Tsakos Energy Navigation (TEN) Increases 2007 Dividend by 25% and Reports EPS of $4.81 for Full Year 2007 and $1.37 for Fourth Quarter 2007

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

19 Mar 2008

Tsakos Energy Navigation Limited (TEN) yesterday reported results for the full year and fourth quarter ended December 31, 2007.Net income was $183.2 million for 2007 as compared with $196.4 million for 2006. Basic earnings per share based on weighted average number of shares outstanding was $4.81 versus earnings per share of $5.15 in 2006. Net revenues (voyage revenues net of commissions and voyage expenses) were $410.57 million in 2007 as compared with $343.15 million in 2006. Net income before depreciation was $264.74 million in 2007 versus $255.46 million a year earlier.Revenues from voyages were 17% higher than the prior year, while the average number of vessels increased from 33.8 in 2006 to 41.7 in 2007. The average rate earned per vessel (voyage revenues less voyage expenses) fell only slightly given the similar market conditions that existed in the prior year, from $30,154 per day in 2006 to $29,421 per day in 2007. TEN's continued policy towards fixed employment with guaranteed minimum rates and profit sharing agreements enabled the company to exploit the higher rates of the spot market while ensuring continuous employment and guaranteed rates in market downturns. In 2007, 76% of total operating days were under time charter with either a fixed rate or profit sharing, compared to 54% in 2006. However, the number of days employed on time charter with profit sharing almost doubled between 2006 and 2007. Utilization of the fleet was 96.6% in 2007 compared with 97.4% in the prior year, due to higher dry-docking activity in 2007.Operating expenses per vessel per day increased by approximately 10% from $6,979 to $7,669 primarily reflecting increases in crew wages as a result of a further decline of the US dollar against the Euro compared to 2006 and crew compensation increases, a reflection of the growing shortage of skilled seafarers. Overhead expenses increased from $1,162 per vessel per day in 2006 to $1,565 in 2007 mainly due to the issuance of restricted stock units and the related amortization of their fair value.Interest and finance costs increased from $42.5 million in 2006 to $77.4 million in 2007 due to the increase in loans to finance new vessels and negative fluctuations in the value of interest rate swaps.Capital gains from vessel sales were $68.9 million in 2007 compared to capital gains of $63.3 million in 2006 from the sale of vessels and the sale of shares in subsidiaries, reflecting the Company's continued policy of fleet renewal and opportunistic divestments.Fourth Quarter 2007Net income in the fourth quarter of 2007 was $52.18 million versus $77.11 million in the same quarter of 2006. Earnings per share (basic) based on weighted average number of shares outstanding were $1.37 in the 2007 fourth quarter versus $2.02 in the same period one year earlier. Net revenues (voyage revenues net of commissions and voyage expenses) were $109.68 million in the fourth quarter of 2007 in comparison with $93.73 million in the prior year's fourth quarter.The size of the fleet increased from an average of 37.0 vessels in the fourth quarter of 2006 to 43.0 vessels in the same period of 2007. Average TCE revenues rose from $29,796 in the last quarter of 2006 to $29,935 in fourth quarter of 2007. The market in the fourth quarter of 2007 bore similarities to that of 2006, starting relatively soft, but regaining significant momentum by December.Operating expenses per vessel per day increased from $7,811 to $8,542, or 9%, due to increases in crew wages, as described above, and increased repair costs incurred during the dry-docking of vessels. The continuous weakening of the dollar and the introduction of the LNG carrier Neo Energy also contributed to this increase.Interest and finance costs increased from $14.8 million in 2006 fourth quarter to $23.5 million in the fourth quarter of 2007 due to the increase of average loan balances and negative movements in interest rate swaps valuations.In the fourth quarter of 2007 the Company sold the aframax tanker Athens 2004 recognizing a capital gain of $30.8 million whereas in the fourth quarter of 2006 the Company recognized total capital gains of $50.0 million.D. John Stavropoulos, Chairman of the Board, observed, "2007 was a very challenging year. The industry dealt with extreme volatility in spot market rates; trade route disruptions arising from geopolitical events; intensified inflation affecting wages, bunkers, lubricants and general maintenance; insurance premiums reflecting rising casualties in many sectors; and the added punch from a very weak US dollar which on a daily average basis continued to decline versus the Euro." He continued, "TEN's performance in this harsh environment was exceptional. The broad strategy of a diversified fleet and balanced employment was tested and verified. Management's execution of the business plan was excellent. The resulting profits and over 24.2% return on beginning net worth was indeed noteworthy."Fleet Strategy2007 was a key year for TEN. The Company entered the LNG market with the delivery and charter of its first LNG carrier, the Neo Energy. Additionally, the Company took delivery of nine newbuildings, eight of which entered