TEN, Ltd. (TEN) reported results (unaudited) for the six months and second quarter ended June 30, 2017.
SIX MONTHS 2017 RESULTS
TEN’s net income in the first six months of 2017 was $21.1 million or $0.13 per basic and diluted share after taking into account $10.5 million in preferred stock dividends. Operating income was $49.1 million.
Earnings before interest, depreciation and amortization (EBITDA) totaled $115.4 million. The daily time charter equivalent rate per vessel was $20,038 and fleet utilization increased to 96.8% compared to $22,477 and 95.8% respectively in the same period of 2016.
The Company and its technical managers continue to keep costs under control with average daily operating expenses per vessel at $7,729, a 3.0% reduction compared to the same period in 2016.
Depreciation and dry-docking amortization costs amounted to $66.6 million compared to $53.0 million for the same period of 2016, with the increase due to the addition of eleven vessels since the first half of 2016. General and administrative expenses totaled $12.7 million, a reduction of $0.2 million from the same period 2016 mainly due to lower incentive awards and reduced office costs.
Interest and finance costs increased to $27.7 million mainly due to increased indebtedness and loan interest increases, while capitalized interest fell as new vessels were delivered.
Since the beginning of this year, the Company has sold 1,165,717 common shares from Treasury Stock and 24,803 Series D preferred shares, in addition to its underwritten sale of 4,600,000 Series E preferred shares in April 2017.
SECOND QUARTER 2017 RESULTS
TEN generated positive net income of $3.6 million in the second quarter of 2017 or $(0.03) per basic and diluted share after taking into account $6.5 million in preferred stock dividends. Operating income amounted to $19.3 million.
Despite difficult market conditions, TEN’s fleet operated at 96.4% utilization in the second quarter of 2017, during which TEN operated, on average, a fleet of 62.3 vessels compared to 50.5 vessels in the second quarter of 2016.
Revenues, net of voyage expenses (bunker, port expenses and commissions), amounted to $104.1 million, an increase of 9.7% from the second quarter of 2016 due mainly to the eleven newbuilding vessels delivered to TEN and now operating in the fleet.
Following the Company’s stated policy, all vessels on time charter have together generated enough gross revenue to cover the voyage, operating, overhead and financial costs of the whole fleet, including those on spot.
EBITDA amounted to $53.7 million in the second quarter of 2017. Six vessels underwent scheduled dry-docking during this period.
During the second quarter of 2017, two additional newbuilding aframaxes, Oslo TS and Sola TS, were delivered to TEN, the newbuilding aframax Stavanger TS was delivered in the third quarter and the newbuilding aframax Bergen TS, will be delivered in the fourth quarter. These vessels, with their long-term employment to a major European oil concern will have a positive impact on the results in the second half of the year.
Depreciation and dry-docking amortization costs were approximately $34.3 million in the second quarter, increasing mainly as a result of the extra tonnage joining the fleet over the twelve months to June 30, 2017.
Global increases in interest rates and fresh financing relating to the new vessels that joined the fleet, caused interest and finance costs to rise to $15.9 million in the second quarter of 2017.
G&A costs totaled $6.6 million, a reduction of $0.9 million from the same period of 2016, mainly due to a reduced incentive award and to savings on office costs.
TEN’s balance sheet remained strong with cash balances at $258.2 million, a similar figure to cash balances at the end of the second quarter of 2016. With the capital expenditure program completed bar two vessels, as of June 30, 2017, TEN had undrawn bank facilities totaling $46.7 million, relating to the vessels at the time, still to be delivered. Net debt to capital at the end of the second quarter was at a comfortable 50.8%, despite the debt necessary for the new vessels.
Dividend – Common Shares
The Company will pay a dividend of $0.05 per common share on November 15, 2017, to shareholders of record as of November 9, 2017. Inclusive of this distribution, TEN will have distributed $10.56 per share in uninterrupted dividends to its common shareholders since the Company’s listing on the NYSE in March 2002.
In the first two quarters of the year, 22 new time charter contracts to international oil concerns have commenced including new strategic relationships with major end users. This brings the time charter coverage of the fleet to more than 75%.
With our growth program through a series of 15 purposely built newbuildings almost complete, management is focusing on the most efficient employment of the fleet, particularly in view of the upcoming winter months which are customarily the stronger periods, in terms of rates. In addition, with 2018 expected to be a year in which the impact of the concentrated deliveries to the global fleet experienced in 2017 will start to wane, the Company’s employment policy will focus on taking advantage of such uptick without weakening its fleet’s tried and tested policy of having a blend of charters to safeguard a consistent, solid and visible cash flow. This blend has recently been enriched through a number of profit sharing charters with various international oil concerns in order to capture the expected upside while safeguarding healthy revenue streams going forward. In addition to the above, the existing secured contracts cover all of Company’s operating expenses, allowing management to explore attractive employment and growth opportunities as they appear.
Apart from solidifying the earning capabilities of the fleet, management, in close cooperation with the fleet’s technical managers, will continue to implement cost effective ways to operate the vessels in order to keep expenses in check, while maintaining the highest standards in terms of safety and environmental protection. The result of such a hands-on approach, epitomizing good vessel management, has been the reduction of the fleet’s average operating expenses per vessel by 3% in the first six months.
With $258 million of cash reported at the end of the second quarter, TEN will continue to be receptive to growth opportunities that would improve the fleet’s already young age profile, while further entrenching the Company’s position as a carrier of choice to blue chip global oil concerns.
Apart from growth, management is also exploring various ways and opportunities to divest a number of its first generation vessels, which will also generate free cash for further investments.
“TEN’s industrial shipping model is continuously reinforced with over 75% of the fleet on long term employment, including profit sharing provisions. This offers cash flow stability, visibility and substantial upside potential,” Mr. George Saroglou, Chief Operating Officer of TEN stated. “The continuous appetite of global oil concerns to cover their long term needs with solid charters is a positive sign for upcoming developments in the global oil markets. TEN, with one of the youngest fleets in international tanker shipping, will be well positioned to benefit from expected market upturns,” Mr. Saroglou concluded.