TEN, Ltd reported results (unaudited) for the quarter and six months ended June 30, 2020.
- Five-fold increase in net income Y-o-Y
- Strong quarterly revenues of $190 million
- $300 million debt reduction from 2016 peak
- New deliveries add a minimum of $180 million in time-charter equivalent revenues during charter period
- TEN’s crew health and safety remains a priority
SIX MONTHS 2020 SUMMARY RESULTS
Net income in the first half of 2020 amounted to $69.2 million excluding non-cash one-off charges or $52.7 million if such non-cash charges are included. Earnings per share for this six-month period were $1.64 compared to a $(0.66) loss per share for the same period of 2019.
Gross revenues in the first half of 2020 amounted to $369.7 million, 27.0% higher than in the first half of 2019, mainly due to the strong rates following the widening contango in the oil markets that started in the first quarter.
The daily time charter equivalent rate per vessel increased by 36% over the equivalent 2019 period to $27,689. Operating income, before the impairment charges and loss on vessel sales totaled $118.2 million compared to $46.8 million in the first six months of 2019, a 153% increase.
Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) increased to $186 million, 55% higher than in the first six months of 2019.
Total cash reserves were $262 million, as at June 30, 2020.
Vessel operating expenses decreased by 1.3% while depreciation and dry-docking amortization costs remained at similar levels as in the first half of 2019.
Total debt outstanding as at June 30, 2020 stood at $1.47 billion, $74.7 million lower from the level at the end of 2019 and about $300 million lower from its peak in 2016.
Four vessels were sold in the 2020 six-month period generating about $30 million free cash after repaying nearly $44 million of debt and maintained TEN’s young fleet profile.
Finance costs in the first six months of 2020 increased by $8.6 million to $47.5 million mainly due to approximately $16 million in non-cash negative bunker hedge valuations.
Q2 2020 SUMMARY RESULTS
Following a solid first quarter, second quarter net income amounted to $49.6 million excluding non-cash losses on a vessel sale and impairment charges. Including these non-cash items, net income was still a healthy $31.5 million and earnings per share were $1.07 from $(0.72) in the 2019 second quarter.
Accordingly, TEN’s voyage revenues increased 32.5% to $190.8 million in the second quarter of 2020 with the fleet achieving 95.7% utilization. TEN’s fleet had one vessel less on average in this second quarter compared to the 2019 second quarter due to the sale of a vessel in June 2020.
The average daily TCE per vessel generated by the fleet was $28,767, approximately $9,000 more than the prior year second quarter.
Operating income during the quarter reached $46.9 million, 147% higher than the equivalent quarter of 2019.
Adjusted EBITDA totaled $98.0 million, up $42.2 million or 75% from the 2019 second quarter.
Total vessel operating expenses decreased by $3.4 million or 7.3% due to efficient cost management and the strengthening of the US dollar against the Euro which had a positive impact on crew costs. On an average daily per vessel basis, operating expenses per ship per day fell to $7,457, a 5.7% reduction.
A modest increase in G&A expenses was mainly due to sundry office expenses and professional fees, while management fees per vessel stayed basically the same, as they have done for over ten years.
Finance costs declined by $7.4 million or 34.7% mainly due to $2.2 million positive bunker hedge valuations and to loan interest decreases following renewed pricing terms on the occasion of refinancing certain loans. Interest costs were also partially reduced by the reduction in total average outstanding debt by $68 million since the end of the prior year second quarter.
CORPORATE STRATEGY & OUTLOOK
The first half of 2020 has been a rollercoaster of sentiments for our industry and the world in general. The year started with optimism on the one hand and justifiable concerns on the other due to the new emission regulations imposed by the IMO and the endless debates on the use of scrubbers, something that TEN has avoided and saved significant unnecessary capital expenditure.
Within weeks however, all this faded away with the spread of the Covid-19 pandemic, affecting everyday life as never before. This combination of events caused volatility leading to wide contango spreads that resulted in a strong tanker market, which TEN’s modern fleet took full advantage of.
In this unprecedented environment, TEN has managed to safeguard the health of its seafarers, increase profitability through high utilization and continue its path to growth and modernization
Following the sale of four vessels with an average age of fourteen years, the Company has taken delivery of a series of three new vessels (two aframaxes and one suezmax), with an additional suezmax to follow in the fourth quarter with long-term employment. All vessels are chartered to a major oil company for a minimum period of five years that will add $180 million in time charter equivalent revenues. Concurrently, the Company was awarded a long-term accretive contract for up to three suezmax DP2 shuttle tankers by a major utility company.
Looking ahead and despite the challenges the world has faced, a silver lining is developing on the horizon; the demand for energy is coming back but more importantly the supply of new tonnage has completely dried up, the contango effect has returned and expectations for a strong market after a seasonally slow quarter are becoming more likely. China is importing sizeable quantities of crude, locked-down Asian recycling yards are coming back to business and the recent emergence of congestion at various terminals in the Far East are promising signs.
TEN continues to build value for its shareholders through the payment of dividends, adding another $0.375 cents (split adjusted) per common share on June 26th, 2020 and its ongoing buy-back program for common shares has so far to this date surpassed $8 million since inception. As previously mentioned, management’s intention to redeem at par the $50 million Series C preferred remains intact and a relevant press release will be issued in due course to that effect.
TEN continues to give priority to environmental issues and has successfully managed the transition to low sulfur fuel without experiencing irreparable adverse issues, thanks to our seasoned and efficient technical managers. However, management’s top priority remain that of the wellbeing of the Company’s seafarers, both physically and mentally and tremendous efforts are being made for the timely and safe repatriation to their families, something that is not straightforward in today’s challenging environment.
“During TEN’s four-decade history, the Company has faced major world crises but always succeeded in navigating its way through stronger, thanks to the unwavering commitment of our seafarers and associates around the world. This will be the case again. We wish everyone to stay safe and healthy during this challenging period”, Mr. George Saroglou, COO of TEN commented.