successful 4 year time charter. The Neo Energy trading in the spot market is now fixed on up to 2 months at a rate that produces positive EBITDA. With the company's new building vessels that will gradually enter the fleet during the year, we expect the annual contracted coverage of the fleet to go to 70%.
The low oil price environment continues to impact the crude sector and tend in a very positive way. World oil demand continues to be strong. For 2016, the International Energy Agency expects oil demand growth to be 1,200,000 barrels per day. However, demand during the Q1 of 2016 has been stronger at 1,400,000 barrels per day, thanks to stronger than forecasted demand from India and China. Despite the spike in the price of oil since February, at 50, the price of oil is still 50% below the average Brent price for 2014.
The low oil price continues to stimulate demand and encourages strategic and commercial stockpiling. On the supply side, OPEC produces at record levels reaching 33,200,000 barrels per day in April. After the lifting of sanctions, Iran has returned to the pre sanction production levels of about 3,500,000 barrels per day. Iraqi production is also at record levels at 4,300,000 barrels per day. Production outside OPEC continues to decline.
U. S. Crude oil production has fallen as a result of the lower price of oil and the slowdown in production has so far a positive impact on U. S. Crude oil imports.
Supply of oil is expected to remain at elevated levels going forward and this is positive for tanker demand and tanker earnings. Fleet growth is manageable. The order book for the next 2 plus years currently stands at 15.6%. However, 12% of the fleet is currently over 15 years and natural fleet replacement should gradually reduce the effect of the new tonnage in the market. Main shipyards in the Far East are in financial distress which could lead to restructuring and capacity cuts.
In addition, lack of access to capital has resulted in very few orders so far in 2016. If these trends continue, global fleet growth will be low after the current quarter in 2016 2017. Overall, we expect 2016 to be another strong year for crude tankers, thanks to the growing global oil demand, high supply of oil, relatively low oil price and moderate fleet growth. Slide number 4 has the main financial highlights of our press release which Paul will present in more detail. I would like to highlight the strong profitability for both for the quarter and more particularly net income of 25,400,000 EBITDA of 60,000,000 and a very strong cash reserve of 276,000,000.
The next slide is the fleet and we see here a pro form a fleet of 65 vessels which currently includes 51 vessels in operation and the new building program which out of the 15 vessels 12 are already in very long and accretive time charter business and are fixed on period on employment with minimum 5 year duration excluding any optional period. When the effect of the full newbuilding program into the fleet will add the company's EBITDA approximately another 100,000,000. Dollars Predominantly the leases and gates that you see in crude oil transportation, there is sizable number of vessels engaged in transporting products while 5 vessels are specialized vessels covering the LNG and the offshore shuttle tanker sector. The fleet is very modern with the average days of the operating fleet at 8.5 years versus almost 10 years for the World Tanker fleet. We are a very low cost base operator as you see on the next slide as most of the fleet has been built and acquired before the rise of newbuilding prices.
The freight market has been strong and is expected to remain strong during the year as the relative low oil price environment stimulates demand for stockpiling especially from oil importing countries and additional energy spending from consumer in both developed and developing economies. We continue to see how we continued the balanced employment strategy of the corporate fleet through a mix spot charters, COAs and pooling arrangements and period charters with fixed rates and minimum rates that have profit sharing arrangements. This is the next slide, the employment slide. 31 vessels in the operating fleet are in secured employment, including 9 vessels and profit sharing arrangements covering 60% of the 2016 operating days. The average charter per vessel today is 2.4 years.
29 vessels including the 9 on profit sharing are on flexible employment whose earnings are affected by the spot market. As you can see for every $1,000 increase in the spot rates the annual effect for $0.10 is an increase of $0.08 in EPS. In the secured employment charters, we had the long term time charter of the new building vessels that will enter the fleet later in the year in 2017 from where TEN expects a minimum revenue backlog of 1.5 $1,000,000,000 and an additional annualized EBITDA of $100,000,000 On the oil demand, just to highlight a few things again, 2016 oil demand is expected to grow at least by 1,200,000 barrels per day which is closer to the long term trend, although we have been pleasantly surprised by the demand numbers in the 4th quarter which has come higher at 1,400,000 barrels per day. The global economy despite headwinds in some regions continues to grow and the lower oil prices are supporting strong demand especially in high consuming countries like the United States and developing economies like China and India. This supply driven drop in the price of oil benefits the tanker market because we have rising volumes, longer distances and manageable fleet growth for crude tankers and all these factors expect to play favorably for us in 2016 and beyond.
