Tsakos Energy Navigation Limited (TEN) Q4 2014 Earnings Call Transcript

Nicolas Bornozis - IR Advisor and President, Capital Link Takis Arapoglou - Chairman and Director Nikolas Tsakos - President and CEO Paul Durham - CFO George Saroglou - COO

Michael Webber - Wells Fargo Fotis Giannakoulis - Morgan Stanley Mark Suarez - Euro Pacific Capital Spiro Dounis - UBS

Thank you for standing-by ladies and gentlemen and welcome to Tsakos Energy Navigation Conference Call on the Fourth Quarter 2014 Financial Results. We have with us Mr. Takis Arapoglou, Chairman of the Board; Mr. Nikolas Tsakos, President and CEO; Mr. Paul Durham, Chief Financial Officer; and Mr. George Saroglou, Chief Operating Officer of the Company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advice you that this conference is being recorded today. And now I pass the floor to Mr. Nicolas Bornozis, President of Capital Link, Investor Relations Advisor of Tsakos Energy Navigation. Please go ahead sir.

Thank you very much and good morning to all of our participants. This is Nicolas Bornozis of Capital Link, Investor Relations Advisor to Tsakos Energy Navigation. The Company released its financial results for the fourth quarter of 2014 this morning. The press release has been distributed publicly. In case you do not have a copy of it, please call us at 212-661-7566 or e-mail us at ten@capitallink.com and we will e-mail a copy to you right away. Please note, that parallel to today's conference call, there is also a live audio and slide webcast, which can be accessed on the Company's Web site on the front page at www.tenn.gr. The conference call will follow the presentation slides, so please we urge you to access the presentation of the webcast. Please note that the slides of the webcast will be available as an archive on the Company's Web site after the conference call. Also please note that the slides of the presentation are user controlled and that means that by clicking on the proper button you can move to the next or to the previous slide on your own. And at this time, I would like to read the Safe Harbor statement. This conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements, involve risks and uncertainties, which may affect TEN's business prospects and results of operations. Such risks are more fully disclosed in TEN's filings with the Securities and Exchange Commission. And ladies and gentlemen at this point I would like to turn the call over to Mr. Takis Arapoglou, the Chairman of the Board of Tsakos Energy Navigation. Mr. Arapoglou, please go ahead sir.

Thank you, Niko. Good morning and good afternoon. Thank you all for joining us on this call today on the occasion of the announcement of the full year 2014 results for TEN. As you have probably already seen TEN is back to profitability coming out unscathed from a very challenging market environment in the last two years. As a matter of fact through best-in-class operating performance, during this recent disciplined period, TEN not only mitigated the effect of poor markets on its balance sheet but was also able to among others strengthen its equity, broaden its investor base, maintain a high level of liquidity, drastically reduce its financing costs, take prudential measures on the value rich assets and enter into new accretive long-term top-quality relationships and products. I am sure that for all of the above you will join the Board and me personally in congratulating Niko Tsakos the TEN CEO and anchor investor and his management team for the excellent results and performance. TEN owes a lot to its balanced asset allocation model which revolves around the following principles. To provide the full spectrum of state of the art crude and product carriers to service all needs of prime oil majors, while maintaining a smaller proportion of the fleet in specialized high value-added vessels like DP shuttle tankers and LNG carriers deployed in highly accretive long-term charters. At the same time TEN continuously manages very successfully the mix between time charters and spot operated vessels to achieve optimal use of market opportunities for the benefit of its shareholders. This particular angle of the model is paying off big time in the present market environment. We've continued to maintain that this excellent consistent performance that clearly distinguishes TEN from all its peers is yet to be duly appreciated by the market, as our stock price continues to trade well below net asset value. We are very pleased that the stocks’ daily liquidity has nearly doubled in the last few months but we believe that there is further room for improvement on that front given the 70% free float. Finally it's time for investors to come to grips with the fact that companies with TEN’s profile uniquely benefit in more ways than one in both arising and a declining oil price environment especially if they're being run by what is probably the best management team in the business. Thank you, over to you Nikolas.

Chairman thank you for your good words and I would like to thank and congratulate the whole TEN and Tsakos and TCM team for making it finally very profitable year and we're looking for significantly more profitability we hope for the year we're in, for 2015. The market has started in the right direction, we for hope that the first quarter and the second quarter would be very strong. And I think with this proof we're maintaining the increase in our dividends and being the anchor investors we hope we will be able to share a further increases as this continues. I would take this opportunity to ask our COO, George Saroglou to discuss the 2014 and the year so far 2015. And then Paul Durham our CFO, will give us the explanations behind the numbers and we would be very happy to answer any questions and looking forward to see most of you or anyone of you that is available in New York next week, the team would be moving for an East Coast road show and we're planning an Investors Day on Thursday the 26th coordinated through Capital Link and Mr. Bornozis. George.

