Capital Link hosted a presentation by the senior management of TEN Ltd. on Thursday, January 12, 2023. During the 45-minute session, Dr. Nikolas P. Tsakos, Founder, President & CEO, Paul Durham, CFO, George Saroglou, Chief Operating Officer and Harrys Kosmatos, Corporate Development Officer, described the strong tanker market, the current state of the company’s fleet, and its dividend policy as part of Capital Link’s Company Presentation Series.
Dr. Nikolas P. Tsakos, CEO, stressed that TEN is focused on capitalizing not only on periods when the market is strong, but also when it lags. He stated that the company’s current strategy includes chartering its vessels in the spot market, for short term periods, when the market is very strong.
The company has “taken advantage of the difficult times” to order its first four green, dual-fuel ships, Dr. Tsakos said, with the order backed by long time charters from one of the company’s main clients.
In terms of chartering, 40 of TEN’s 66 vessels on the water, or 61%, have market exposure, or a combination of spot and time charter, along with profit sharing.
A total of 44 of 66 vessels on the water, or 67%, are in secure revenue contracts, or fixed time charters and time charters with profit sharing. “This means that TEN is capturing the positive tanker market fundamentals that prevail today, George Saroglou, COO, stated.
“We have a simple operating model—we try to have our time charter vessels generate revenue to cover the company’s cash needs, the vessel operating expenses, finance expenses, overheads, chartering costs and commissions,” explained George Saroglou.
“We let the revenue from spot rating vessels opportunistically contribute to the profitability of the company,” he continued.
George Saroglou stressed the company’s commitment to keeping operating costs low and utilization rates high. Currently, TEN’s fleet utilization sits at nearly 94%. This figure is quite high, considering that a number of dry dockings for ship surveys that have taken place.
The company is also expecting a total of six newbuilds to be delivered from 3Q23 until 2Q25. Of these new vessels, four will be dual-fuel LNG, and “represent the company’s entrance into green shipping,” Saroglou said.
TEN has traditionally been active in the S&P market focusing on fleet renewal. “We’re looking to sell 7 or 8 of our older generation ships,” Dr. Tsakos stated. “That would give us a very big capital gain and boost for the year 2023.”
“Based on the positive quarterly results through the past year, it’s clear that the annual numbers will be strong,” Paul Durham, CFO stated of 2022.
The current market is “very favorable” for tanker owners on both the supply and demand side, Harrys Kosmatos, Corporate Development Officer, said expressing his confidence, particularly in terms of demand. “Global oil demand has recovered” in the wake of the pandemic, and has even exceeded pre-pandemic levels, Harrys Kosmatos pointed out. China’s reopening will likely propel this demand even further, he noted, as the country could become, once again, a “major oil importer”.
Kosmatos argued that Russia’s invasion of the Ukraine has created “a new and possibly lasting trend” in oil markets, namely the creation of new trading patterns and the elongation of shipping routes as a result of Europe’s ban on Russian oil imports. Due to these regulations, Europe now has to import oil from further distances, particularly the US, West Africa, and the Arabian Gulf. “The short-term voyages from Russia have been replaced by longer haul trades and the emerging ‘new’ Russian trades, particularly to India and China as it reopens, are performed by older vessels, acquired by “non-western” entities, that up until recently competed in the international commercial arena with everybody else,” Kosmatos noted.
Additionally, the sector is facing one of the lowest orderbooks in recent memory, under 4%, while nearly 10% of the current global fleet is over 20 years old, and 24% over 15 years old. “As a result, we could be faced with a situation where some segments in the tanker market could experience negative growth. Negative growth against an increasing global oil demand should translate to a sustainable strong market environment.” Kosmatos asserted.
TEN Ltd. is one of the largest and most well-established independent energy transporters in the world. With a diverse fleet of 73 modern vessels, including both crude oil and oil-product as well as LNG transportation. This includes 7 newbuilds. TEN Ltd maintains a customer base consisting of major global energy companies.
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