TEN, Ltd (TEN) (NYSE: TNP) reported results (unaudited) for the quarter and year ended December 31, 2016.
FOURTH QUARTER 2016 RESULTS
TEN generated net income of $11.9 million in the fourth quarter of 2016. Revenues, net of voyage expenses (bunker, port expenses and commissions) for the same period were $99.1 million, approximately $17.0 million more than in the third quarter of 2016 due to the delivery of three vessels, the new charters of the two LNG carriers and a high utilization rate of 98%. In addition, during the last quarter of the year, the seasonally strong quarter, the tanker markets saw a promising improvement as certain of the factors that had depressed rates in most of 2016 dissipated, such as oil supply disruptions.
In October and November 2016, TEN took delivery of the aframax newbuildings Leontios H and Parthenon TS, both employed under long-term charters. In addition, in October 2016, the LNG carrier Maria Energy was delivered and placed on a time-charter with escalating options until mid-2018, when it is expected that higher rates may be available.
Depreciation and dry-docking amortization costs increased to $31.7 million, again due to the new vessels joining the fleet.
Interest and finance costs in the fourth quarter of 2016 totaled $10.1 million, an increase over the 2015 fourth quarter mainly due to the new loans for the newbuilding program and increases in the applicable LIBOR rate.
TEN’s balance sheet remained strong with cash balances at $197.8 million as of December 31, 2016. As of year-end 2016, TEN had undrawn bank facilities totaling $194.3 million, specifically relating to the seven vessels then under construction, of which $99.6 million has since been drawn for the 2017 deliveries to date (aframax Marathon TS, shuttle tanker Lisboa and VLCC Hercules I).
Net debt to capital at December 31, 2016 was at a healthy 52.5%.
Earnings before interest, depreciation and amortization (EBITDA) in the fourth quarter of 2016 amounted to $53.7 million.
YEAR END 2016 RESULTS
TEN’s net income for the year 2016 was $55.8 million.
Operating income in 2016 amounted to $89.8 million and EBITDA to $205.1 million. All the vessels, apart from the 2007-built LNG Neo Energy, currently on a floating storage employment, generated positive EBITDA in the year.
The daily time charter equivalent (TCE) for the fleet (voyage revenue less voyage expenses) averaged $20,412 for the full year.
Vessel operating expenses, on a daily average per vessel basis for 2016 decreased by 2.1% to $7,763 from $7,933 in 2015.
Due to fleet growth, depreciation and dry-docking amortization costs increased to $113.4 million.
Interest and finance costs reached $35.9 million from $30.0 million in 2015, due to increased loan expenses and interest on new debt related to the new vessels in the fleet. In 2015, there was a gain on a loan repaid at a discount.
Dividend – Common Shares
The Company will pay a dividend of $0.05 per common share on April 28, 2017 to shareholders of record as of April 25, 2017. Inclusive of this payment, TEN will have distributed a total of $10.46 per share in uninterrupted dividends to its common shareholders since the Company’s listing on the NYSE in March 2002.
On January 2017, the Company took delivery of the VLCC Hercules I from Hyundai Heavy Industries in South Korea which has subsequently been chartered for a period of up to 18 months to a significant North American oil company. In February 2017 the aframax tanker Marathon TS was delivered from Daewoo Mangalia Heavy Industries, the fifth in a series of nine aframaxes built against long-term contracts for a Norwegian oil major. On March 10, 2017, the Company took delivery of the DP2 suezmax shuttle tanker Lisboa from Sungdong Shipbuilding in South Korea. The vessel was built against an eight year contract, with an option to extend to eleven years, to a major European oil concern and gross revenues from this employment, may reach $200 million over its maximum potential duration.
“The industrial nature of our recent charters fits in well with the Company’s strategy in building and operating vessels to accommodate the long-term needs of international oil concerns,” stated Mr. Nikolas P. Tsakos, President and CEO of TEN and current Chairman of INTERTANKO. “With our entire newbuilding program chartered on long-term accretive employment to first class end-users, TEN’s new phase will be in full force within 2017. The long-term business further solidifies our balance-sheet, ensures TEN’s continued profitability and dividend distribution. This should ultimately be reflected in our share’s true valuation,” Mr. Tsakos concluded.
TEN’s growth has continued unabated in 2017 with the delivery of one VLCC, the Hercules I, one aframax tanker the Marathon TS and the shuttle tanker Lisboa, currently all under long-term employment to solid counterparties. These came on the back of nine vessels that were delivered or acquired in 2016 and will be followed in 2017 by the last four, of nine, aframaxes that were built against long-term employment to a Norwegian oil major. With the delivery of these remaining high-end aframaxes, TEN’s fully fixed, fully financed newbuilding program will complete and increase the Company’s vessels in the water to 65 vessels, and the fleet’s available days under secured employment, for this year so far to 63%, averaging approximately 2.7 years. The intention of management is to increase this coverage further with placements under secured contracts, ideally with profit sharing provisions, of some of its vessels currently operating under flexible charters, without materially reducing its exposure in the spot market, which is expected to firm up again after a large part of the current (low) order book is delivered and as oil prices remain range bound.
Concurrent with this integral growth, management would also explore opportunities to profitably divest some of its vessels around the 10 year of age mark either through direct sales
or other related structured transactions as they become available. In addition, separately from the growth achieved via the newbuilding program, the Company remains on the lookout for additional opportunities, in the sectors which it operates, in order to further solidify the industrial nature of its business and enhance its cash flow visibility going forward.
Management remains optimistic for 2017 due to the continued low price of crude oil, abundant alternative sources of oil supply and growing consumer demand. These positive fundamentals are expected to become more apparent as any pressure from excess fleet supply gradually diminishes as we move later into 2017.