attractive medium to long-term charters and one strategically placed in the spot market. Further, TEN sold three Aframaxes, the Maria Tsakos, the Athens 2004 and the Olympia at rates considerably above the vessels' book value and delivered the Panamax Bregen to its new owners as per the sale agreement of November 2006. All-in-all 2007 was a year where TEN's net fleet expanded by 490,000 dwt and a year in which the fleet's average age was further reduced from 5.9 years to 5.6 years, half the industry's average.In 2007, TEN invested over $580 million in nine newbuilding vessels, six of which were of ice-class design, and recognized $68.9 million in capital gains from the sale of the two Aframaxes (the third was delivered in the first quarter of 2008) and the one Panamax.TEN's continued growth enabled the Company to solidify and expand its relationships with major international oil and gas entities, resulting in the enhancement of the future earnings visibility of the fleet. Including the introduction of the two Panamax newbuildings Selecao and Socrates, which entered the fleet in February and March of 2008, TEN's 39 vessels with fixed employment have secured 80% of 2008 and 62% of 2009 employable days guaranteeing at least $564 million of gross revenues over that period (assuming only the minimum rates for those under profit sharing agreements).Mr. Nikolas P. Tsakos, President & CEO of TEN stated, "Our sale and purchase policy has once again enabled us to increase the size of our fleet, further reduce its already low average age, increase dividend distribution to our shareholders and provide us with increased balance sheet leverage for growth projects, including the reacquisition later in the year of the two Suezmaxes, sold five years ago and chartered back to us. With six vessels currently under construction, two of which to be delivered this year, the Company is well positioned to take advantage of market conditions as we move forward."Tanker IndustryFollowing the strong growth of the third quarter of 2007, global economic expansion has begun to moderate in response to the continuing turbulence in the world financial markets. In its latest report, the IMF (International Monetary Fund) is forecasting global economic growth to decelerate from 4.9% in 2007 to 4.1% in 2008 (a 0.3% downward revision) due to reductions in the 2008 growth forecasts of the world's major economies. Projected growth in the USA has been lowered to 1.5% compared to 2.2% in 2007. In the Euro area, 2008 growth is projected at 1.6% versus 2.6% for 2007. For Japan, 2008 growth is expected at 1.5% versus 1.9% in 2007. Emerging and developing economies continue to expand although the ongoing turmoil in financial markets is expected to impact their export growth potential. In China, growth has been revised downwards as well, from 11.4% in 2007 to 10.0% in 2008. Globally, growth in emerging market and developing economies is expected to decline, from 7.8% in 2007 to 6.9% in 2008.Headline inflation has increased since mid-2007 in both advanced and emerging market economies. In the USA, Federal Reserve rate cuts could provide some cushion from the downward pressures the US economy is experiencing, while at the same time central bankers in Europe and Japan have kept interest rates steady. Central banks in many emerging markets where edible commodities and energy represent a higher share of consumption baskets are tightening monetary policy.Global oil demand remains robust at 87.6 mb/d in 2008 (up 1.7 mb/d from 2007, a 1.9% increase) despite a 200 kb/d downward OECD revision for North America. By contrast, in 2007 according to the International Energy Agency, global oil demand has been adjusted upwards by roughly 110 kb/d to 86.0 mb/d (up 1.1 mb/d over 2006, a 1.4% increase) due to revisions in several non-OECD countries in Asia and Latin America. In its March meeting, OPEC decided to maintain crude oil production targets steady at 29.673 mb/d for 12 of its 13 members as Iraq is the only member with no quotas and production of approximately 2.3 mp/d. In February 2008, commercial oil stocks in the USA and Europe were above the five year average. OPEC's decision to keep production steady during the second quarter of 2008 -at a time of slower demand - should assist in the build-up of global oil inventories. However oil prices are back in backwardation (following a short stint in contago) and continue breaking records as geopolitical tensions and fears of supply disruptions remain intact. Funds are continuing to pour money into commodities and in particular in oil futures as a "hedge" against the falling dollar and inflation.In the oil tanker market, spot rates recovered markedly during the second half of the 4Q 2007 and, despite experiencing some softening recently rates are generally healthy. Asset prices have remained firm during this period and are not expected to decline materially for the foreseeable future. Oil majors, state oil companies and commodity traders continue to time-charter quality tonnage, for long periods at rates marginally below 2007 levels.The global economy is now in its sixth year of expansion and, despite the recent downward revisions for global growth is continuing to grow at healthy levels. Despite this, there are many factors that could destabilize this growth as advanced economies are still facing risks and challenges, affecting