The next slide is basically the history of our cash distributions. We have increased the dividend distribution in 2016 from $0.06 to $0.08 per quarter, which is a 33% increase. And we paid in total $0.24 per share in 2015 while this year we will pay $0.32 per share. The first dividend for 2016 was paid on April 7. The next dividend which we announced today is scheduled for August 10.
We have 2 more dividend payments in October December at dates that will be announced during the course of the year. The company likes to reward shareholders with sustainable and growing dividends. In total, since 2002, TEN has paid $10.28 in cash dividends or approximately 430,000,000 and this compares with a listing price in our IPO of $7.50 So the average yield, if one goes back to 2,002 is 5.25. In addition to the dividend distribution, the company has a $20,000,000 buyback program in place that so far has repurchased 2,200,000 shares at an all in common shares at an all in cost of $5.84 The next slide has the most recent NED calculation and the analyst has covered TEN. The vision of the management of the company is to continue growing TEN responsibly and at the same time have the reality being reflected in the company's share price.
At the same time, believing in the company's value and the business in which we operate, management continue to increase their holdings in the company as the relating filings indicate. That concludes the operational part of our presentation. Paul will walk you through the financial highlights for the Q1. Paul?
Thank
you, John.
Well, TEN had a good quarter, in line with our expectations and which could have more closely matched the prior year's excellent Q1, except for a number of factors that either were unavoidable or were deliberate to secure future benefits. As a result, net income of $25,400,000 in quarter 1 it was down $12,000,000 against quarter 1, 2015, due mainly to a foreign net revenue. Firstly, the lucrative time charter of our LNG carrier ended halfway through the quarter, reducing our net revenue in quarter 1 by nearly $4,000,000 compared to previous quarters. This may affect most of 2016, although we are now picking up short term charters as mentioned. Secondly, scheduled dry dockings of 3 Suezmaxes were advanced to undergo necessary and beneficial regulatory upgrading, which lost us 120 days earnings equivalent to over $3,000,000 Dry docking days lost in the prior quarter 1 were minimal.
A further $1,000,000 reduction from quarter 1, 2015 was due to the sale of 2 ships in 2015, offset by strong revenue from the 2 new Suezmaxes, although one only started operations in mid quarter. There was some softening of the spot market, which affected certain of our vessels, some of our Iphremaxes and Handysize product carriers compared to last year's quarter 1. And of course, our elderly VLCC did not repeat the very rewarding storage charter of last year. All this contributed to a reduction of $3,000,000 to $4,000,000 revenue compared to quarter 1, 2015. Operating expenses in particular crew costs fell by $1,000,000 mainly due to a stronger U.
S. Dollar versus euro and tighter control by the technical managers as mentioned by the Chairman. Daily OpEx per vessel fell to below $7,900 that is to levels we were achieving half a decade ago. Finance costs were down $500,000 to $7,900,000 mainly because of a non recurring expense in last year's quarter 1. A small increase in loan interest was offset by a more benign impact of bunker hitches than we had expected.
EBITDA totaled $60,000,000 down from the prior quarter 1, but all vessels actually earned positive EBITDA in quarter 1, even those vessels undergoing drydocking in the quarter. In quarter 1, dollars 76,000,000 debt was repaid, including $47,000,000 as prepayment on a maturing loan. Dollars 101,000,000 new debt was drawn, of which $31,000,000 refinanced the expired loans, dollars 25,000,000 was pre delivery financing relating to new buildings, and $45,000,000 was for part financing the acquisition of the Suezmax Decathlon. As at the end of quarter 1, we had $1,420,000,000 debt outstanding and net debt to capital was under 45%. Our all in Q1 cost of debt still remained at a modest 2.5%.
