Thank you for standing by, ladies and gentlemen, and welcome to the Tsakos Energy Navigation Conference Call on the Second Quarter 2021 Financial Results. We have with us Mr. Takis Arapoglou, Chairman of the Board; Mr. Nikolas Tsakos, President and CEO; Mr. Paul Durham, Chief Financial Officer; and Mr. George Saroglou, Chief Operating Officer of the Company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. I must advise you that this conference is being recorded today. And now, I'll pass the floor to Mr. Nicolas Bornozis, President of Capital Link Investor Relations Advisor of Tsakos Energy Navigation. Please go ahead, sir.

Thank you, very much, and good morning to all of our participants. I'm Nicolas Bornozis of Capital Link, Investor Relations Adviser to Tsakos Energy Navigation. This morning, the Company released publicly its financial results for the second quarter and six-month period ended June 30, 2021. In case you do not have a copy of today's earnings release, please call us at (212) 661-7566 or e-mail us at ten@capitallink.com, and we will have a copy sent to you by e-mail right away. Please note that parallel to today's conference call, there is also a live audio and slide webcast, which can be accessed on the Company's website on the front page at www.tenn.gr. The conference call will follow the presentation slides, so please we urge you to access the presentation slides on the Company's website. Please note that the slides of the webcast presentation will be available and archived on the website of the Company after the conference call. Also, please note that the slides of the webcast presentation are user-controlled, and that means that by clicking on the proper button, you can move to the next or to the previous slide on your own. At this time, I would like to read the Safe Harbor statement. This conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, which may affect TEN's business prospects and results of operations. And before turning the floor over to Mr. Arapoglou, I would like to say that we are particularly happy to be hosting this conference call today from New York. Dr. Tsakos is in New York. And actually, I would like to congratulate him that a couple of days ago, he was inducted into the International Maritime Hall of Fame in a big ceremony in New York organized by the Maritime Association of the Port of New York and New Jersey. So Dr. Tsakos, congratulations, and delighted to have you with us in New York. And without any further delay, I would like to pass the floor to Arapoglou, the Chairman of Tsakos Energy Navigation. Mr. Arapoglou, please go ahead, sir.

Thank you, Nicolas. Good morning and good afternoon to everyone. Thank you for joining our call today. We clearly are in the worst period in the market in recent memory. And despite this, the results that we show today indicate that we've managed to stay relatively unscathed, proving once more that we have a robust operating model. We continued our well-proven strategy of countercyclical new investments in accretive charters and with blue-chip customers as always. We continue selling all the vessels to maintain a young fleet. We continue keeping a substantial portion of our vessels on time charter, albeit at a lower percentage to ensure a predictable revenue flow and cover costs, while steadily increasing the spot content to position TEN for, as expected, a strong rebound in the market. All this, while maintaining a very comfortable cash position, constantly repaying debt, servicing our obligations, maintaining dividends and containing costs. So nothing really new, just tweaking the same model according to what's happened in the market. This has served us all along well. And for this, again, we need to congratulate Nikolas Tsakos and his team for the focus and the excellent performance. I'll now pass the floor to Nikolas Tsakos. Thank you very much from my side.

Good morning to all, and thank you, Nic Bornozis for your wishes, and thank you, Chairman. We would like to be congratulated also when we would start making the big profits. We hope that will be coming soon, but thank you for your good words. We have been using TEN's model in a difficult environment; and the difficult environment, it has not only been the market conditions, but the operational conditions that our 70 vessels have been facing, navigating through the pandemic around the world. And we would like to thank the whole operation team and the men and women on board the ships for actually being the unsung heroes and recognized heroes for spending more and more time on board their ships away from their families than actually ever before due to a very hostile repatriation rules from various regions and countries. And from our side, we have tried to do the utmost to succeed in vaccinating the majority of them and also making sure that at any cost, and you will see this also sometimes in our bottom line, navigating our vessels at significant costs to frankly repatriations areas like, I would say, the Philippines and Greece, the France, in order to make sure that people will go back to their families, and we will get them safely on board. So it has been, I would say, a very strange period of time. We try to keep a clear head through this storm. And so far, as our good Chairman said, so good. The horizon seems to be brightening up. I think we have all looked at this at the fourth quarter of 2021 as a time that things would start normalizing. We are looking at the other markets that we are participating like the dry cargo market…