their financial condition and negatively impact the financial state of the emerging and developing economies currently leading the growth charge. Oil demand is growing, which can only be positive for the tanker market. However, the tanker industry is still facing the same set of risks and challenges with the power to affect the revenue and cost base of owners and operators. The falling dollar, increases in personnel expenses, insurance premiums, higher bunker and lubricant prices, rises in risk premiums, and the international credit market tightening could create strong headwinds.Outlook for TEN2007 was a challenging year for all involved in the tanker industry as freight rates exhibited their usual volatility, and on occasions with more vigor than in the past. Further, events in world capital markets compounded the nervousness of equity investors in our sector. In spite of this nervousness, TEN's knowledge and experience in navigating the industry's cyclicality allowed TEN's shares to appreciate significantly in 2007.Challenging environments are where solid companies prove their mettle and TEN has proved that it excels in such conditions. The Asian crisis of 1997 and the subsequent financial meltdown of emerging markets in Latin America and Russia were times when TEN commenced its newbuilding program and built strong relationships with leading shipbuilders in the Far East that proved beneficial later in securing advantageous newbuilding slots and resales. The 53 tankers TEN has constructed since that time have supported the Company's profitability, quarter after quarter, and assisted in its growth. The Company's relationships with its bankers, who supported TEN's growth at every stage of its development, remain strong as well.The industry is fast approaching the crossroads that will define its identity for years to come. The issue of the single-hull phase-out, which represents about 21% of the world fleet today, is gaining attention and momentum. As we move closer to the April 2010 deadline, the assets of companies with 100% double-hulled fleets will be in greater demand. TEN has already positioned itself to meet the challenges of the future by establishing a sound platform to seize opportunities as they arise. With a versatile fleet of all double-hulled crude and product tankers, a LNG carrier, a prominent position in ice-class trades and a balanced employment policy tailored to safeguard against market downturns with upside options, TEN is well positioned to confront the challenges of the future and continue to offer a viable proposition to investors looking to participate in the ever developing maritime energy trades.China and India continue to fuel the maritime locomotive, but the current newbuilding orderbook, if left unchecked, could potentially lead to its slowdown. With Korean and Japanese yards working at full capacity and China slowly entering the fray, owners need to enhance prudence before placing speculative orders. The market today is finely balanced with the current state of the orderbook. The deadline on single-hull vessels, together with the eventual evaporation of the scrapping backlog created by the very firm freight environment of the last few years coupled with the increase in ton-mile demand, should allow new tonnage to be absorbed smoothly within the existing framework.Looking ahead, TEN will continue to build on its existing relationships and foster new ones while exploring ways to further enhance the Company's value. TEN's healthy balance sheet affords the Company the flexibility to evaluate accretive transactions without jeopardizing its obligations to its creditors and shareholders. Now entering its fifteenth year of operations, TEN has successfully navigated many industry cycles. 2007 was one such year, and proved to the investment community that sound companies with experienced management, a young fleet and a long track record continue to offer a bright spot in an overall gloomy international capital markets environment. The management will continue to exercise prudence with the Company's liquidity and cash reserves and expects, irrespective of any turbulence ahead, 2008 to be another healthy year for TEN.Subsequent EventsTsakos Energy Navigation Limited announced today that its Board of Directors has declared the Company's semi-annual dividend of $0.90 per share payable April 30, 2008 with a record date of April 24, 2008, and an ex- dividend date of April 22, 2008.D. John Stavropoulos, Chairman of the Board, stated, "We are pleased and proud to announce an increased final dividend of $0.90 per share for fiscal 2007. This dividend raised the total for 2007 to $1.725 which compares with $1.375 for fiscal 2006 and represents the fifth consecutive year of increased dividends since initiation of cash dividends in fiscal 2002." Mr. Stavropoulos added, "This latest declaration reaffirms our policy to reward shareowners with generous dividends complemented by periodic share buybacks while reinvesting in the dynamic growth of the enterprise."The company's dividend policy targets a cash dividend payout of 25% to 50% of earnings subject to the discretion of the Board of Directors and depends on available cash, anticipated cash needs, overall financial condition, loan agreement restrictions, capital commitments, future prospects for earnings and cash flows, as well as other relevant factors.