With current cash of $270,000,000 and an expected healthy year in earnings plus potential proceeds from vessel sales and with oil prices expected to continue benefiting voyage costs and encouraging demand, we are confident of meeting all our operational, newbuilding, dividend, share buyback and debt service obligations through 2017. This confidence will grow with delivery of our new vessels from June to year end with accretive charters attached, a contribution which will do much to balance any LNG carrier lost time. And this concludes my comments. And now I'll hand the call back to Nikos.
Thank you, Paul, and thank you for the good news. And hopefully, that we'll get even better as we go into the year and our deliveries will come to build more and more profitability and more EBITDA. So we are very excited. As I said 2016 is the most pivotal year of growth in the company for many, many years. And we are looking to continue, of course, and grow our dividend policy, which is something that we have we are one of the very few companies in the cyclical market that since inception we have maintained a dividend and hopefully it will go from strength to strength.
The market environment we are facing, it's a comfortable market environment. We can see that there is more uncertainty and less focus than we had a year ago, whereas the VLCC rates have stayed very strong, very similar to a year ago. I think we are seeing a 20% to 25% decrease in the other segments of the market, perhaps excluding the smaller sizes where there have always been a traditional less fluctuation in this market. We are seeing the LNG segment hitting bottom sometime in the Q1. We have signs there that although this market is starting to get some steam, we are seeing the trains and the projects starting to arrive.
We're seeing the U. S. Exports becoming more a reality in this respect. We're seeing more gas coming and furthermore to come out of Australia. So I think this is a market that we have to absorb I would say 40 to 50 vessels that are out there, but when this happens and I think it will happen within 2016 then the market will be very strong and that's where we want to position our timing and grow the company in that respect.
So we are looking at an exciting year. We have 100,000,000 of EBITDA already additional EBITDA from our existing vessels. And with this in mind, we would like to open the floor to any questions. Hi, Jenny. Yes, I think we would like to open the floor for any questions.
That's perfect. Thank you very much. And from Deutsche Bank, you have a question from the line of Jason Crescenzo. And I hope I've pronounced your name correctly, sir.
I hope you pronounced it correctly. Hi, guys. Thanks for taking the question. It was recently reported you fixed the VLC Ulysses on an attractive time charter. While I understand you may not be able to comment on the specifics, could you just give a high level overview or outlook of how you see the VLCC time charter market evolving?
Yes. Thank you. Well, as I said, this is the market that has kept the very strong, the VLCC market also on the spot. I think as we speak, since we started this call, I even saw that the market which is waking up in your part of the world after your Memorial Day weekend is becoming even stronger. So we closed at world scale 56, the Far Eastern roots, or we have ships on subjects at around 62.5, which starts touching the 50,000, 55,000 time charter equivalent.
So I think there is liquidity, there is strength in this market. We first, maiden voyage is a very accretive voyage, way above anything you can get today on time charter. A time charter, you can get for a long period of time, something starting with a 4. We have a lot of offers for 1st class end users as we always use. And I think most probably we will be looking to do something like that.
Very good. Thank you for that. And just one last one. Regarding the timing or parameters of potential asset sales, could you just give a little more color on that?
Well, I think we have always announced that we are always looking to keep the fleet young. We have quite a nice number a nice mix of vessels there and our 1st generation vessels, which are all built in the best yards around outside, there's always an appetite for them. Right now, there is an uncertainty mainly due to the lack of bank financing for secondhand tonnage. There are negotiations going on, but there's nothing I think firm that we could announce as we speak today.
I got you. And just if I could follow-up, just some guidance concerning the potential age of assets you would be looking to sell and or I know you said there wasn't anything in timing, but anything in the pipeline coming up soon?
Yes, I think we hope to be able within before the end of the Q3 to announce the sales of our ships which are 10 years or older.
Very good. That's it for me. Thanks a lot for the time guys. Thank you.
Thank you very much indeed. Now from Stifel, you have a question from the line of Ben Nolan. And your line is now open, sir.
Yes. This is actually Steven Titsworth on for Ben Nolan. I had a couple of questions. First is centering around the Korean shipyard news. Recently there's been a lot of talk about STX going through financial difficulties, very troubled.
In your view, do you believe there could be a material contraction in shipyard capacity over the next coming years?
