Why the chartering strategy supports growth and dividend



Chartering strategy

Tsakos’ (or TNP) chartering policy supports significant growth for the company by generating high returns and dividend for shareholders. The company has maintained stability throughout industry cycles with employment of a high percentage of its fleet on long and medium-term employment with fixed rates or minimum rates plus profit sharing agreements. As a result, this leads to high utilization rates for its vessels.

Revenue breakup

At the same time, TNP maintains flexibility in its chartering policy to take advantage of favorable rate trends through spot market employment, pools, and contract of affreightment charters with periodic adjustments.

Tsakos has long-term relationships with first class oil majors, independent oil companies, and refineries worldwide. Their strategic blend of charters with upside options and downside protection generate profitability through market cycles.

Time charter equivalent

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Time charter equivalent recorded $22,750 per day in the 1Q14 versus $18,176 in 1Q13—a 25% increase. TNP operated an average of 48 vessels in the 1Q14, compared to 46.2 in the 1Q13—the additional vessels being the two new shuttle tankers. Despite drydocking, the company’s fleet utilization was at a high of 98%.

A strong crude market resulted in all of the ten conventional suezmaxes generating positive results, several of them at exceptional levels. The spot rates also enjoyed some benefit from reduced bunker costs, which helped offset the increase in voyage expenses incurred due to the significant 24% increase in the number of operating days TNP’s vessels operated in the spot market compared to the 1Q13, and to the long-haul voyages undertaken by several of the suezmaxes.

Overall, TNP’s chartering strategy supports the company to face the industry down turns in a better manner compared to other companies that are highly engaged in the spot market. It also makes TNP less volatile from a revenue standpoint.

The company has peers like DHT Holdings Inc. (DHT), Teekay Tankers Ltd. (TNK), Navios Maritime Acquisition (NNA), and Nordic American Tankers (NAT) while the Guggenheim Shipping ETF (SEA) tracks the shipping companies.

Let’s discuss how the company’s highly skilled management charters its investment strategies in the next section in this series.


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