Tsakos Energy Navigation Limited reported results (unaudited) for the year ended December 31, 2014 and the fourth quarter of 2014.
FULL YEAR 2014 RESULTS
TEN achieved the best annual results in 2014 since 2010 and which were significantly higher than 2013. Operating income for 2014 was $76.0 million compared to $33.2 million (before $28.3 million impairment charges) in 2013, a 129.2% increase. Net income for 2014 amounted to $33.5 million compared to a net loss of $9.2 million in 2013 (before impairment charges).
Revenue, net of voyage expenses and commissions, totaled $346.9 million in 2014 compared to $285.4 million in 2013, a 21.5% increase. The increase was primarily due to the significantly stronger TCE rates achieved for crude carrying suezmaxes and aframaxes in 2014, especially in the first and fourth quarters.
EBITDA for the year 2014 amounted to $179.5 million, a 35.8% increase from 2013. All the vessels enjoyed positive EBITDA during 2014.
The full year operation of the two shuttle tankers, the two new suezmaxes and the fact that the VLCC Millennium completed its bare-boat charter in late 2013, together contributed over half of the $16.6 million increase in total vessel operating costs in 2014 over 2013. However, these five vessels generated three and a half times more net revenue than operating expenses in 2014, and together $20.2 million more net revenue than in 2013. General and administrative expenses continued to remain relatively stable at $4.4 million.
Interest and finance costs in 2014 were $43.1 million, compared to $40.9 million in 2013.
FOURTH QUARTER RESULTS
TEN enjoyed a very strong fourth quarter with operating income amounting to $29.2 million, compared to $5.2 million (before impairment charges) in the fourth quarter of 2013 mainly due to a robust freight market, particularly for crude cargoes, generating higher net revenue. The sudden fall in oil prices, although it spurred demand and reduced bunker costs, also resulted in a one-time negative hit in valuations and charges relating to our bunker hedges. Without these bunker hedge costs, net income would had been $21.1 million or $0.23 per share. The fourth quarter of 2014 ended with net income of $13.5 million or $0.14 per basic and diluted share, compared to a net loss of $7.3 million in the fourth quarter of 2013 (before impairment charges).
Revenues, net of voyage expenses and commissions, were $99.5 million in the fourth quarter of 2014, up 41.0% from the previous fourth quarter. The fall in oil prices had a markedly positive effect on tanker demand within the fourth quarter and an additional substantial impact by lowering bunker prices and thereby increasing TCE rates on spot voyages. Despite significant exposure in spot related days and three vessels undergoing dry-docking during the 2014 fourth quarter, fleet utilization remained high at 97.7%, an indication of the tight supply of crude tankers and the success of TEN in securing lucrative employment for its vessels. The success of the chartering strategy is also reflected in the total amount of profit-share that is generated by time-charters with a profit-share element, once the tanker market starts to enjoy stronger rates. In the fourth quarter of 2014, $5.5 million extra gross revenue was earned through profit-share, which mostly went straight to the bottom-line, making up approximately 40% of the net income. The average daily time charter equivalent per vessel increased by 33.7% to $23,289, compared to $17,419 in the fourth quarter of 2013.
Cash flow for the quarter from net income before depreciation, amortization and interest (“EBITDA”) was $55.4 million, compared to $28.7 million in the prior fourth quarter when the 2013 impairment is also ignored for calculating EBITDA.
Fourth quarter 2014 interest and finance costs were $15.6 million compared to $10.0 million in the fourth quarter of 2013. This increase was due to costs and negative valuation of bunker hedging swaps following the sudden and sharp drop in oil prices, which resulted in a cut in bunker prices by more than half, the effect of which by far covered the hedging costs.
“It is a great pleasure to report significant profitability in 2014. It is also encouraging that 2015 has started with very strong rates. The market fundamentals including the low cost of oil and the negative fleet growth is reassuring for, at least, the medium term prospects of our industry, ” stated Mr. Nikolas P. Tsakos, President and CEO of TEN. “Through our counter cyclical investment strategy and flexible chartering policy, TEN has become a prime beneficiary of the rewards the tanker markets are offering. We strongly believe that the Company’s sound fundamentals and prospects, particularly in the strong market we are currently navigating, will be soon reflected in our share price and further enhance our shareholders value,” Mr. Tsakos concluded.
LIQUIDITY
TEN continued to maintain strong liquidity through the fourth quarter of 2014, at the end of which, total cash amounted to $214.4 million compared to $171.8 million at the end of 2013. Net debt to capital was a comfortable 50.6% at the end of the fourth quarter 2014, compared to 54.8% at end of 2013.
Cash flow for the quarter from net income before depreciation, amortization and interest (“EBITDA”) was $55.4 million, compared to $28.7 million in the prior fourth quarter. EBITDA for the year 2014 amounted to $179.5 million, a 35.8% increase. All the vessels enjoyed positive EBITDA during 2014.
The Company has also earmarked several vessels for possible sale, which if all materialized could result in as much as $100 million of cash being released.
DIVIDEND – COMMON SHARES
The Company will pay a dividend of $0.06 per share of common stock on May 28, 2015 to shareholders of record as of May 21, 2015. TEN’s total dividends since 2002 amount to $405 million or $10.0 per share.
CORPORATE STRATEGY
Following on the impressive take-off in the latter part of the third quarter of 2014, crude tanker rates continued to surge through the fourth quarter and first quarter of 2015 and remain firm fuelled by low oil prices that supported a boost in consumer demand around the world that has led to increased imports. In addition, the depressed price of crude has generated a contango effect, which removed a meaningful amount of tonnage from the market while the continuation of slow steaming, which despite a small uptick in average speeds, avoided additional capacity being added to the available “for charter” fleet. All these factors, coupled with the limited growth of the fleet over the last 12 months (indeed some tanker categories could even experience negative fleet capacity growth this year) and the manageable orderbook provide TEN with utmost confidence for solid tanker markets over the medium term.
This realignment in market fundamentals has created a solid underlying strength in the overall crude and product tanker markets, especially evident in spot fixtures, and as a result they have allowed TEN, with 73% of remaining 2015 available days on spot or spot related contracts, to enjoy significant benefits from operating under such market related and flexible charters.
The intention of the management is to retain charter flexibility and the ability to adjust the blend of charters opportunistically, but always mindful of the continuation, and further creation, of secured cash streams and healthy cash buffers, irrespective of cycles. In addition, and in order to take advantage of the current pick-up in asset values, management evaluates and will continue to assess opportunities to strategically divest some of its older assets in line with its long stated policy of vessel divestments for capital and cash gains and fleet rejuvenation. At the same time, management will remain on the look-out for modern accretive assets to acquire, while avoiding large speculative newbuilding orders.