TEN, Ltd (TEN) (NYSE: TNP) on Friday reported results (unaudited) for the quarter and half-year ended June 30, 2019.
SIX MONTHS 2019 SUMMARY RESULTS
TEN earned gross revenues of $291 million, 17% higher from the same period in 2018 and net income of $11.5 million compared to a loss of $21.5 million in the first six months of 2018, a $33 million positive swing.
Operating income totaled $46.8 million, a near five-fold increase over the equivalent period in 2018 while adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) climbed to $120 million, 43% higher than in the first six months of 2018.
The daily time charter equivalent rate per vessel was $20,418, a 17% increase over the equivalent 2018 period and substantially higher than the average spot market rates for the period. Total operating costs decreased by over 3%. Depreciation and dry-docking amortization costs were also reduced by $2.9 million.
General and administrative expenses decreased by $0.4 million or 3% from the same period in 2018. Daily overhead cost per vessel remained again at competitive levels at $1,142.
Vessel operating expenses decreased by 2.5% from the 2018 six months period due to proactive and efficient management operations conducted by TCM, our technical managers, while daily operating expenses per vessel remained well under $7,800. Most other expense categories (management fees and G&A) remained relatively stable as a result of effective cost controls.
Finance costs increased by $6.1 million mainly due to bunker hedge losses, but interest rate increases were partially offset by the reduction in total outstanding debt by $142 million since the end of the 2018 second quarter.
During the first six months of 2019, TEN continued its stated policy of expanding its strategic alliances by adding four new vessels with long term employment to a major US end user and two vessels to its existing joint venture with a South American entity.
Q2 2019 SUMMARY RESULTS
TEN earned a net income of $0.3 million, a $10 million improvement from the $9.6 million loss in the second quarter of 2018, despite the market softness which followed a strong first quarter, due to continued refinery maintenance, high inventories, excess vessel capacity and oil production cuts.
Adjusted EBITDA increased to $55.8 million, 32% higher than in the 2018 second quarter, helping to boost our cash reserves, which stood at $193 million at the end of June 2019. Operating income amounted to $19.0 million, a five-fold increase for the operating income of the second quarter of 2018.
TEN’s ability to smooth the market’s cyclicality was again demonstrated by strong fleet utilization of 96.6% generating gross revenues of $144 million during the second quarter, 16% higher than in the second quarter of 2018. $90 million of this revenue, was from time-charter hire, including profit shares, which covered the cash costs of TEN.
The two LNG carriers, which both enjoyed significant increases in rates since the prior second quarter provided an additional $4.3 million more than in the second quarter of 2018. Revenues from vessels on spot were $21 million higher. Spot rates achieved by TEN’s vessels were on average 30% higher than those achieved by the same vessels in the equivalent period of 2018.
Finance costs increased by $6.5 million. Loan interest remained at about the same as in the 2018 second quarter with rate increases being offset by the reduction in outstanding debt by $142 million since June 30, 2018. Compared to last year’s second quarter, bunker hedge gains fell by $2.5 million and negative movements in the value of bunker hedges amounted to a non-cash of $4.8 million.
TEN proceeded with the order of one-option-one 174,000cbm LNG carrier from Hyundai Heavy Industries in South Korea with expected delivery in the second half of 2021. With this order, the Company’s LNG proforma fleet rises to four vessels, two of which are employed on timechartered contracts with major international natural gas production and trading entities.
TEN continues its stated policy of maintaining a diversified energy fleet with a focus on LNG as an area of growth. Management expects more accretive investments in the sector as that develops.
CORPORATE STRATEGY & OUTLOOK
As we exit the seasonally soft part of the cycle, a confluence of positive events including increased US crude oil exports that lead to increases in ton-mile demand and ultimately reductions in vessel supply, the impact of the IMO 2020 regulations which should facilitate an accelerated departure of older tonnage from the competitive fleet and the historically low orderbook as well as the impact of refineries returning from maintenance, create the springboard for a healthy market going forward. Management is positioning the fleet to take advantage of this upturn by having adequate appropriate vessels in the spot market, which together with those on profit sharing arrangements could provide additional revenue upside for TEN, whose primary model of having enough vessels on secured revenue contracts to cover the entire fleet’s expenses remains intact.
TEN’s chartering policy enabled the Company to outperform by 38% the spot market and maintain its profitability and therefore making it one of the few companies in its peer group with profits during such a challenging period.
On the growth front, the Company’s newbuilding program progresses as planned. The first of two aframaxes on long-term contracts to a major US end user is expected to be delivered in October 2019, with the second in January 2020. Expanding TEN’s presence in the developing natural gas sector, management signed a contract for the construction of an additional LNG carrier with an option for one more at competitive prices.
“With gross fleet revenues up $41 million higher than the end of the second quarter last year, with an equivalent number of vessels, we feel confident that the market is on its way to a healthy recovery and comfortable that our fleet has the capacity to capture market upturns as they develop,” George Saroglou, COO of TEN commented. “TEN is well prepared to take advantage of the positive fundamentals as they unfold and expects such momentum to be translated in increased profits and eventually in a higher share price,” Saroglou concluded.
Sea News, September 9