Thank you, Nikos, and good morning to all of you joining our earnings call. So let me start by saying that we're currently seeing a bouncing freight markets in the larger-sized vessels compared to the summer months and the year-to-date average rates. Spot rates for VLCCs and Suezmax', on average, are currently 4 to 5x higher than the year-to-date average. And we expect this improvement to continue across all vessel types as we enter the seasonally strong fourth quarter. The anticipation of this improvement, we consider it to be sustainable, considering that oil demand continues to recover from the demand losses of last year. Global oil inventories that built last year continue to grow and are below the five-year average in all major economies and geographies. Mobility statistics in the U.S.A., China and Europe are improving, and the strong demand recovery of 2021 will continue next year when we expect to be at the pre-COVID demand levels by the end of 2022. OPEC+ has now restored almost 50% of the initial 10 million-plus production cuts and is adding from August, 400,000 barrels per day every month until the 5 million barrels per day of current supply cuts are phased out, which is expected to happen at the end of the third quarter of 2022 based on the current OPEC+ plans. And of course, supply of new tankers continues to be at low historical levels while the global fleet is getting older, and new upcoming environmental regulations are expected to phase out the big part of the agent fleet. Let's move now to the slides of our presentation. In Slide 3, we see that in TEN since inception in 1993, we have faced four major crises. But this time, the Company, thanks to its operating model, which is built to be…

Thank you, George. So despite the continuing stagnant market in quarter two, TEN was able to generate gross revenue of nearly $137 million and over $275 million in the half year. Much of this was due to our ability to secure almost full utilization with 2/3 of the fleet on time charter and despite eight vessels undergoing dry docking, and that includes four vessels brought forward for dry-docking. Of some significance in these times of squeezed liquidity for tankers, time charter hire was still enough to cover our charter-in costs, our operating expenses, our overheads and our cash finance costs, and during the six-month period, managing to reduce debt by nearly $87 million. That still left 32 of our 65 vessels in quarter two to operate in the spot market, where they successfully earned revenue over $65 million, covering all voyage expenses, which had been impacted by a large increase in fuel costs due to rising oil prices. Also, fuel consumption increased as certain vessels completed their time charter and moved into the spot market to find more lucrative earnings where possible. In June, Suezmax', Arctic and Antarctic was sold for a total of $45 million, incurring a modest loss of $5.8 million, but free in cash of almost $17 million after repaying related loans of $27 billion. Excluding the loss on the sale of the Suezmax', net operating losses were just $7.1 million, and the overall net loss was held to a relatively decent $13.8 million, in the circumstances. Our daily TCE per vessel in quarter two averaged $17,240, a strong performance compared to market average TCE given the difficult conditions and the dry dockings. TEN's overall expenses have been held down by our technical managers since the prior quarter two, rising in total by only 4%. Operating expenses increased by $3.5 million on the addition of a further vessel and also due to dry dockings, which this quarter included an LNG carrier, which especially pushed up expenses temporarily, but left the vessel in perfect condition to continue its time charter to a major LNG trade. A weaker dollar also contributed to higher costs, although we expect this to reverse as the U.S. economy continues to revise. So average OpEx per vessel moderately increased, but in the six months, it fell to just over $7,800, while G&A costs stayed at exactly the same level as in the prior quarter two, bearing in mind that fees -- management fees have not been increased for over 10 years. Finance costs fell 46%, mainly due to reduced debt and lower interest rates and margins. While the cost of our debt has remained at only 2% and also positive bunker hedge valuation movements amounted to over $3 million. And at this point, I'll now hand the call back to Nikolas.

Thank you, Paul, and that's how we'll be all reporting with even more enthusiasm and big profits sometime soon. Well, I think as it is clear, it has been a very trying period and it has been a trying period for all of us, and sometimes the trying period on the business segment, it has been secondary to what people have suffered around the world. So it is very good to be able to stay safe and maintain our course with a clear head under these circumstances. And finally, we start seeing things becoming better on the period and the spot rates we are expecting the Chinese Golden Week to start thinning out and people getting back to work next week, and we hope to see through that even more stronger rates going forward. And with this, I would be very happy to answer any questions so that you might have. Thank you very much.

Your first question today comes from the line of Ben Nolan from Stifel. Please go ahead. Your line is open.

So I've got a couple. I wanted to start with the vessels that you ordered. These are Dual-Fuel, I believe, the press release said Dual-Fuel LNG and conventional. Strategically, I guess the question or where I'm headed on this is and obviously, most of what you do is on long-term contract. But is it fair to say that given sort of the uncertainty with respect to fuel and emissions that at the moment, if you're going to be building anything, it probably is going to be Dual-Fuel? Or was this a specific request of your customer and maybe you're less strict on sort of how you're -- what you would be looking to build?

