Tsakos Energy Navigation Ltd. Lytham Partners Fall 2026 Investor Conference

All right. Hello, everyone, and thank you all for joining us during the Litham Partners Fall 2026 Investor Conference. Again, my name is Robert Blum, Managing Partner here at Litham. And up next, Mike Kimble who heads Investor Relations at Tsakos Energy Navigation. We'll be taking us through the company's slide presentation. Mike, thanks so much for your participation here in the conference today. The floor is all yours.

Thank you, Robert. I appreciate being invited. As Robert said, I head Investor Relations for 10 Limited. That's short for Tsakos Energy Navigation. And we are a tanker company. We carry crude oil. I'll tell you a little bit about us. If you look at dedicated tanker companies, because there are companies like Marisk and others that have ships in every domain, we just do tankers, and there are several competitors. Among those, we are one of the largest in the world. We have 81 ships. We transported 565 million barrels of oil last year, which is about 28 days of U.S. consumption. We are New York Stock Exchange listed, the oldest tanker company that does have a public listing. And once you go beyond that, we are different from our peers in a lot of ways, at least our publicly listed peers. The biggest difference is that we our customers are exclusively the oil majors. Our customers are Exxon, Equinor, Shell, Chevron, you know, we joke that our subprime customers are Glencore and Trafigura, the big trading houses. We just deal with the majors. And what we try to do is get long-term contracts that make sure our ships are employed at good rates, with creditworthy counterparties, who also share our values about safety and keeping out of harm's way, which I'll get to more.

That's a big topic now. And so if you look at our fixed-term contracts, we have 3.6 billion of minimum revenue over the next several years. And if you're going to do this business, what it means is you have to have a modern fleet, and a well-trained crew, we are one of the best in the business, if not the best. We're the only tanker company or the only shipping company by the way, that I know of that has its own merchant marine academy and accredited academy to turn out officers. At the end of the day, what we're trying to get out of these long-term contracts is to add some stability to a cyclical business. So relative to the public peers, our cash flow is more stable. Because our cash flow is more stable, we probably get the lowest cost of debt in the industry. And the shipyards love us because they know that when we order a ship, we're good for the money. And when an oil major has a new project, and they need ships, they don't call the people they're going to do deal with in the spot market. They call us and say, we need a ship, can you help us?

I'm sure most of you know industry fundamentals are better than they have ever been. In that cyclical business, we have a relatively low-risk-based model, business model, and we actually have the biggest order book among any of the public companies. Until recently, most of our peers had no orders. We have 20 new builds on order. You know, when you get to tankers, there are obviously two factors: supply and demand. When you look at the demand side of oil consumption, basically it's risen 1 to 2 percent a year, with very few exceptions. The only time oil demand has really dropped was in COVID, when we shut down the world economy. And for a couple of weeks during the first Iraq War. Where the real rubber meets the road is in supply. That's what generates the cycle. And so the shipping cycle has been characterized by good demand, tight supply, high prices, and with that, ship owners go out and order a lot of ships. This cycle is different. For the past 6 or 7 years, at least, there hasn't been a lot of new builds out there. There haven't been a lot of orders to build new ships.

And it takes about 3 years to build a ship. So there are a lot of reasons for that. I don't have to get too much into it. Certainly, during COVID, when the world economy slowed down so much, a lot of ship owners got into trouble. That's where our long-term contracts were incredibly valuable. Since the recent bull market, which is the past just the past couple of years, ship owners have been reluctant to place new orders because the first thing on their minds has been to pay down debt and make sure they build their cash balances and don't have a repeat of the COVID experience. The end result is that we haven't had many orders for several years. And right now, 23 percent of the world's fleet is over 20 years old. In dog years, that's dead. I mean, basically ships you amortize a ship over 20 years. That's of course they can go a little bit longer, but that's sort of the practical expected life. Certainly, the customers we deal with don't charter ships that are over 20 years old. 50 percent of the world's fleet is over 15 years old. And considering it takes 3 years to build a ship, what we know is that in 3 years, that 23 percent number is going to be higher.

You know, there are a lot of reasons for that. The biggest reason is the shadow fleet. I mean, essentially, if you think about a 20-year life on a ship, what that means is about 5 percent of the world's fleet would be expected to be scrapped every year. Over the since sanctions were imposed on Russia, that scrapping went to around 1 percent, and in one year it was even below 1 percent. So very, very little scrapping. And that's why the fleet has aged. But the point is, after 20 years, ships are less efficient, you know, I was at a conference and someone told me that there are Iranian shadow fleet tankers where their top speed is about 5 knots. Whereas on a typical journey, you're going closer to 20 knots. And that's because they can't. They can't go any faster. In any event, these ships are going away. Scrapping will increase. And that's why we have such a large order book, because we see an unprecedented opportunity. Something that the CEO and senior management have never seen in their 40-year careers. A bull market that is that has legs. We have visibility. For the next 3 years.

And over the next 3 years, yes, the order book has grown, but it's still only 20 percent of the fleet. And what that means is about 6 percent a year. Well, 6 percent a year barely covers scrappage. So there's a serious supply-demand issue in the market. And that's why what's happened recently is making tanker rates go crazy. So for example, roughly 2 years ago, rates for VLCCs were roughly 45 spot rates, roughly 45,000 dollars a day. 45,000 dollars a day is more or less break even. So it costs 130 million dollars to build a VLCC, the very large crude carriers. They're the biggest tankers out there that carry 2 million barrels of oil. You would need to get 45,000 dollars a day to cover your expenses, interest on the debt, amortization of the fleet, of the ship, and at the end of the day, you'd look at a 12 or 13 percent return on your equity. That's sort of break even. In the fall, before the invasion of Venezuela, things started tightening up, and that's because of what I just described. There aren't a lot of extra ships out there. So rates started climbing to 75, 80 thousand dollars a day.

