Q4 2019 Earnings Call
Keep spending.
<unk>.
Tacos.
Congrats.
On the fourth quarter.
I'm not sure.
We have for those.
Takis Arapoglou chime in if the boat Mr Nikolas Tsakos, President and CEO.
Jeremy Chief Financial Officer, Mr., George sorry.
Chief operating officer, that's a company.
All participants.
There will be a presentation followed by question answer session.
If you wish to ask your question. Please press Star then one on your telephone keypad.
Turning to be announced.
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What did you take no cost so.
Yes, I shouldn't have to link investor relation adviser sockets energy navigation. Please go ahead Sir.
Thank you very mark and good morning, all about but there's about Nicolas Bornozis I've got that the link and best ordinary from suppliers or cycle energy, Let me give.
Good morning, the company publicly released its financial results for the fourth quarter and the your ended 2019.
It does not cover a copy of todays earnings release, Luiz Carlos I do want to [laughter] 61756 fix or email.
Then I got be telling dot com.
A copy for you you made right away.
Please note that bothered to there's copper gold. There's also live audio and slide webcast, which can be accessed on the company's website front page www Dot Dee Ann and.
We are.
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Like separate them difference large other companies' website.
Please note.
<unk>, there's one would be available and Dr. <unk> whip side to the company after the Gulf of school.
Also please note that the flights.
But then theres from our user controlled.
And that means a by clicking on the proper buttons that can move to the next <unk> on euro.
This time I would like to read the Safe Harbor statement.
Going from school and slide presentation of the webcast contain certain forward looking statement would have good meeting of the safe Harbor, because one of the private Securities Litigation Reform Act 90 95.
Investors are carlson.
Such forward looking statements involve risks and uncertainties.
They affect that business prospects and results of operation.
At this moment.
Like to pass the floor to make the <unk> the <unk>.
Tacos and that's another Joseph Please go ahead sorry.
Thank you Nicholas.
Good morning, everyone.
2019, what was another year.
Right and the the both its defensive qualities in difficult times and its ability to respond fast when markets Cynthia.
Today, we announced a profitable last quarter last year on the brokerage anyway.
Yeah.
And.
Which allows us of course to.
Take a very sizable impairment charge.
Allows us to maintain our dividends I know some buyback.
And and are well at the same time so we.
Oh, renewing our fleet expanding relationships with a blue chip customers.
Oh stuff that we've been doing all along and 10 has established.
Very sound based seen its business throughout the years congratulations are in order for news sockets and the team.
Uh Huh, let's hope the top markets continued to be a strong as they are today for the rest of the year.
That's all for me over to U. Nicholas I wish thank you.
Thank you so termite first of all.
Oh no one can wish you all know locked up fronts.
This.
Yes.
[noise] very far.
With that at least disruption to how many happiness.
Kelly.
Thank God business problems secondly.
But of course.
What I was here in Greece them with a 3000 seafarers onboard and we consider all of them from initial.
They are working being is very very important us well also there were being.
Oh, yes, it's pretty tough it's been not so much.
Oh, we spoke before 2000 I didn't know what Schwartz.
Well of course, the year with lots of ups and downs, so with a very strong start oh ready ready.
I would say the price today than vitamins in the second and third quarter than than a sudden woman to afford it looks funny like a way to normal year on what has happened since since then however.
The company split and utilization is working.
And taking advantage of circumstances that they might think the drop in the Prize award Luxor leap and harnesses and business.
So there's a lot the void that they've been moved go down right now there's a lot of inventory OID. It there's a huge opportunity for all the.
Product Scott is that a finally.
They can actually move lower so for a economically around the world So ownership so well.
Very much in the month, so unlike unfortunately or I mean, unlike other transportation a in the <unk> parts of it that's what they should mean their studies a this seaborne transportation right now mainly the energy segment, especially if it didn't go and products is really its Israeli booming.
So we expect the looking forward, we have the oil companies that know what they're doing there the clients looking for ships for one or two years pushing out it's very hard things very sad to see a click through rates for these businesses. No. One is building a new supply right now all the secrets and toward the gross the last thing someone has in mind is a twog.