I think we are seeing a very serious contraction of new building capacity. And I think it was time. We saw this starting in China. If for us old enough to remember the 10 years ago what was happening. I think, as you know, we have Posidonia coming here in Greece next week, and I hope as many of you will come and visit us.
We have the company's opening party here, open house party on 7th 8th. And we would like to see as many of you and come kick the tires, see our training centers, meet some of our captains and the people who run actually the ships. And 10 years ago, at the similar event, we were, I would say, harassed by Chinese shipyards of all sizes and sorts of all types of ship of people. I think this is something that does not exist anymore. Right now, we are seeing that this has now been moved to the more traditional shipyards, the big shipyards of Japan and Korea.
I think we are going to see shrinkage in this. It comes because of the business of the damage that has been caused by the offshore industry, number 1, and of course, the overcapacity that has flooded the market in dry cargo containers. So I think although we feel very close to the shipyards, I think for the long term survival and profitability of our business, the less of new building capacity out there, the better it is.
Perfect, perfect. And then my last question just centers around your share repurchase program. I know you purchased $2,200,000 so far. It looks like you have about $7,000,000 left over just based on what you spent. Have you thought about upsizing that share repurchase program or continuing at the current pace or perhaps maybe focusing more on paying down debt instead?
Yes. I think this is a very fair question. Yes, I think we will be increasing as the Board has taken the decision to increase it. However, we have to understand that we buy and operate ships, we are a ship owner. It's not our business to buy and cancel shares.
We are not an investment banker. And so I think our main business, if we want to reward our shareholders, we're going to do it through dividends and through reducing our debt. These are our first. And if we have remaining cash, of course, an investment in our services are very, very good investments right now.
Okay, perfect. That does it for me. Thank you for your time.
Thank you.
Okay. Thank you very much indeed, sir. Now your next question from JPMorgan comes from the line of Noah Parquette. And your line is open, sir.
Thanks for taking my questions. I wanted to ask, you just finished up the financing for your new build program. There's a lot of talk about a lack of financing out there. Can you talk a little bit about how those discussions went? What your takeaway is in terms of availability of finance to maybe other owners?
I think that there is adequate finance for companies that have a long term strategy, that have a majority of a fleet that is a strategically strategic fleet with our relationships. As you know, we are expecting we're starting taking over 9 Aframaxes with very long time charters to site oil, one of the largest oil producers in the world. So I think for deals like this for us and the remaining of our peer group, I would say a dozen companies out there, there is Adecco Finance and there are banks chasing competitive giving competitive terms for this business. But then if you go to the other side of the equation, I think for new startups, for people who are looking to buy a secondhand ship, I think there's really nothing more than 50% oil finance in case you can even get that. So I think it is and of course there is no finance for speculative new business.
It's Niko, if I can add to this. Needless to say that banks all over the world are finding it more difficult to lend in view of the economic situation, in view of the heavier capital requirements they have. It's not just shipping that they're hesitant. It's a phenomenon that most of the world banks are going through right now that are more picky and have more limited capital to lend.
Okay. And are you still seeing importexport banks kind of filling the void there or has that come down too?
I think very selectively, very selectively themselves. They will only do something like that if there is a major owner. As I said, we're way what makes us comfortable, there's no of course no new buildings are being ordered, neither in, of course, dry carbon containers, but also in tankers right now. And I think that makes us more comfortable for going forward that the bubble we all had to face the burst of in 2,008. The 2009 is not there.
Okay. And then I just wanted to ask, can you give an update on your kind of employment strategy for the LNG vessels? The Neo Energy is not earning anything right now just to confirm, right?
The Neo Energy is well, it's earning, but it's not anything to write home about. Okay.
So it's basically in the spot market now?
The tip is on the spot market. I think in these markets, it is very, very important to get the get as we say the propeller moving and to get the steel coal to have a cool down ship. So I think this is what most of the ships on the spot market are doing. We have been very lucky after almost 9 years of very profitable employment to be immune from the spot market, which we are facing today where we have beefed up our operations. We have signed a joint venture with 1 of the largest technical LNG technical managers and shuttle shipping and trading for running the ships in house and we're very proud and excited about this new development.