And my boss, ship owners, they were all getting happy about this. They were making money. They were very good money. The return on equity of those rates is pretty good. That kind of characterized in the past what a bull market would be, 85, 90 thousand dollars a day. And then what happened was we invaded Venezuela, and suddenly all this oil that was being transported on a shadow fleet was going to be transported on the non-shadow fleet, our side of things. Rates spiked to about 125 thousand dollars a day. Ship owners couldn't believe it. With what recently happened in the Straits of Hormuz, the US cracking down on the Iranian shadow fleet, Europe cracking down on the Russian shadow fleet, rates have gone crazy. And so for example, to go from inside the Straits of Hormuz to China it passed a million dollars a day recently. For a VLCC. It's important to note that these rates you read about, though, don't cover the entire fleet. The there are probably 35 key routes for tankers that are followed. And depending on the type of ship, the route, et cetera, rates are different. Kind of like Uber. It's different wherever you are.

But to give you an example, in the Middle East, close to a million dollars a day, but going from West Africa to China, 525 thousand dollars a day. Going from the US Gulf Coast to China, almost 400 thousand dollars a day. So when you think about a 45 thousand dollar break even, these rates are incredible. And they shouldn't last. But exactly how long this lasts and where it settles out, we're not going back to 100 thousand dollars a day. There aren't enough ships and that's a problem that's going to take several years to work out. List of our customers. This is our fleet list. I guess another thing to point out about us as compared to many other public companies is we have the most diversified fleet out there. And that's because we service our customers. So when they have a new project, and they need a shuttle tanker or a VLCC, we get the call and we build it. And we tend to we get diversified because of customer demand. Many investors would prefer much more concentration. It makes it easier to analyze. What we like about this is it gives us a diversified fleet.

Which stabilizes cash flows. Getting back to long-term viability and safety, et cetera. I did mention opportunities. I mentioned shuttle tankers. The fastest growing oil source in the world is deep water off the coast of Brazil and West Africa. Most oil companies think this is the lowest marginal cost of getting oil out of the ground. With recent events in the Gulf, which haven't even played out yet, many countries are trying to diversify away from the Middle East. So in any event, before things happened in the Middle East, offshore Brazil was growing 12, 13 percent a year. Whereas oil demand in general is 1 or 2 percent. What these projects need is something called a shuttle tanker. And these are the most specialized ships out there. So most specialized tankers. Because don't have pipelines to shore. So what they do is they store in a float storage form. And you need to come out there and download from the storage platform and then shore. And then they come back and do the same thing. That's why they're called a shuttle. The seas off the coast of Brazil can get very, very rough. So what these ships need is something called dynamic positioning.

It's kind of like Air Force planes refueling in midair. You have to keep the ship stable. So whereas a VLCC might be 130 million, these are closer to 150 million. And you need a highly trained specialized crew to rate them. We're one of the few operators that can do it. Exxon got us into the business 15 years ago. And it's arguably our most profitable line and we're growing. We have 12 ships on order. And shuttle tankers. It's the largest order book out there. And we're excited about that. We grow over time. We're in the business for the long run. And so over the past several years, we've disposed of 20 older vessels and we've acquired 35, either have them in the fleet or they're on order. And that's why you see this growth trajectory. We've always paid a dividend. That's because of the stability of our cash flows. Even when the market is bad, we're never worried about survival. And so we're able to pay a dividend. Our latest results, I mean, it's worth mentioning, you know, we're not unique. You can look at the performance of tanker stocks but the second quarter was incredible.

And the third quarter is looking even better than the second. We earned 440 we earned $4.40 a share in the second quarter compared to 67 cents last year. And last year was a good year. Through the first six months, we're at 7.12 a share. Compared to 1.70 last year. And as I said, so far in the second half, things are looking even better. It's worth noting out noting that we have these long-term contracts but so roughly 80 percent of our fleet is under some sort of long-term contract. And the average age for the entire fleet is about three years. So there are a couple of things to note. These contracts do roll off. So roughly a third of our contracts are rolling off every year. And so they get repriced at current rates. As well as half of those longer-term contracts have something called a profit share. So it's tied to an index. We have a floor and you put all our fixed payments together our goal is to make sure it always covers all our costs so that we're never in danger. But anything above that floor if the index is at if the floor is 75,000 and the index is at 100,000, that extra 25,000, the difference we split with the customer.

So the rate would go up by 12.5 thousand a day. Which is a long way of saying we've participated in the rally. Most of our competitors are operating in the spot market. We're taking contracts for one cargo going from one place to another. Our earnings are cash flow have risen roughly in line with most of our competitors. So it's a good market. We're taking advantage of it. I don't think these rates are going to continue but they're not going to go back to where they were before is our best forecast. As I told you, our debt levels are pretty stable. Because of our contracts, we can keep it that way. Our banks are happy. We've never had a problem. And this is a summary of just who we are. I don't think I have to read it to you. We have high-quality customers, very creditworthy. We've got a solid balance sheet. And us, as well as other tanker stocks, are very attractive in terms of P/E ratios and other valuation metrics. So thank you for your time, Robert.

Very good, Mike. Thank you very much for your participation here in the conference. Thank you, of course, to everybody here for watching. If you'd like to schedule a meeting, with 10 here, send me an email whether it be here at the conference over the next couple of days. Or in the weeks to come here, get my email is blume@lytham-partners.com. To learn more about Litham, make sure you visit our website, lithampartners.com. As well as make sure to follow us on LinkedIn and subscribe on YouTube to stay connected on future webcasts such as this presentation here from Mike. So we hope you all enjoy the rest of the conference. Have a great day. Again, Mike, thanks so much for your participation.

Thank you,