TSAKOS ENERGY NAVIGATION REPORTS RECORD PROFITS FOR 1st QUARTER 2007
Wednesday, 23 May 2007
tentsakos.gif Athens, Greece- May 22, 2007- Tsakos Energy Navigation Limited (TEN) (NYSE: TNP) today reported results (unaudited) for the first quarter of 2007.



Newbuilding program continues with four of 11 2007 deliveries in the first quarter

FIRST QUARTER HIGHLIGHTS

  • Net revenue of $96.49 million up from $75.61 million in the first quarter of 2006
  • Net income of $43.47 million compared to $41.77 million in first quarter 2006
  • Earnings per share (basic) $2.28 up 4.1% from first quarter 2006
  • Delivery and charter of four vessels including the Company’s first LNG carrier (Arctic, Izumo Princess, Andromeda and Neo Energy)
  • Repurchase of the 1999-built Aframax Olympia at a significant discount to market value
  • Sale of the 1989-built Panamax Bregen for a $6.40 million capital gain
  • Semi-annual dividend of $1.50 per share, paid April 26, 2007 raising the dividend for 2006 operations to $2.75 per share from $2.10 for 2005 operations
  • Entered fourteenth year in the public markets, celebrated 5th anniversary of listing on the New York Stock Exchange

 

Athens, Greece- May 22, 2007- Tsakos Energy Navigation Limited (TEN) (NYSE: TNP) today reported results (unaudited) for the first quarter of 2007. Revenue, net of voyage expenses and commissions, was $96.49 million in the first quarter of 2007 as compared with $75.61 million in the same quarter of 2006. TEN deployed 37.7 vessels in the 2007 quarter versus 27.1 in the 2006 period. The average time charter equivalent (TCE) was $31,649 against $33,128 in the first quarter 2006. Fleet utilization was 94.4% compared with 99.2% in the first quarter of 2006, due to the dry docking of the Aframax crude carrier Vergina II for a mandatory special survey and double-hull conversion, and the Aframax product carrier Propontis for repairs. Vessel operating expenses per ship per day increased to $7,292 compared with $6,931 in the first quarter of 2006. This resulted principally from the impact of higher crew expenses due to the weakening of the US dollar, and higher repair and spares costs.

Depreciation and dry-docking amortization costs were $18.87 million versus $12.10 million in the first quarter of 2006 reflecting the material fleet expansion experienced since the first quarter of last year. Management fees in the first quarter of 2007 were $2.20 million as against $1.40 million in the same quarter of 2006. This increase was due to fleet expansion and the predetermined increase in fees which became effective in January 2007. General and administrative expenses increased to $0.82 million from $0.47 million in the same quarter last year due to higher Sarbanes-Oxley compliance costs and a more active investor relations schedule. TEN realized a capital gain of $6.40 million from the sale of the Bregen in the first quarter of 2007. There were no capital gains in the first quarter of 2006. Operating income was $53.6 million compared to $41.9 million in the previous year quarter, a 28.0% increase.

Interest and finance costs, net of interest income, were $9.5 million as against $0.84 million in the like quarter of 2006 due to the increase in loans necessary for financing the significant growth of the fleet. This higher interest cost was partially offset by increases in interest and investment income, $5.99 million this quarter versus $2.78 million in the first quarter of 2006. Income before depreciation charges was $61.61 million in the 2007 quarter as compared to $52.45 million in the 2006 period. Net Income was a record $43.47 million as compared to $41.77 million in the first quarter of 2006. Basic earnings per share rose 4.1 % from $2.19 to $2.28.

“Net Income in the first quarter of 2007 exceeded the superb results realized in the first quarter of 2006,” observed Mr. D. John Stavropoulos, Tsakos Energy Navigation’s Chairman of the Board. “Fleet modernization and expansion, combined with a balanced employment strategy and thoughtful expense containment, produced outstanding operating results.” Mr. Stavropoulos further stated, “The financial strength of TEN combined with its long history of solid performance has been rewarded by its creditors with smaller interest margins. These factors complemented by growth have built shareholder value through secular earnings advances and increasing dividends. These dynamics are beginning to be reflected in the share price.”

