Tsakos' Q2 2025: Contradictions Emerge on Dividend Strategy, Fleet Management, Restructuring, and VLCC Orders

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 10, 2025

Financials Results

• Revenue: $390M for 1H 2025, down $25M (-6%) YOY from $415M (1H 2024)
• EPS: $0.67 per diluted share for Q2 2025; prior-year quarter included $32.5M vessel sale gains (none in Q2 2025)

Guidance:

• Board expected to consider a “healthy” dividend in November, supported by strong markets.
• Management remains optimistic on tanker markets for at least the next 18 months.
• Strong charterer appetite; renewing VLCC charters at higher base rates with profit-sharing.
• Contracted revenue backlog approximately $3.7B (minimum), with 87% of operating fleet on secured contracts.
• Increased use of profit-sharing contracts to capture upside into winter.
• Newbuild program: 3 firm VLCCs with scrubbers plus 1 option at top-tier Korean yards; evaluating timing of fixing employment.

Business Commentary:

* Fleet and Contract Revenue Growth: - Tsakos Energy Navigation (TEN) has a pro forma fleet of 82 vessels, with a cash-settled backlog of approximately $3.7 billion, equating to more than $120 per share. - The growth in contract revenue is attributed to maintaining strong relationships with major energy companies, such as ExxonMobil, Equinor, Shell, Chevron, Total, and BP, which account for a significant portion of TEN's revenue.

• Vessel Renewal and Fleet Modernization:
• TEN has focused on renewing its fleet with new, environmentally friendly vessels, having sold 17 vessels and replaced them with 33 modern vessels since January 2023.

• The company aims to maintain a young, diversified fleet to attract major clients and meet evolving environmental regulations.

• VLCC Segment Focus:

• TEN ordered 3 new VLCCs with scrubbers and additional options, recognizing the need to increase the number of VLCCs in its fleet.

• The strategic move is to fill a gap in its portfolio and capitalize on the strong fundamentals of the VLCC market, where a significant part of the fleet is over 15 years old.

• Dividend Policy and Financial Performance:

• TEN paid its first dividend in July and plans to announce the second half dividend in November.
• The financial performance, driven by a larger fleet and increased time charter contracts, has positively impacted the company's ability to distribute dividends to shareholders.

Sentiment Analysis:

• Management reported “another profitable quarter,” Q2 utilization rose to 96.6% from 92.4% YOY, and backlog is ~$3.7B. CEO expects a “healthy dividend” and is “optimistic” about at least the next 18 months. Demand from energy majors remains strong with higher-rate time charters and profit-sharing.

Q&A:

• Question from Poe Fratt (Alliance Global Partners): Why pursue newbuild VLCCs instead of secondhand purchases?
  Response: Secondhand prices are elevated; building sister, environmentally compliant ships at top Korean yards lowers long-term opex and fits TEN’s quality and efficiency model, though secondhand deals aren’t ruled out.

• Question from Poe Fratt (Alliance Global Partners): Did you exercise the VLCC options and do you have time charters lined up?
  Response: TEN has 3 firm VLCCs plus an extended option; VLCC market is strong, and it’s renewing existing VLs at higher base rates with profit sharing; it’s early to fix the newbuilds but interest is high.

• Question from Poe Fratt (Alliance Global Partners): Can you preview the second-half dividend?
  Response: Too early to specify, but management expects the Board to approve a healthy dividend in November given market strength.

• Question from Poe Fratt (Alliance Global Partners): Any progress on separating specialized assets or other strategic alternatives?
  Response: No restructuring; exploring value-unlocking options, potentially a vehicle for specialized assets within the next ~8 quarters with TEN as majority holder; nothing imminent in the next 4 quarters.

• Question from Poe Fratt (Alliance Global Partners): Direction of OpEx and G&A in 2H?
  Response: Despite inflation, TEN aims to maintain sub-$10k/day average opex via tight management; G&A included incentive comp; overall focus remains on cost containment.