Thank you. Thank you very much, Ben. And we took the, I would say, strategic decision, not we invest in many conventional new buildings anymore. So it is with our strategic partners going hand-to-hand, taking a dive into future technology, which it's always better when you dive in to hold somebody's hand than dive into it by yourself. We are as uncertain as anybody that where the future will take us. The way we speak today and is -- that the way we see today is that the Dual-Fuel seems to be the medium-term solution from now until 2050. As you know, we are building ships. We are building ships that would last 20 to 25 years, and that's why we took this decision. So it is a decision based on the future and not the decision made on a piece of business that came, we have been offered quite a number of attractive business on conventional vessels, and we decided to pass because we have the model 10 was created the new -- most of you're too young to remember, back in 1993. On the aftermath of the OPA 90, when we had to convert the whole world's tanker fleet between 1990 and 2000 into the double-double design, and that's why TEN was -- started this very, very soon the way before time, we had the full double-double-double fleet. And I think that's what we're looking in the future with this new technology.

Okay. That's helpful. And then sort of following on to that, one of the, again, fuel challenges is the potential of carbon taxes in the not-too-distant future. And as I understand it though, it would be borne by the ship owner. That could, in theory, present a problem if you have a legacy time charter contract that doesn't -- isn't built to compensate for that. How do you think you -- or how do you manage through that if there is, in fact, whatever it is, a $60 ton carbon tax or whatnot, how do you think that will be borne or mitigated or handled on your part?

In most of our time charter contracts, we have foreseen. And I would say I think this is something that I -- wearing my ex-INTERTANKO hat, I will get most of my other colleagues to foresee on the long-term time charters to make sure that this will be shared between the charters and the owners. I think that is fair. I think it is unfair for owners to carry the whole burden of something like this. The owners are paying for the new technology we are building the new ships. We are making the investment as we did with a double-double design 30 years ago. But when I think it has to be shared together with the end users and our charterers. So, I think -- so in our long-term contracts and we have quite a few of them, we have discerning arrangement.

Okay. That's helpful. And then the last, just out of curiosity, I mean, it's October 7, I mean the last tanker company to report was two months ago. Any color as to what -- how we're so behind schedule?

Yes. Well, it had to do a lot that we were planning finally after 20 long months to be here in the United States and do a road show. We wanted you to do this on our results. The migration legislation, the COVID would not allow us to come. We were trying to come end of August, and end of September, and the only reason we were able to -- I was able to get a permit to come was because of my award for the Hall of Fame, two days ago. So, we said, it would be good to be here in New York, and do the result show. Immediately, we could do a road show not to be in a block period. So that's why it was postponed. Like my award, I was supposed to be getting this award at the CMA in March 2020. So I'm glad I got it alive.

Well, congratulations, and welcome to the U.S. And I was -- I traveled internationally last week, and it felt nice to use my passport again. So anyway, I appreciate it. Thanks so much, Nik.

Thank you.

Thank you. Your next question comes from the line of Magnus Fyhr from H.C. Wainwright. Please go ahead. Your line is open.

Good afternoon team, Tsakos, and Congratulations, Nikolas, to the award and the new contracts for the Aframax'.

Thank you. Thank you, Magnus.

All right. Couple of questions. Just a follow-up on those contracts. I know you stated a few that should be $350 million. Can you give a little more flavor on what kind of targeted returns and the additional cost over a regular Aframax newbuild that this LNG capability would cost? And it looks like there's somewhere in the ballpark of six years contracts. I don't know if you can comment further on that. Thank you.

Yes. I think that's quite accurate to what you have said. I think the -- we were able to achieve the contracts because of our long relationships and being, I would say, one of the companies that we have been always faithful to our shipbuilders and not really jumping from country to country. So that's another -- we have put our continued trust to Korean shipbuilding and are actually, our new building team has been there since the '90s without moving because we keep on building vessels there, which gives us at least the comfort that technologically in this new environment, we are not taking too many chances. Of course, the cost, we were able to achieve the pre-explosion of the steel prices environment. And I think today, those ships have an additional 15% to 20% value, at least 15 for sure, percent value as we go because steel prices, as you know, have gone through the roof as most commodities have been going through the roof. So we are glad we were able to build really the previous four vessels for the U.S. major oil company and those six at the pre-up prices for new buildings. But however, still, there is a significant -- another 10 -- at least 10% to 15% higher price due to the very complicated and excitingly new technology.

Okay. Good. And as far as timing and financing of these vessels, can you comment on what kind of delivery time frame you would see?

Well, we are hopeful, we are very certain we will start taking delivery of those ships every quarter in 2023. And -- but in the meantime, we still have quite a few deliveries that are right now a lot into the money in a very big way. We have our LNG coming for delivery in January that energy and which is as you've seen what has happened to the LNG markets and to the LNG value. So I think that vessel today is at least $30 million more we could flip here, if we hope for $30 million at least more than what we have paid for here, which is a good situation to be in to. And then later in the year, in April, we have our next Brazilian endeavor with our shuttle tanker. So we will have things to do from now until the Dual-Fuel will be coming for delivery.