We're beefing up also on the commercial side and we are actually optimistic that this market will be turning later this year to levels that will be accretive again.
Okay. So and when you're looking at the FSRUs, is it fair to say that that was applied to your older vessel? And then your view on the LNG market itself, you expect to approve this year, so you would look for regular employment for your newbuild. Is that kind of a fair assessment?
There is employment we could secure today at a very accretive rate in 18 months down the road. And we could fix the Maria today for delivery 2019 beginning 2019 end of 2018 at very accretive rates. But of course you have to find something to do in the meantime. So it's for a company like ours that is well diversified in the energy segment, we have 2 out of 65 vessels in that. In that part of the business, I think it is a good it's a luxury problem to have how to get into to do with the Marianas.
Okay. That's really helpful. And then I just wanted to ask about the Suezmaxes you drydocked. Are there any other ships that have that type of drydocking that needs to happen in the next couple of quarters? Or is that all done now?
We have a couple of vessels this quarter and then one more around the end of Q4.
Okay. All right. Thanks. That's all I have.
Thank you.
Thank you very much indeed. Now your next question from Wells Fargo comes from the line of Mike Webber. Your line is now open, sir.
Good afternoon, gentlemen. This is Donald stepping in for Mike. How are
you? Hi, very well. Thank you.
So there have been a couple of recent transactions on the crude tanker side that suggests newbuild levels maybe back to decade lows. And while I understand that the bulk of your cash is focused on your current CapEx and general corporate purposes, are you seeing more aggressive inquiry from yards for future newbuild activity? And is this starting to look attractive to you?
Yes. I think I mean we will not and as my role as the current Chairman of Intertango, I think we will not do any speculative newbuilding orders because I think by putting more supply in the market, it will do as bad long term. However, if there are as we did previously a year or more ago with the 2 VLCC resales against share price, we will look at resales of course when they become interested. But I think we are not there as a company. There are enough vessels out there right now to service our clients and for us to earn a respectable return that we do not need to go out in the market and order ships even if the vessels keep on dropping in value as you said.
Got it. And then my next question is just sort of a follow-up on your previous comments on financing. I guess if we step back and think about 12 months ago, certainly owners were able to go out to banks and get 70%, 80% financing. I mean is that constrained? Is it very difficult right now to get any financing above 60%?
Or is it even moved lower for some of the small and less liquid owners?
I think first of all, smaller owners cannot get financed for a vessel that they will buy on a speculative basis. I think 50% is the 70% of the past right now. So that's our number of factors with 50% rather than 7% that you will lend up to. But of course, if you have a good reputation and if you have a project with employment, you might be able to get something better. So as I said, there are a dozen companies out there in our peer group on the energy segment that compete for that upper scale of finance.
All right. Appreciate the color guys and enjoy Pazdoni next week.
Thank you. Hope to see you there.
Thank you very much indeed, sir. Now from Morgan Stanley, your next question comes from the line of Fotis Giannakoulis.
This is actually Ben stepping in Fotis. I just had one question relating to floating storage in the oil macro. So several sources recently have written about increased floating storage and its relation to potentially growing global inventories. I just wanted some color from you guys on how much of this you think may still be contango driven and what sort of effect it has both on the broader oil macro climate and tanker rates?
I mean, we have seen that the price of oil has dropped since from $114 all the way down to $25, dollars 26 from the summer of 2014 until January of this year. And in the last 3 months has gradually gone back to the 50 level. We have the contango has been there for a short period of time last year. But we have seen charterers asking from owners the option when they have a regular time charter to also include the storage as part of their overall, let's say, use of the vessel. And I think most of the times, owners have given this option.
So from even if the contango was not there of the full time to support the economics of the trade, the combination of trading the vessel, moving cargoes and partially storing it for a period of time, taking advantage of the change in the market that we have seen since February seems to be working.
Okay. Thank you so much, guys.
Thank you very much indeed. Now from UBS Securities, you have a question from the line of Spiro Dounis. Your line is open, sir.
Good morning, gentlemen. Thanks for taking the question. Just wanted to Paul, maybe this one's for you. Obviously, leverage levels look pretty good right now. I think you guys have some of the lowest in terms of net debt.