FLEET STRATEGY
TEN’s fleet growth has continued through the consolidation of two private fleets and the ongoing newbuilding program. Since the equivalent period last year, TEN’s fleet has grown by over 40% in terms of vessels and by over 62% in terms of deadweight while achieving a reduction in the fleet’s average age, from 6.5 years in the first quarter of 2006 to 5.4 years in the first quarter of 2007. This reduction also reflected the disposal of older tonnage which generated $19.70 million in capital gains. In line with the Company’s active engagement in the sale & purchase market and without inhibiting the growth of the enterprise, in the same period, the Company also achieved capital gains of an additional $50 million, from strategic divestments.

In the first quarter, TEN took delivery of four of 11 newbuildings including the Company’s first LNG (Liquefied Natural Gas) carrier, Neo Energy. In addition to these newbuildings, in January 2007 the Company repurchased the Aframax Olympia from a German financial institution for a pre-agreed price at a significant discount to its current market value.

The Company’s chartering strategy has evolved to facilitate the increasing demand from charterers to accommodate profit sharing provisions in chartering transactions. This offers the Company the benefits of downside protection and upside participation while allowing for closer cooperation with its customers. This type of vessel employment fits the Company’s strategy of balanced employment.

“Our corporate strategy and business plan is to sustain profitability and generate strong earnings growth in a highly cyclical industry,” stated Mr. Nikolas P. Tsakos, President & Chief Executive Officer of TEN. “To achieve these basic objectives we pursue a balanced employment policy that provides assured revenues and opportunities to participate in strong charter environments. This, combined with fleet growth and renewal as well as opportunistic sale and purchase transactions, has resulted in a strong record of profitability.”

Mr. Tsakos continued, “With TEN increasing its critical mass in all the sectors it operates and with a growing fleet in high demand by major charterers worldwide, we believe our fleet strategy both in terms of growth and employment will serve shareholders well in the future.”

TANKER INDUSTRY
Despite numerous downside risks, widespread consensus supports the notion that the global economy is on the right footing for another year of broad-based growth, only moderately slower than in 2006. This strength is expected to continue with the main drivers still the Asian economies. The International Energy Agency’s world GDP growth forecast for 2007 stands at 4.8%, 0.6 percentage points lower than 2006 but still above the five-year average of 4.5% and above the twenty-year average of 3.5%. This indicates that the global economy is capable of successfully absorbing the higher prices of commodities including oil which have recurred since January 2007 without inhibiting its growth. Overall, world oil demand has grown by 0.8% in 2006 or 0.7mb/d and is expected to rise by 1.8% in 2007 which translates to 1.5 mb/d.

The world tanker fleet, based on current estimates, is expected to grow by about 8% per annum until 2010 however this is not expected to upset the current supply/demand balance which continues to be satisfactory. Demand for seaborne transportation continues to be strong as the larger consumer markets, distant from the source, primarily depend on imports to satisfy their needs for petroleum and its products. Energy transport distances (ton-mile demand) continue to grow year over year which assist in maintaining the high utilization rate of the world tanker fleet. Single-hull tankers (which in deadweight constitute about 26% of the world tanker fleet) should experience further decline in their productivity until mandatory scrappage starting in 2010 will require their removal from service. Yards are fully committed until 2010 with other types of vessels and forward fixing of quality tonnage by oil majors providing encouraging signs that a healthy supply/demand balance will be maintained for the foreseeable future. TEN does expect, however, rate volatility to remain elevated due to bullish-price refinery issues, high crude and oil product demand, arbitrage trade opportunities, declining OECD stocks, due to OPEC’s cut-backs, and geopolitical and weather related risks.

TEN believes 2007 will continue to experience acceptable fleet utilization levels and healthy charter rates. However, owners and operators will face increasing challenges including higher capital commitments to fund higher new building costs and secondhand prices, potentially higher interest rates and insurance premiums as well as increased personnel expenses, lubricant prices, maintenance needs, and a weakening dollar. Fees associated with corporate governance should continue to push up overheads. Despite these concerns, the Company expects the tanker industry to reward owners running efficient operations with a record fifth consecutive year of general prosperity.