All right. So should we assume that you already spent the 10% down and then just regular down payment, performance payments in 2022?

That's true.

All right. The last question and I'll let over to somebody else to ask questions. But the cash balance have declined here, you still have a significant cash balance. But my question is, can you still sleep at night with $140 million on the balance sheet?

Well, I've been criticized in the past for having too much cash in the balance sheet. And there is -- and now you can see why it was the correct thing to do. And yes, I think we are -- as I said, we are hopeful that with the market turning and most of our obligations have -- are out of the way. Don't forget, we had to -- we do not have any more obligations for the delivery of either our shuttle tankers or our LNGs. These are money that we have paid the Company takes very seriously its cash management. We have reduced debt from the peak in 2016 of close to $1.8 billion, right now, to $1.35 billion. And that's all from the Company's cash. And on top of that, we have repaid $100 million of our step-up preferreds. So, we are reducing significantly our obligations, and we are enjoying very low -- we're enjoying a very low debt environment, which today is under 2%. So I think our WAC cost of capital it is very, very low, and that's why we feel comfortable. And do not forget that we hope that we have close to 2 billion -- sorry, 2 million or 1.7 million lightweight tons of steel. So our whole fleet, our debt in our fleet is about $1.35 billion, which is supported by an excess of $1 billion of scrap values. And still a very, very, very young fleet. So with all this, I think Paul, referred to a comfortable situation in today's market environment, of course.

Yes. No, that's an interesting way to look at it. Nikos, congratulations to your award.

Thank you. Thank you very much.

Your next question comes from the line of Jefferies. Please go ahead. Your line is open.

This is Chris Robertson on for Randy. How are you.

I very well. Thank you. Finally, on this side of the Atlantic.

Yes. Congratulations on the award as well. I guess, just following up on the new build questions that were asked. Is it fair to say that you put down payments on four out of the six? And then can you discuss kind of the timing for the option period on the additional two?

Yes, yes. That's the situation. And I think it will be for January 2022.

Okay. And then can you talk about any of the other systems aside from the propulsion, obviously, that will be -- maybe a new design or upgrade that we'll be able to comply with the new Phase III requirements for the EEDI?

Well, I think I have -- I hope we have our new building department on the line. But I think from -- this is going to be an engineer's dream. And I have one of my daughters is threatening to study engineering. So I think she'll be in a very good time to follow up the construction of those ships, for all our teams. I don't know how she wants to become an engineer, but it's good to have someone in the family in this. But it is going to be really breaking new ground. It will be based on what we already experienced on our LNG vessels. So I think we have the knowledge of operating those ships due to the similarity of the LNG vessels that are Dual- or sometimes Tri-Fuel ships. The challenges are going to be the containment system for the gas, which in the design profile will be in tanks instead of being allocated spaces on deck, which happens in retrofit vessels. So I think we're going for the whole -- having a very, very demanding and high-class charter, we are going for the whole ship. And as we said, I think we are excited that we're starting this phase of the new design of ships. So again, against a very long charter, as we did back in 1998 when we build against a 50-year contract, a number of our first -- sorry, 1996, our first double-double ships.

Sure. I guess moving on to the ATM program, can you talk about kind of the breakdown between the preferred shares versus common shares? And how are you guys thinking about that in terms of the balanced strategy between the two?

Yes. Well, I think we have made a breakdown in the press release about the ATM program. And I think we have about $20 million have come from the common and $15 million from the preferred so far. And we find the ATM program as a very efficient and inexpensive way to create liquidity in the market. And I think, it will continue in a measured way.

And can you briefly comment on the remaining authorization in that program?

I think it's, George Saroglou, if you're listening. He's the one who's keeping all the -- what is it, George is it $15 million or?

Yes, close to this level.

$15 million, approximately another $15 million, 1-5.

I think that's it for us.

Thank you very much.

Thank you. I will now hand the call back for any closing remarks.

Well, again, it has been a real pleasure to be able to be back in the in the United States and hopefully have spent a little time seeing now that we have our results out with our shareholders later this week and next week. We have entered the new phase of development for the Company. We expect this phase of development to take us to a much greener environment. And we always follow the environmental calls in a big way, and we're very excited about this. And the signs of our markets are looking finally better in numbers and not just in feeling, and we hope that this will continue. And in our next call, we will have much better news. Thank you for all your support following the Company. And please let Nic Bornozis is now on the team, if you would like to have any one-on-ones now that I am finally free to come and visit. Thank you very much.

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.