Tsakos Energy Navigation Ltd. 2026 Q2 Earnings Call

Welcome to Tenaris' 2026 second quarter conference call. Before we start, I would like to remind you that we will be discussing forward-looking information in the call, and that our actual results may vary from those expressed or implied during this call. With me on the call today are Gabriel Podskubka, our Chief Executive Officer, Carlos Gomez Alzaga, our Chief Financial Officer, and Guillermo Moreno, President of our U.S. operations. Before passing over the call to Gabriel for his opening remarks, I would like to briefly comment our quarterly results. Our second quarter sales reached $3 billion, down 4% year-on-year and sequentially, mainly reflecting the postponement of shipment to customers in the Middle East due to the effective closure of the Strait of Hormuz for most of the quarter.

Average selling prices in our tube operating segment were basically flat compared to the corresponding quarter of last year and sequentially. Our quarterly EBITDA decreased 12% sequentially to $649 million, while our net income decreased 13% to $492 million, mainly due to lower absorption of fixed costs in addition to higher raw material and logistic costs. With operating cash flow of $580 million and capital expenditure of $121 million, our free cash flow for the quarter was $396 million. Following a dividend payment of $606 million in the quarter, our net cash position at the end of the quarter decreased to $3.6 billion. The board of directors approved the payment of an interim dividend of $0.59 per share or $1.18 per ADR, approximately $600 million, that will be paid the 25th of November.

I will ask Gabriel to say a few words before we open the call to questions.

Thank you, Giovanni. I would like to extend a warm welcome to all of you participating in our call today. Our second quarter results clearly reflect the impact of the Middle East conflict and disruption in the Strait of Hormuz, as well as the consequent impact of logistics and energy cost increases. Even so, they also demonstrate the resilience of our performance based on the strength of our global positioning and the efficiency of our industrial operations. In the Middle East, shipments to Iraq, Kuwait, and Qatar have been postponed as our customers were forced to reduce their operations, and ships are unable to enter the Gulf. This situation will continue until the Hormuz Strait reopens. In Saudi Arabia and the Emirates, however, we were able to continue supply of OCTG to Aramco and ADNOC, who have maintained their drilling operations fairly intact.

In other regions of the world, customers are advancing investments to meet the need for energy security and diversification of supply. Drilling activity in unconventional plays is increasing in the United States, in Canada, and also in Argentina. In the United States, we are adding work shifts at our industrial facilities. Our Bay City mill is producing at record levels, and we continue to invest to improve the production capabilities of our copper steel shop and our Ambridge seamless pipe mill. We are also extensively deploying a new high torque wedge connection, which we developed for longer laterals. In Canada, we have launched a major $230 million investment program to increase the effective production capacity of our mill in Sault Ste. Marie. These investments will strengthen our domestic supply capabilities for our Canadian customers.

In Argentina, nine high-spec rigs have been added in Vaca Muerta since the beginning of the year, bringing the total to 42 in operation today. In addition, YPF, together with Eni and XRG, are advancing investment plans for the $30 billion Argentina LNG project, for which an FID is expected at the end of this year. We commented last time on the favorable outlook for long cycle deepwater projects. With technology advances and short-term development schedules, these projects have become more cost-competitive and are well suited to support security and diversification of supply. Several FIDs were taken over the last three months. An example is the Cronos project sanctioned by Eni and TotalEnergies, which will take deepwater gas from Cyprus to an LNG facility in Egypt.

Tenaris has been supporting Eni in the definition and the supply of the pipeline requirements, and also on the OCTG needed for the four wells of the project. We inaugurated our new service center in Suriname together with TotalEnergies and government officials. From this base, we manage the OCTG supply chain for the GranMorgu project. We also began deliveries of line pipe and coating for the Sakarya project in the Black Sea. Our backlog of offshore projects has increased, and we expect this to be reflected in our sales from the fourth quarter and into 2027. This year, our raw material costs have increased and are impacting our results progressively. We are also increasing prices, and in the fourth quarter, we should see this positive effect in our sales and margins.

As we all adapt to a world of increased volatility and supply chain disruption, Tenaris is uniquely positioned to meet the diverse needs of its customers around the world with its global reach, differentiated service and technology, and investments to strengthen its industrial system. With this, we open the floor for questions.

Thank you, Arun. Good morning, thank you for your question on this point. As you mentioned, the board has decided to increase the interim dividend to $600 million, doubling, as you mentioned, given the strong balance sheet and sustained cash generation of the company. As you mentioned, the board has favored distribution through dividends, given the simplicity and also as a means of preserving the liquidity of the company shares. That's the rationale for the decision. In terms of sustainability and going forward, I believe that what we can say is that the board remains committed to maintaining a level of shareholder returns that are broadly in line with the past levels, at the same time wishes to maintain financial flexibility in an environment of uncertainty, that can also offer growth opportunities.

Regarding sustainability and future, I would say at this time that this will be decided by the board and subject to the approval of a shareholder annual meeting. That said, and based on past practice and our track record and our strong balance sheet, this could be a continuation in the amount of the dividend and the proposal for a payment in May as well.