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TEN Gears Up Fleet Modernization Amid Firming Markets

TEN, Ltd. (TEN) reports results (unaudited) for the fourth quarter and the year ended December 31, 2021.

In the fourth quarter of 2021, TEN incurred a net loss of $14.9 million before taking account of non-cash vessel impairment charges of $86.4 million, as compared to a $10.8 million net loss in the 2020 fourth quarter, also before non-cash items.

Excluding the impairment charges, this is one of the best quarterly performances of the past year, indicating the possible beginning of a turnaround, as several of our vessels have been employed at considerably more lucrative rates than what the market was offering in 2021, leaving behind us the challenging consequences arising from two years of global lockdowns that had severely hindered economic growth and frustrated the ability of tanker owners to secure meaningful earnings that market fundamentals underpinned.

Voyage revenues increased in the fourth quarter of 2021 by $7.5 million to $139.1 million, a 5.7% improvement over the 2020 fourth quarter which also had, on average, a slightly higher number of vessels in the fleet.

TEN had six vessels in dry-dock in the 2021 fourth quarter, two of which were brought forward in order to be available for the expected market upturn. Vessel utilization at about 96.1% compared to 91.1% in the 2020 fourth quarter.

The average daily time charter equivalent (TCE) per vessel in the fleet was a healthy $16,891, well in excess of average market rates and an 8% increase from the third quarter of 2021 as markets rounded.

The sizable impairment charges that were incurred in the 2021 fourth quarter, related to six handymax product carriers built in 2005, and a 2006-built product tanker, which will lead to $9.2 million in depreciation savings per annum. These seven vessels remain in good condition and continue to be active in the chartering market, operating primarily under spot contracts.

Management actively monitors the sale & purchase market as asset prices are on the rise and is prepared to sell any of these vessels if and when the opportunity arises. As a result of the impairment charge, there will be a total quarterly reduction in depreciation of almost $2.3 million going forward.

Total operating expenses decreased by 3% or $1.3 million, to $44.5 million from the 2020 fourth quarter which amounted to $45.8 million. On a daily average per vessel basis, fourth quarter operating expenses were $7,919 a 1.2% per day fall and vessel overhead costs remained on average at $1,200 per day, little changed over the past decade.

Depreciation and amortization edged higher by $1.4 million due to preemptive increases of vessels in dry-dock over the past months.

Interest and finance costs net, in the fourth quarter of 2021 amounted to just $8.7 million a 6.5% reduction from the 2020 fourth quarter, again due to lower interest rates, margins and to lower bunker hedge valuations.

Adjusted EBITDA settled at $29.2 million.

In 2021, TEN incurred losses of $58.4 million before non-cash vessel value impairment charges and loss on sale of vessels as mentioned above.

However, voyage revenues achieved in 2021 amounted to $546.1 million as tanker freight rates fell further due to lack of oil demand and reduced production brought about by pandemic factors and the ensuing lockdowns, which led to demand destruction, trade dysfunction and inflation.

TEN was able to reduce overall operating expenses by over 3.3% with savings of nearly $6 million despite twenty-one vessel dry-dockings, twelve of which were brought forward due to the weak freight rate environment and in expectation of a market turnaround.

Depreciation and amortization increased by 4.5.% partly as a result of the amortization that arose from the dry-docking costs over prior quarters.

G&A expenses remained essentially the same as in the previous year, management fees not moving for over a decade.

As of December 31, 2021, total debt was reduced by a net $129.1 million.

Interest and finance costs fell by 56% or nearly $40 million, as interest rates and margins were reduced.

Adjusted EBITDA in the year amounted to over $115.4 million, a reduction of $151.5 million compared to the previous year.

The Company will pay a semi-annual dividend of $0.10 per common share in June 2022. This brings the total dividends paid since the NYSE listing in 2002 to about $500 million.

During the fourth quarter of 2021, the Company issued, through its ATM program 4,711,582 common shares and 190,813 preferred shares. As of December 31, 2021, there were outstanding 24,565,940 common shares and 15,001,863 NYSE-listed preferred shares.

On January 12, 2022, TEN took delivery of its third LNG carrier, the Tenergy and commenced its long-term charter at a healthy base rate with an upside potential to today’s very lucrative LNG market.

On March 10, 2022, TEN signed long-term charter contracts for the construction of four dual-fuel LNG powered aframax tankers to a major European end user.

Inclusive of the above charters, TEN’s fixed revenue backlog exceeds $1.0 billion.

In the first quarter of 2022, tanker rates have firmed due to positive fundamentals and geopolitical ramifications caused by the Russian invasion in Ukraine.

As the world is exiting the pandemic and forcefully adapting to the new realities of the Russian-Ukrainian conflict, energy transportation is again at the forefront of the global agenda as its importance to the global economy is, at last recognized. The expected growth in US oil exports as well as increased LNG shipments to Europe to partly substitute Russian natural gas, in a period of higher global demand for both commodities, will provide additional ton-miles and a boost to both rates and asset prices. In oil tankers in particular, where the orderbook is at historical lows and vessel supply on the backfoot, due to increased scrapping and the elongation of new trade routes, this anticipated firmness is already in evidence. In addition, environmental speed limits that go in force in 2023 will further decrease supply.

In this global backdrop, TEN has already embarked in further modernizing its fleet with the order of four dual-fuel LNG powered aframaxes on long-term employment to a substantial European oil major. On top of this, management is exploring additional opportunities for similar technology vessels in order to reach its goal of a full “Green” fleet by 2030.

In view of the above, a number of our first-generation vessels are sales candidates in the forthcoming months.

With 2021 behind us, experiencing the worst tanker in recent memory, TEN continued its tested and counter-cyclical operating model that targets growth, at market lows and accretive business expansion. With high utilization a solid balance sheet and further debt reduction.

The first quarter of 2022 reflected solid oil market fundamentals while the effects of the Russian invasion of Ukraine fueled rates to even higher levels.

“We all hope and pray for the end of the conflict and the return to a peaceful open-barrier trading environment,” Mr. Saroglou, Chief Operating Officer in TEN commented. “The path to normality will further amplify the positive fundamentals for tankers and drive strong growth going forward from which TEN is well placed to benefit,” Mr. Saroglou concluded.

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