OUTLOOK FOR TEN
TEN’s vessels continue to be in demand by charterers and earn rates that provide healthy margins. The balanced chartering strategy, designed to smooth the cyclical nature of the market, affords the Company earnings visibility well into next year and beyond. With 80% of employable days for the remaining three quarters of 2007 already booked securing minimum revenues of $215 million and with 62% for 2008 translating to $210 million of minimum revenue, TEN’s cash generating ability remains on solid ground.

As of May 22, 2007, seven newbuildings have been delivered; of these three have entered three-year time charter contracts with profit sharing agreements. These vessels, just by earning the minimum rate, should generate at least $63 million in gross revenues over the corresponding charter period. With ten more vessels to join the fleet by the second quarter of 2010, TEN’s chartering policy will be determined according to client needs and market conditions at the time. Nevertheless, management will preserve the balanced employment composition of the fleet as the fleet grows.

In general, TEN with its diversified fleet, balanced employment profile and healthy balance sheet, is well positioned to take advantage of market opportunities as they develop. Active fleet renewal will continue along with opportunistic sales which should continue to provide significant capital gains.

“TEN has experienced steady growth and has rewarded shareholders over the years with annualized returns well in excess of most benchmark standards,” Mr. Tsakos stated. “We are proud of the platform we have created and we will strive to match if not exceed past results in the future. We sincerely hope that the markets will reward these efforts and eventually assign tanker companies and ours in particular, the true value that they deserve.”

TEN’s Newbuilding Program:

Vessel

Dwt

Design

Delivery

Aframax

 

 

 

1. Sakura Princess

105,000

DH / DNA

8 June 2007

2. H/N 1342

105,000

DH / DNA

November 2008

3. H/N 1344

105,000

DH / DNA

November 2008

4. H/N 1349

105,000

DH / DNA

Q3 2009

5. H/N 1350

105,000

DH / DNA

Q4 2009

6. H/N 1356

105,000

DH / DNA

Q1 2010

7. H/N 1360

105,000

DH / DNA

Q2 2010

Panamax

 

 

 

1. Selecao

73,000

DH

15 November 2007

2. Socrates

73,000

DH

30 November 2007

Handysize

 

 

 

1. Bosporos

37,340

DH / 1B - Ice-Class

21 August 2007

DH: Double Hull
DNA: Design New Aframax

Assuming no interim retirements of vessels the following outlines the composition of TEN’s fleet after delivery of the orders cited above:

TYPE

Total

Double Hull

Ice Class

VLCC

3

3

 

Suezmax

10

10

6

Aframax

18

18

3

Panamax

7

7

2

Handymax

6

6

6

Handysize

8

8

6

LNG

1

1

 

Total:

53

53

23

 

 

 

 

 

CONFERENCE CALL

This morning at 10:00 a.m. Eastern Time, TEN will also host a conference call to review the first quarter as well as management's outlook for the business. The call, which will be hosted by TEN's senior management, may contain information beyond what is included in the earnings press release.

To participate in the call from the United States or Canada, please dial +1 888.693.3477 approximately five minutes prior to the starting time. To participate in the call outside the United States or Canada, please dial +1 973.582.2710 five minutes prior to the starting time. The Conference ID is 8789281. Two hours after the completion of the conference call, a digital recording of the call will be available for seven days, and can be accessed by dialling
+1 877.519.4471 from inside the United States or Canada and +1 973.341.3080 from outside the United States or Canada and entering the Conference ID 8789281.

The call, which will be simultaneously broadcast live over the Internet, can be accessed at: http://www.videonewswire.com/event.asp?id=39771 .

Please log in approximately ten minutes before the start of the call to allow extra time to visit the site and download the streaming media software required to listen to the Internet broadcast.

Concurrent with the live broadcast, the Company will post a supplemental slide presentation providing details related to fleet composition and deployment and other related company information. This presentation will be available on the Company’s corporate website reception page at www.tenn.gr.