Just wondering if you can give us a sense maybe the pro form a leverage of what that looks like when you get full delivery of the fleet?
Are we talking about balance sheet leverage or the covenant leverage?
Yes, balance sheet would be great.
Yes, I think it's at an all time low now. So inevitably with the new debt that's coming on, it will start to creep up. In the past, we've had net debt to capital as high as 65%. I don't think we'll go that high, but certainly, yes, we could go 55% to 60%. We find that that's very manageable.
It was manageable in the past and we believe it will be manageable in the future. We've never had problems with our banks. Our relationships are so good due to our perfect debt service that even if it approached breaking covenants, we would not have a problem with the banks. But we're not likely even to get to that kind of situation. So we feel fairly comfortable with the situation that could potentially arise over the next year or so, 50%, 55%.
Okay. Perfect. Yes. That makes sense. And just, I guess, in terms of use of cash going forward, I think we talked about dividends and maybe share buybacks.
But I was just wondering on the preferred front, you got a few series of preferreds there carrying a pretty decent coupon. Just wondering how you're looking at those in relation to buying back those as opposed to something else?
I think this is a priority that we have. Our first preferred, I think, matures in 2018. And we would like to be able to refinance it with our cash after we finish with our newbuilding program. It fits very well. We're finishing our existing newbuilding program in the middle of next year.
So I think that will give us enough time to refinance it with our cash proceeds.
Got it. Okay. Last one, just on the FSRU. Just wondering if you think that maybe putting that vessel in for conversion before a contract to maybe sweeten the deal or get a leg up in the tendering process makes sense? Or is that just something that's maybe a little too risky?
The Head of our new building department, I think just jumped out of the window. Well, I don't think I think the vessels that we're building and specifically the Maria is an ideal vessel for FSRU. But I don't think right now we will be going through the investing $50,000,000 $60,000,000 in doing this on a speculation. But we have good leads on doing it for against long term business.
Perfect. That's it for me. Thanks guys.
Thank you.
Thank you very much indeed. Thank you. We've had a question come through from Macquillan Holding. You have a question from the line of Mark Suarez. Your line is open, sir.
Hi, guys. Thanks for taking my question. Just to go back on the employment strategy here. I know you mentioned your strategy of maybe going into period charters. How do you see the 2 VLCCs that you have right now?
I know that you have one for delivery. What's your strategy there in terms of time charter arrangements? And how do you look at profit sharing as you move forward?
As you know, profit sharing is for us the preferred way of doing business. We believe it's a win win situation both for the charters and for the owners. So I think this is what we're this is where we give prior sites when we talk to a major charter owner. So I think, of course, the quality of the charterer and FD is very important for us. And as long as we have a good quality charter with coming up with a profit sharing arrangement, I think this is something we prioritize.
So yes, you're correct. This is what we're it's closer to our mentality, to our strategy, and it has worked for us in the past. And we are looking and hopefully before the summer holidays, we will announce some of these type of businesses.
Okay. And then maybe we could take a step back, Nick. Looking at your overall capital deployment, you've done a pretty good job in your sources your uses of cash. Now moving forward, now that you have your newbuild coming in, you have a pretty clear road map in terms of newbuild growth and employment strategy. How do you view any excess cash going forward in terms of newbuild resales?
I think you mentioned that that's not really in your cards. But what about any secondhand opportunities, distressed assets that you can maybe put under quality long term time charters moving forward? Is that something you guys are looking into here?
We are looking very seriously into something like this. I think whatever does not I did not exclude new building resales. I mean those ships were going to be built by someone in the someone. So if they are going to be built, we'd rather buy them than leaving the market to somebody else if they make financials, etcetera. So resales is something we look at.
But what I think we do not look is speculative new buildings, of course, but we are looking at distressed fleets. I think this is something we have done in the past and this is something we will be using our resources for it going forward. Okay. And many banks are approaching us with this type deals because a lot of owners have mixed fleets. We are not one of those owners.
We have they have mixed fleets and they are tend to be in a crisis, as they say, sell the jewels of the house in order to go forward.
