TEN reported results (unaudited) for the quarter ended March 31, 2018.
Q1 2018 Summary Results
TEN generated gross revenues of $125.7 million, an Operating Income of $5.6 million and incurred a net loss of $11.9 million in the first quarter of 2018. EBITDA (Earnings before interest, taxes, depreciation and amortization) totaled $41.8 million
Following the Company’s long-term strategy, with 80% of the fleet employed during the first quarter on secured revenue contracts, TEN was able to successfully manage the impact of an exceptionally poor spot market, in which rates, in all categories of vessels, reached historic lows. Over that period, TEN’s fleet averaged $17,771 per day in time charter equivalent earnings against approximately $8,700 per day average market spot rates during the quarter. An outperformance by over 100%.
Five vessels underwent scheduled dry-docking within the first quarter. Four of these vessels were under attractive time-charters, and therefore lost the revenue that would otherwise have been earned during the period they were out of service.
Despite the state of the market and dry-dockings, fleet utilization in the first quarter was a healthy 96% consistent with the above 95% utilization that TEN has maintained through the cycles in recent years.
Average rates achieved by TEN’s fleet, due to the majority of vessels operating on time-charters, were more than double the available market spot rates in the first quarter. The vessels on time charter alone generated $86.0 million of gross revenue, enough to cover all the operating, overhead and finance costs of the whole fleet. In the crude tanker sector in particular, TEN’s time charter equivalent earnings were materially higher than average market spot rates during the quarter. TEN’s vessels on spot charter, despite the severe softness in that market, contributed an additional $18.0 million of revenue after bunker and port expenses.
Depreciation and dry-docking amortization costs increased to $35.8 million due to the addition of new vessels into the fleet and recent dry-dockings. Subsequent to the period, one vessel, the 20-year old VLCC Millennium, was sold for recycling, releasing $7.4 million of free cash after sale expenses and the corresponding debt repayment of $10.2 million.
Interest and finance costs totaled $17.9 million. Apart from loans relating to the delivery of new vessels, LIBOR has also increased, although margins in recent loan refinancing have fallen. Also, there was an increase in non-cash negative valuations in bunker hedges compared to valuations received in the first quarter of 2017. Given recent oil price movements, it is currently expected that there will be both bunker hedge cash gains and positive valuations in the second quarter of 2018. In addition, capitalization of interest ceased at the end of 2017 upon completion of the new building program.
Cash balances amounted to $178.3 million with net debt to capital at March 31, 2018 at 51%. TEN continues to maintain a perfect debt service record and a sustainable dividend.
“Navigating one of the weakest quarters in recent memory, TEN’s operating strategy of keeping the majority of the fleet on long term contracts significantly benefited our revenues and protected us from the pressure the markets were applying on companies with heavy exposure to the spot market. The fleet’s time charter earnings were more than double the average market spot rates during the first quarter and hence alleviating any sustained pressure on the Company’s results,” Mr. George Saroglou, COO of TEN commented. “Looking ahead with Q1 firmly behind us, the accelerated scrapping of late, the deceleration in global fleet growth, the positive global oil demand and the continuing increases in US crude oil exports, point to more favorable market fundamentals for Q2 and beyond. TEN’s modern and diversified fleet with the ability to capture market upturns, puts us in a unique position to generate stronger revenues when markets turn while at the same time maintain and solidify our Company’s healthy financial position,” Mr. Saroglou concluded.
TEN has signed a long-term contract with a major oil company for two new Aframax tankers. The time charter equivalent income of these two vessels, over the minimum charter period, equates to about $82.0 million.
Dividend – Common Shares
The Company will pay a dividend of $0.05 per common share on August 8, 2018 to shareholders of record as of August 2, 2018. Inclusive of this payment, TEN will have distributed a total of $10.705 per share in uninterrupted dividends to its common shareholders since the Company’s listing on the NYSE in March 2002 against an issue price of $7.50.