Why TNP’s partnerships create value and positive outlook

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Aug. 18 2020, Updated 9:34 a.m. ET

Tsakos Energy’s partnerships

Tsakos Energy Navigation Limited’s (or TNP) management believes that the value created by its new partnerships will be profitable for the company. This will be reflected in its valuations.

Vessels Growth

Recent vessel chartering

In mid-August, Tsakos announced that it started chartering two of its modern Suezmax tankers from 3Q14. It’s chartering the tankers with a European oil major for one and two years, respectively. There are charter options for another year for each vessel. The options are at an accretive base rate with profit sharing. The company forecasts minimum gross revenues of ~$35 million—31% of the current quarter revenue—for the full period.

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It also revealed its new partnership with an oil major to construct and charter two LR1 tankers for five years—starting in the second half of 2016. The vessels would be employed under five-year charters. They would be at an accretive base rate. They would have 50-50 profit sharing above the base rate between TNP and the oil major. The charters are expected to generate minimum gross revenues of $62 million for the two vessels during the five-year period.

Outlook

The company’s CEO believes that TNP performed stronger for the first half of 2014. This was mainly because it reinforced its strategy to focus on the versatile and diversified fleet in the crude sector. The acquisitions of the modern Suezmax crude tankers, Euro and Eurovision, will add to the company’s strength. The company’s decision to utilize its product carriers in the dirty and crude markets will also add value to TNP’s bottom line.

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

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