Tsakos Energy Navigation Limited Friday reported results (unaudited) for the second quarter and first six months of 2012. SECOND QUARTER RESULTS Revenues, net of voyage expenses and commissions, were $72.0 million in the second quarter of 2012, an increase of 12.7% over the second quarter of 2011, despite a continuation of the difficult freight market as a result of tanker oversupply. However, there was considerable relief in the second quarter of 2012 in the form of reduced bunker costs for spot vessels by 5% as oil prices fell and from reduced consumption, especially by the VLCCS which incurred lengthy repositioning voyages last year.
On average, TEN's fleet had 48.0 vessels (including a non-operating VLCC La Prudencia which is held for sale) versus 47.5 vessels in the prior year quarter. Excluding La Prudencia, fleet utilization remained high at 98.4%. The average daily time charter equivalent rate per vessel was $17,714 compared to $16,426 in the second quarter of 2011, and $17,129 in the first quarter of 2012. Rates for most sectors were not significantly different from those of the second quarter of 2011 except for the handysize vessels where rates were down, but this was outweighed by the impact of the LNG carrier, Neo Energy which earned nearly four times as much as the rate it was earning in the second quarter of 2011. The VLCC La Madrina, which is also held for sale, was active during the quarter and earned a break-even rate which allowed it to generate a positive EBITDA.
Total operating costs for the second quarter of 2012 amounted to $32.1 million versus $33.1 million for the same period last year and $35.5 million in the first quarter of 2012. Average daily operating costs per vessel were $7,505 in the second quarter of 2012 compared to $7,826 in the same period of 2011, and considerably less (by 10%) from the unusual level reached in the first quarter of 2012 caused by high non-deferrable dry-docking expenditure. Cost savings on purchases achieved by the technical managers, and the strengthening of the US dollar against the Euro were also factors in the reduction.
Depreciation and dry-docking amortization costs totaled $24.9 million in the second quarter of 2012 compared to $26.0 million in the second quarter of 2011, due to cessation of depreciation following the impairment and categorization as held for sale of the two older VLCCS at the end of 2011. Technical and commercial management fees were approximately the same as in the previous second quarter at just under $4.0 million. G&A costs were down by nearly 10% from the previous second quarter due to savings in most categories.
Interest and finance costs in the second quarter of 2012 were $16.1 million, nearly 5% down from the previous second quarter, but up by $5.8 million from the first quarter of 2012. This was mainly due to flat movements in the valuations of non-hedging interest rate swaps in the second quarter of 2012, compared to over $3 million gains in the first quarter of 2012. There was also a negative valuation movement on the bunker swap of $1.9 million, but this was because of lower bunker prices in the quarter the results of which outweighed the negative movement on the related swap.
The second quarter of 2012 ended in a net loss of $5.7 million or $0.10 per share compared to a net loss of $18.1 million in the second quarter of 2011.
TEN's liquidity at the end of the second quarter of 2012 remained strong. Total cash and investments amounted to $221 million. Total indebtedness since the second quarter of 2011, fell by $53 million. During the second quarter of 2012 TEN issued ten million shares in a secondary offering which raised a net amount of $62.7 million. Cash flow from net income before depreciation, amortization and finance costs ("EBITDA") was $35.3 million. Despite the difficult market, all the vessels generated positive EBITDA, except for the non-operational La Prudencia and the product carrier Aegeas which underwent an extensive dry-docking.
SIX MONTH RESULTS
Revenues, net of voyage expenses and commissions, in the first six months of 2012, totaled $138.2 million, a modest improvement over the first half of 2011. TEN operated an average of 48.0 vessels as compared with 47.7 in the first half of 2011, although the VLCC La Prudencia did not operate in the first half of 2012. The average daily time charter equivalent rate per vessel was $17,407 and daily operating expenses per ship were $7,906. Depreciation and dry-docking amortization costs were $49.6 million. General and administrative expenses totaled $1.8 million, compared to $2.2 million in the first half of 2011.
Interest and finance costs increased in the first half of 2012 to $26.4 million, mainly due to the reduction in positive swap valuation movements.
In the first half of 2012, there was a net loss of $14.5 million, or $0.29 per diluted share.
QUARTERLY DIVIDEND
As announced today, the Company's Board of Directors has declared a quarterly dividend of $0.15 per share of common stock outstanding payable on September 14, 2012 to shareholders of record as of September 7, 2012. Inclusive of this distribution, TEN has distributed in total $9.525 per share in dividends to its shareholders since the Company was listed on the NYSE in March of 2002. The listing price was $7.50 per share taking into account the 2-1 share split of November 14, 2007.
SUBSEQUENT EVENTS
On July 27, 2012 the Company announced a two-year charter of the 2008-built aframax tanker Nippon Princess to the existing charterer, a state owned company. The gross revenues from this charter over the corresponding renewal period are expected to be $14.5 million.
On July 31 and in direct continuation of its prior charter, the Company has been successful in re-fixing the 2003-built panamax product tanker Maya for a period of twelve months for a minimum rate that is expected to generate gross revenues of over $5.5 million.
FLEET STRATEGY & OUTLOOK
The vessel supply situation in the crude market continued to provide a lid to any material rate appreciation that the current world oil demand would have triggered and for another quarter the tanker industry fell victim of its prior and on occasions, uncontrollable, lust for newbuildings. For products market, weak demand in Europe and slow growth in the U.S. economy failed to strengthen rates. On a positive note however, the supply situation seems to be recalibrating towards some equilibrium with the tanker orderbook, this quarter, down to 12% of the fleet (13% in Q1 2012) compared to 27% at the end of 2009. With world economies, driven by China and India with annual GDP growths in the 8.0-9.0% range compared to 1.5% in the US, on the rebound, oil consumption levels at record highs coupled with political tensions around the world, the tanker market downturn may well come to an end sooner than expected.
TEN, due to its size, fleet diversification and modernity, extended client reach and experience in managing cycles, has rode another difficult quarter with fewer bruises then one would had anticipated. With over $221 million in cash and investments reserves at times when liquidity is scarce for most the Company continued to operate in a "business-as-usual" mode and used this time not only to further solidify its exposure with major international end-users but also to expand its chartering horizons further afield with equally pristine names. Its exposure in LNG and shuttle tankers has allowed for such latitude.
Cost containment will continue to feature highly on the agenda going forward and the close to 10.0% drop in quarter-over-quarter daily operating expenses, without jeopardizing the safety of our people on board, provides a sample of our intentions and capability.
In terms of growth, management is currently exploring various opportunities in LNG, shuttle tankers and other mainstream offshore markets while keeping a close eye on developments with conventional tankers which to some degree is entwined to developments in the shipping banking sector. The placement of a state-of-the-art tri-fuel LNG newbuilding order (and an option for an additional vessel) entrenches the Company deeper into this close-knit and high barriers-to-entry market, and management believes that TEN can leverage this modest exposure to its long term advantage.
"Following our tested corporate strategy, TEN has managed to absorb the pressures of the tanker markets while navigating the Company closer to profitability," stated Mr. Nikolas P. Tsakos, President and Chief Executive Officer of TEN. "As mentioned in the past, high utilization, cost control, cash generation and a healthy balance sheet are the cornerstones of our business model. We continue to be alert of market developments and remain optimistic that the Company is well positioned to benefit when the market turns," Mr. Tsakos concluded.
Source: Tsakos Energy Navigation Ltd.