Right. And so that was going to be my follow-up question. And you mentioned the banks coming to D2 opportunity. Do you see that more on the crude tanker side, on some of the larger sized vessels or on the product side? What's your sense?
I think mix, it's funny you asked this because I guess we're looking as you know at the mix splits coming out which they have I think they have a good flavor of products of big sizes. So they have a combination of crude and product. And I think that makes sense. That fits very well in our fleet profile, which I think we have there in the presentation, which we are the most diversified energy mover out there.
Great. I appreciate the color, like always. Thanks for your
time. Thank
you. Thank you very much indeed. Now then your next question from Seaport Global comes from the line of Magnus Fayer. And your line is open sir.
Fejer. Just one last question, if you can maybe elaborate a little bit on your strategy for LNG going forward. You're both looking at SSRUs and also LNG, regular LNG. So what do you think as far as buying ships, either new builds or consolidate some of the existing supply going forward against long term contracts? I suppose you wouldn't buy anything on speculation.
I'm not sure you're talking mainly on the gas side? Yes. I think, yes, this is a business that we are using. As I said, we have been immune from the crisis or the past in the market. We were likely to have the NEO, one of the best quality ships out there operating profitably during a difficult time.
This has given us time to beef up our expertise on the operating side. We're doing it in house. Also on the commercial side, we're increasing this significantly. And we will be looking at situations that if a major oil company or another end user would like to part from one of their assets with a long or longish, because what is long in LNG now, it's not as long as it used to be, but it's been 5 years or 7 years employment, it's not 20 years. We would be there to do this.
And as long as the same time use our existing vessels in that employment in that deal. So we are looking to beef up the LNG segment.
I think you mentioned that you think the before 2020. Is that still kind of a goal? Or has that changed at all with the weakness that we're seeing in the market?
I think as a minimum would be to double the size to have 4 vessels. I think we are also in a wait and see situation right now because as jokingly we have discussed in the past, this industry changes quicker than the iPhone technology By the time you get LNG, LNG S appears and then you have to compete with Galaxy and the Androids. So it is a technology that changes quicker than other technologies. So we don't unless there's a long term employment, we don't want to invest in something that might not be a long term vessel with a long term use.
Okay, great. Thanks for clarifying.
Thank you.
Thank you very much indeed. There appear to be no further requests. So I shall pass the floor back to Mr. Nicholas Zakos for closing remarks.
Well, I will ask our Chairman to do the closing remarks, but I would again want to thank all of you for your questions. I think it shows that there is interest for our company and hopefully we can see the interest also reflecting on our share price very soon. The company is going from strength to strength. It has always been built on a very conservative long term process. I think our view is we're not looking to try to impress our shareholders for the next quarter, but we're taking decisions for the next generations to come.
So I think this is our logo here and we try to adhere to it as much as possible. That's why we have reached the stage that 2016 2017 would be years of extraordinary growth for us, almost 30% increase of our EBITDA with another 100,000,000 regardless of market conditions because most of it is fixed business, focusing on specialized segments which include shuttle tankers and long term strategic projects with Profitsure. We are looking at a market which is right now as we speak is well balanced. We might have to absorb some oversupply of tonnage going forward for 2016 and the remaining of 2016 and 2017. But I think that the market has, I would say, has the legs to be able to go through this.
We're going to maintain and increase our dividend and looking forward to welcome as many as possible of you in next week at Posidonia. And after myself, I would like to ask our Chairman, Mr. Arafatoglou for a closing statement. Thank you very much. [SPEAKER JOSE RAFAEL
FERNANDEZ:] Thank you. Thank you, Nicole. I just once again want to highlight that TEN always announces a clear plan of actions and it executes exactly what it commits to do. There are no surprises. If there are surprises, there are positive surprises.
It continues to grow according to plan, generating accretive business. It is the most diversified tanker transport business. And all this together continues not to justify its share price. So I believe that gradually the market will be convinced of the hidden value and this will soon be reflected on the stock price. Thank you.
Thank you and have a nice afternoon.
Thank you very much indeed, sir. And with many thanks to all our speakers today, that concludes the conference. And thank you for participating. You may now disconnect. Thank you so much, gentlemen.
Thank you, Jamie.
All the very best to you. Bye bye.