Right. So we have looking when we get out and as I said that priorities to get everybody out safe from this from this <unk> I'm not sure unless we get out of that I think we wouldn't have continued to see I can't see it doesn't oh, yeah, if the Israeli Mindboggling <unk> got the performance all four of our service together with every day.
Other Sir I think in our case.
It. These are really it makes no sense and that's why we have initiated the significant by bucket program and we maintain our dividend due to give the signal to all the business as usual he's there and of course, the as usual hasn't <unk> business, but of course Kim is more important.
In this environment as I said things.
Right it bodes well for the first.
Well, certainly looks a that them what might get the wouldn't go Oh, what we didn't know fortunate in the second quarter and a and.
For the fourth for the full year and without the one that's got Jordan George <unk>.
Oh, they all know how does she won't do sanitize, good times, and they give us or give us a little bit of what's happening George.
Thank you very much sneakers, and let me start.
So by wishing Hello, everybody joining us what are these cold.
<unk>.
Onshore personnel.
The next at least for every human being out there fighting to stay well and healthy.
Difficult times.
We're pleased to report that probably something here.
But their freight market environment, that's started improving since the fourth quarter of 2018.
Right.
2019 started strong during the first quarter.
Hi, this drops to me.
And the very strong finish in the fourth quarter with freight rates keeping multiyear highs.
This year.
With a strong.
In January before the news over the virus outbreak.
He coming out of China, and then from the rest of the world change the positive sentiment the market had 40 years.
It varies containment measures.
Spoke to stop divided from spreading globally.
That's significantly global economic activity and as a result.
The collapsing the talks between OPEC and Russia, one additional production cuts to count there, we expect that falling Chinese and globally the mine.
<unk>.
Between Saudi Arabia in Russia since oil prices crushing.
11 is that we have not seen since 2003.
We thought if prices keeping multiyear lows and the oil conflicts into contango.
Filing.
11 prices and always thought I'd seen tankers helped freight rates sheep again, the multi year high levels of last year.
That's a market that started initially with she sees.
And the spillover effect.
Suezmaxes and Aframaxes and that <unk> size and thanks.
With.
The first slide presentation on slide three strong freight markets.
Just trying to pick up that's one of the market's current <unk>.
We have 37 vessels trading that's brought to market and to see ways and profit sharing arrangements.
And we have six more I guess that's opened during the year.
If we combine the two then 80% operating fleet, but have not afraid income related to this brought to market.
This slide.
Since everybody is that.
That sounds currently trading and the sports market.
And read the medicines that opened 40 child.
Yes.
Next slide slide four shows how many of the 16 vessels.
It's worth it with the majority of <unk> as you see.
Hey, it's five opening of the second and third sport that over the year.
Slide five.
Presents the audience breakeven of course for the various vessel types as well, but I think that.
As you can see.
Well of course base.
In addition to the low shipbuilding course.
Hi, light <unk> power [laughter] management, our technical managers.
Continuous cost control efforts.
In order to maintain and low opex covenants for the fleet.
General and administrative expenses what are the same time, we keep a very high fleet utilization rate quarter after quarter end year after year.
Yeah in excess of 96% for the year.
And thanks for the profit sharing element, that's a big portion of the fleet enjoys.
Benefits from <unk> <unk> market conditions improve like the period, we have now.
And based on current market conditions on the number of vessels operating of the sports market for every $1000 increase.
<unk>.
Good.
Right, we have a positive six cents impact.
Yes.
[noise] debt reduction is an integral parts of the company strategy and slide six you'll see that since the end of December 2017, we cavity viewers that by 200 anything media in the last month the company paid back six it won't be taking down the net debt to capital ratio.
2019 below 50%.
In addition at the end of July fully redeemed highly successful 50 million sheet it'd be fair chairs.
Looking at the mine that's true.
I live items related to look down for cities States and Congress.
Yes.
Oil demand is expected to rebound hopefully quickly enough to put <unk> <unk> <unk> 11.
Additional major support measures from governments in central banks remain highly likely to ensure consumer and small to medium sized businesses survive.
Containment measures last and economic activity as good a tape.
