Tsakos Energy Navigation Limited (TEN) reported unaudited 1Q results (first quarter ended March 31, 2009) which showed that while revenues dropped, profits remained. This marks the company’s 62 consecutive quarter reporting a profit.
Revenue, net of voyage expenses and commissions, was $106.14 million in the first quarter of 2009 as compared with $115.67 million in the same quarter of 2008. TEN deployed an average of 46 vessels in the first quarter of 2009 versus 43.1 in the 2008 period. The average daily time charter equivalent (TCE) rate was $27,495 versus $31,387 in the first quarter 2008 (TCE is voyage revenue less voyage expenses). Fleet utilization was 98.5% almost unchanged from 98.3% in the first quarter of 2008. Vessel operating expenses per ship per day increased to $9,355 compared with $8,969 in the first quarter of 2008. This resulted principally from increased insurance premiums and higher repair costs, although a strengthening of the US dollar since last year contributed to reduced crewing costs.
Depreciation and dry-docking amortization costs were $24.79 million versus $21.98 million in the first quarter of 2008, reflecting the fleet expansion since the first quarter of last year.
Management fees in the first quarter of 2009 were $3.27 million versus $2.91 million in the same quarter of 2008. This increase was due to fleet expansion and a 3% increase in fees, effective in January 2009.
In the first quarter of 2009, operating income was $38.87 million compared to $86.43 million in the previous year quarter, which also included a capital gain. TEN did not realize any capital gains in the current first quarter compared with $34.57 million in capital gains from the sale of the Aframax Olympia in the first quarter of 2008.
Interest and finance costs were $15.11 million compared to $23.84 million in the first quarter of 2008 due partly to a decrease in interest rates from the prior year quarter and partly to non-cash positive valuations on non-hedging interest rate and bunker swaps amounting to $2.07 million, compared to negative valuations of $6.61 million in the prior year first quarter.
“Net Income in the first quarter of 2009 exceeded our initial expectations in what increasingly became a challenging environment,” said D. John Stavropoulos, Tsakos Energy Navigation’s Chairman of the Board. “Nevertheless, as rates softened, TEN’s balanced employment strategy, of fixed charters with some spot market exposure, produced healthy operating results and strengthened further the Company’s financial position.”
Despite a softening in the tanker market that started in the latter part of 2008, spurred on by a deceleration in world oil demand, TEN’s results in the first quarter of 2009 were encouraging given market conditions. TEN’s vessels again performed at very high utilization levels, 98.5% versus 98.3% in the first quarter of 2008 and voyage revenues were only 7.6% down from the first quarter of 2008, a year which turned out to be a record earnings year for the tanker sector. Most importantly and in line with management’s objective of cash preservation, TEN’s available cash balances increased
On the chartering front, management remains optimistic that the company’s vessels will
continue to be in demand by the chartering community while recognizing that the current
downturn in market rates may present difficulties in achieving renewals at previous rates. The charter extension of the suezmax Triathlon earlier in the year, from seven years to ten, at one year increments to a major refiner is only one indication that leading charterers regard our vessels and technical management favorably.
In light of the expected market conditions for the remainder of 2009, management has decided to proceed with a dry-docking realignment schedule to take advantage of the eventual market turnaround when world economies recover, possibly expected as early as 2010. Of the 11 vessels scheduled to enter dry-dock in 2010, five have been moved forward to 2009. As a result, the company will have more operating days available in
2010 to take advantage of any improvement in the rate environment in that year.
For the remaining three quarters of 2009, 66% of the fleet is under secured employment
(including vessels under profit sharing arrangements) expected to generate at least $209 million in gross revenues. For 2010, 45% of available days have so far been fixed, which are expected to provide the Company with an additional $176 million in minimum gross revenues.