<unk> is slowly coming back as the latest news out of China suggests that the virus outbreak is slowly slowly if not almost over.
Do you mind in China. This month will get about from this everybody lows.
However, modest 2020 year over year will be approximately 19%.
Or 2.5 million barrels per day, citing every born from China National Petroleum Corporation.
Low oil price environments as long as it last is stimulating stockpiling started to see and reduces the <unk> course bunker fuel for shipping company. So if you look but there will be looked it it's basically a blessing.
On the supply the started to the order book at 7% is low compared to historical levels. It big part of the fleet is over 15 years and environmental regulations <unk> <unk> I guess.
Approaching what about 20 years ago for trucking.
2018 was one of the highest cropping, yes, Fred good.
Last year scrapping, what's known as expected.
But with more than 1100 tankage older than 15, yes, we could see a pickup in scrapping with more environmental regulations on the horizon, especially.
He said towards the vessels that approach for our over 20 years.
[noise] <unk> prospects generally speaking our goods.
And we expect a threat to continue as soon as you know the virus is behind us and we thought we conclude the operation on the part of her presentation Board will walk through some of the financial highlights for the fourth quarter and if we get bored.
Yeah. Thank you George.
Well at the end of what I saw it was a difficult yeah, but as a nickel says it wasn't a difficult after all compared to where we are like a normal yeah.
10 achieved a quota for knitting come close to $41 million before impairment charges of $28 million.
Can you elaborate compared to 3 million dollar netincome before in 10 minutes in the prior quarter floors are quite a change.
For 2019 net income before impairment charges was almost $43 million $76 million 10 around from the previous yeah.
Quota for revenue totaled $175 million 22 million dollar increase.
Much too to profit Ya.
As a tanker market was blessed with a long victory recovery, allowing our fleet to achieving 98 [noise].
Hi station.
In 2019 revenue amounted to $597 million 68 million dollar increase I said, if which came from profit yeah.
Well said, a creative chart to renewals with secured including a significant increase you know LNG carrier rates.
Quota for daily Tc per vessel approached $26000 at 20% increase.
Quota for close to category remained at similar levels to the practical to fool, except for voyage expenses, which fell 17% due mainly to lower bunker costs.
Total quotes for operating costs remained at about $46 million. It's the same average number of vessels well daily average opex per vessel remained at about $7800 helped by a stronger dollar.
Well, so DNA expenses were at exactly the same number as in previous calls before.
Quota for finance costs, what huffed to $13.7 million, mainly due to improved Duncan hedge gains.
We aim to sell eight vessels in 2021 of which Sealy a T was sold at this February releasing $5 million cash after paying down $11 million debt.
Two suezmaxes were sold this January as part of a sale and leaseback deal, resulting introduction of debt by $27 million and release of 22 million dollar cash.
As a result of these proposed disposals impairment charges were in good.
We took delivery of a new aframax in January were $26 million paid from debt and <unk> million dollars in cash.
We should take delivery of a suezmax with chartering in quarter three I didn't know they include a fool with payments of $110 million sign it's mostly with arranged bank finance.
Payments at $46 million will also be made this year relating to our LNG carrier under construction and $165 million next year.
Despite new debt relating to the delivery of new vessels and refinancing of older debt in 2000 at night 19.
That's it turns which actually released $29 million in cash debt was reduced by $62 million in the bringing total debt down to 1.4 billion net debt to capital to 48%.
Quota for EBITDA was $19 million, a 36% increase for the year EBITDA was $257 billion $66 million increase over 2018, allowing tend to maintain a healthy cash position at the year end.
We enjoyed a spectacular recovery of the tanker market and quote to fool, which lasted well into quarter. One apart from this brief did in February.
With a with many vessels is still operating on a healthy time charters.
But with profit sharing and without spot vessels again, attracting lucrative rates, we expect a strong cash flow plus freed up cashman vessel sales to tell the whole obligations in quarter, one including loan repayments and prepayments totaling $100.
I wish $100 million.
This concludes my comments, so I'll pass the call back to Nicholas.
Thank you Paula I like the way you think.
They usually you shouldn't be expenses and increasingly.
Yeah that makes the most is really good.
Well.
Thank you very much more than we thought we would like good to open the door open the floor, what I mean for any questions.
Ladies and gentlemen, well now begin the question answer session I should remind the please press star then one on your telephone keypad and what's your name.
If you wish to kind of <unk> once again that started one.
Well now take my first question from Randy Guineans from Jefferies.
Please go ahead.
[noise], Saudi gentlemen, how's it going.
Hi, good.
Look stopping muffins, but what the couldn't do worse. That's that's for sure no worse places to be locked up but oh, well a few quick questions for me I guess looking at your Newbuildings on order.
I have we seen many delays for those handed the delivery now is for Threeq and Fourq you have this year have there been kinda Fortunately shore decorations that the shipyards that are likely going to push those or do you still expect ever see those on time later this year.
I I believe that we wouldn't be yeah.
I think mr. Mr. Up are you already you know gives it isn't the in our meeting here Yeah I would be live the first person like it's going to be de lever. The on schedule in the first week of some Denver and then the second one name that last week or walk numbers are so far on schedule from what do we understand.
Let's see how do you always want to either.
[laughter].
What was the last part sorry.
Oh yeah.
Okay very good.
Okay. So yeah, so on schedule and so far.
Got it Okay, and then quickly looking at the refined products I know you said, obviously the that crude market has been robust floating storage you have all these standards coming out of Saudi Arabia have you seen a lot of activity on the refined product side any for storage on the floating.
Storage for refined products or is that purely just gasoline diesel and jet fuel arb opportunities on the products tankers, well I think what we're seeing right now is and lot of products movement, which would not expect.
And in from Oh that lot of one [noise].
And.
Sometimes said a lot of doors that may jump on clean market.
The public market is that the all time record high because what I see is in Europe, but have shown low understandably. So people are replenishing. The you know the the all five this you remember that there was a lot of spoke a that's what's getting very expensive.
You mean, the old fiber regulation.
The 0.5 regulation, but that's what they mean and no at this at these prices when certain lower than I have a few I'm used to be last year, well much lower and people are more so we have another wouldn't be month between the med than Japan.
14, a photo for four Flynn and I think another thing that we have a goliat experiencing good.
He is that Oh unfold the globally.
Stoppage of movement in signing up.
Hi, good they that a lot of available products from the local refineries. So we have seen then any crucial what about 70% <unk> also on on exports off products from so I'm not doing there aren't going to leverage and so in general that is a lot more running but that's the.
Well one more money there that's what we are there you know where there was when the truck drivers over this issue when they do.
You can pick it up.
Got it Okay fair.
Well and then two quick modeling questions. You know obviously your your interest expense fell dramatically I think you said that was mainly due to bunker hedging or trade. What is your expected interest expense and the first quarter and the second thing Paul Paul. Please stay exactly I mean, you heard me they want hoarded uses that.
Yes, I think we're looking at around.
The $10 million.
A quota.
Oh, so that everyone around six or a quarter one we're looking at.
Yes, you know about 15 million 15 million accordingly.
<unk> going up extra reversal in Q2, just continuing with the.
As the bunkers are less profitable the bunker hedging or what the Q2 guidance.
That's very possible they probably good [laughter] since the middle of the yeah.
Well, it's probably going to go up to.
Who knows but yeah.
Essentially $20 million each cool okay.
That's there and why we're discussing first quarter I'm, you know for all intents and purposes. The first quarter is also over right. So how are you looking at you know one Q numbers is it safe to assume that one could you could even better or should be better than the fourth quarter I can get some kind of guidance on no now that the first quarter is done.
I think I think about.
Well, what do you see here of course, it varies but over the course, there Oh, we might have some non gosh I them SUS Board said the.
I think Oh, we have made that hey kids in Oh, It was more oh about the 70% Oh for Oh OVARA needs for all four or five basically the going forward. So I think we have a.
[laughter] <unk> percent over the next 40 years.
It's not that I have George I don't know [laughter] show that blend to maybe on the ballroom mentions it's not that you're not getting [laughter] say that getting figure. It's a it's a figure into that you know it does not compound because the same figure that in some quarters, depending on the price of oil it might be higher or lower so it's not.
Oh, well when we say opt to blend to me on that or third doesn't mean, a it does not mean 80 million a year. It means that they do one important it might be 20 million one quarter might be for 10 million that's under suddenly a non-GAAP.
Oh, gosh I've done, but at the same time without that both parents or been carrying needs are making a killing a well because we are paying <unk> bankers on the spot market much much much much cheaper. So if you exclude those non cash items I think we'll have a better seem a lot of course.
Yeah, and believe it or not I think even the second quarter will not show me very strong because a lot of our restaurants can give you an example.
Yeah on the fourth quarter, there ought to be able to see they usually shoes and up to February hunger and $25000 a day.
Uh huh.
Okay next of all yet so we're just finishing in the middle vein <unk> isn't having only $40000 every day.
Were negotiating the next well I guess, but don't close to $100000 a day. So what do you Gotta catch <unk> you know very much Oh, we have in the second and third quarter.
And and of course, and another factor that we should not forget is that.
So from a April Fools day airplanes first a they knew waived a huge escalation rates are happening going on and then is it got is going up too close to $75000.
Sure, Yes, so in general I think we will have a seamless authentic excluding yeah. The unrealized losses on by good Kids Yep Yep. That's understandable I you know last question for me, obviously, the 50 million dollar repurchase authorization is very encouraging to see here.
You mentioned in the press release, you know that there has been panic selling you mentioned on that prepared remarks at the obviously the the sell off has been mind boggling quoting you know so how quickly can you implement and use that $50 million can we do it all tomorrow right and.
Then secondly isn't going to be geared toward the common units at a 50% discount to anybody or is it going to be the preferred which are also trading at you know 13 $14 for for some of the C. D E F. Even the D. So how do you kind of balance those two.
I think that <unk> will you do it we wouldn't do it makes the we might give priority.
To do that to the Coleman, the do and what I say mind Boggling gets worked at holding on getting that stands out, though I mean out cases, because we know when the I mean weve the company and I know, we've got a valued almost as much as the classical either [laughter] with having the bonds are doing it on it.
I agree it's ready ready to show I think it's a very good a investment for US a products to make all show we have about coupons no. We have one <unk> Oh, we have one about obligations is that a is you and we wouldn't be buying it out in a in October but by October and then not obligations.
You know the coupons or should the which I posted 9%, but we are paying people not having adopted on them right now which is huge.
I couldn't be any good [laughter]. There's just so we wouldn't we wouldn't we wouldn't mix it up something without stopping or not the you know something on the Oh.
On the Coleman I've been doing something more organized on the preferred.
Got it and then just the <unk> you know the first part that question. How quickly can you implement that can we do $50 million pretty soon or is it like having the I I think you have to follow a bottle for liquid the Detroit has to be done in unorganized my modeling one stop us a seamless Wallace.
XR, all right well I'm looking forward to a the next results with some huge preferred and common units [laughter] very good.
Hi, Thanks, again, you all stay healthy and God bless hungry man.
Thank you all the best say something too.
Thank you.
I'm wondering if you'd like to ask a question.
And we have no further questions.
Thank you well yeah. It is a again, it's encouraging that or do have you listening or.
Glass and listening to our study we are very <unk>. Yeah. We are in the unchartered said he thought in the but.
<unk> expenses navigating thinks it's really think where will we wouldn't find that I'd shores going forward as we speak right now we expect a the way we run the business or that we habit and model we have our clients applying some of the biggest oil companies out there and so we expect a <unk>.
Good day next a one or two quarters, but more importantly, what do you know what else is we'll have all all you and your families and not enough bumblebees supers.
Yes, so thank you very much for that.
And ladies or were last Oh, chairman and Mr. up a little.
Two to two girls <unk> the quota.
Hello.
Hello. Thank you when you go just to a close by saying Oh look after yourselves stay healthy.
And let's hope that the markets continue a the way they are today all the best Thank you Andrew.
Thank you.
Thank you know well well done guys. Thank you.
Well, that's a nickel I, maybe I'm not I'm on 'em do not wish they gave you, especially the game I. So let me maybe there's a whole oh go towards how many different.
[music].