Thank you, Nikolas. It is my pleasure to speak with all of you today and provide you with details of the operation for 2014, the year the company returned back to significant profitability. For those who are connected to the Internet and our Web site there is an online slide presentation whose format we will follow during the call. Let's turn to Slide Number 3, we have a pro forma fleet of 64 vessels if we include the option for a fourth shuttle, 44 of which carry crude oil and consist of one VLCC, 12 Suezmaxes after the company took delivery of two modern Suezmax tankers in mid-June and in early July of 2014. With one of these vessels trading in the spot market but is very strong since the start of the fourth quarter of 2014 with rates currently around $50,000 and a sister vessel on a profitable time charter to a major oil company. We have 17 Aframax tankers, eight in the water and nine new buildings under construction for Statoil, four DP2 Statoil Suezmax tankers, two in the water, fixed on long time charter, one in order for delivery during the first quarter of 2017 also fixed on a long time charter and we have an option for another one and have 14 out of the 28 product tankers in the fleet engaged at the moment in crude rate operation, resulting in 35 vessels out of 50 vessels operating trading today in crudes. 31 vessels have their earnings tied to a surging spot market. We also have two LNG vessels including one in the water and one on order. Thanks to our balanced time charter philosophy we continue to operate the fleet at a very high utilization rate, almost 98% for the fourth quarter and full year when the average utilization for the tanker fleet in 2014 is expected to be closer to 90%. For the year we should highlight the timely acquisition of two shuttle vessel Suezmax tankers, the additional long-term contracted business with oil majors adding to Company’s current portfolio of new building assets. And we are certainly above the two LR1 product tankers and one DP2 Suezmax Shuttle tankers and the nine Statoil Aframaxes all of which are under long-term contracts which creates a series of assets with potential gross revenue generation if all charter options are exercised of approximately $1.25 billion with average charter duration of approximately 11 years making most of these vessels candidates for an MLP spin-off when conditions and valuations in the MLP market come closer to the levels that meet the Company's expectations. We charted eight vessels during 2014 and three so far during 2015, on a combination of charters with profit sharing arrangements and fixed time charters at higher levels and expiring rates. The 2015 features include the Company's VLCC tanker which has been extended for six more months on a storage contract at a fixed rate reflecting the current market reality and two Panamax tankers on profit sharing arrangements. The collapse in the price of oil which accelerates from the start of the fourth quarter 2014 and reached six year lows in mid-January 2015 impacted the crude sector and TEN in a very positive way. Traders in consuming countries stockpiled cheaply priced spot crude oil in onshore and offshore product tanks and tankers. In addition, seasonality, demand factors, winter weather delays, falling bunker prices and limited supply of new products created the rally in spot trade rates for crude tankers that we hadn’t experienced since 2008. And which has been sustained well into the fourth quarter of 2015. Products is once again expected to play a key role as it did between 2009 and the first half of 2010 by removing products from the market creating a positive trigger down effect on tanker smaller than VLCCs. Market deals have been hard impacting positively voyeurs expenses. The next slide is our main financial highlights of our proper press release, strong improvement in every metric leading to a profitable quarter and full year. 33.5 million net income for the 2014 year, versus a loss of 37.5 million in 2013. Almost 130% increase in operating income to 76 million, 180 million of EBITDA for the full year which represents almost 36% increase from the previous year with positive EBITDA for the qualified entity very strong cash results of 214.4 million, 31 vessels benefiting from a very strong spot tanker market and rates which is triggered by the reduction in the price of oil and of course we continue to have an impeccable debt service record since the crisis started back in 2008 while maintaining the fire power to grow responses. The next slide is a snapshot of all three sectors where the Company operates which is in the crude, products, and DP2 and LNG. The fleet is very sophisticated, that was built to fit the transportation requirements of the Company’s clients. Slide 6 we see the Company's pro forma fleet which includes the 50 vessels in operations and the vessels under construction, 73% of the 2015 ship available days from this date are spot of what are on spot or spot related contracts. The fleet is very modern with the average rates of the operating fleet today at 7.9 years versus 9.4 years for the world tanker fleet. Slide 7 shows the clients of TEN all blue chip names which from the Company's is doing the fixed business over the years thanks to the quality of service, fleet modality, and the safety records of the enterprise fleet. These TEN client names account for 78% of the 2014 revenue. The next slide shows you the low cost base which TEN has where most of the fleet has been built before the rise of new building prices. With the tanker market expected to remain firm in 2016 the prospects for 2015 bearing a of course general consensus going down to an even better year than 2014. And this is also reflected in the snapshot of the rates that you see at the right side of the slide. The next slide, as you see we continue have a balanced employment strategy with a mix of spot charter CoA's pooling arrangements and period charters with fixed rates with minimum rates and profit sharing arrangements. Right now we have 19 vessels on time charter with fixed employment 10 vessels in profit sharing and 31 vessels trading in a combination in spot CoA's and pools. Another to read the employment details of the fleet is of 31 vessels have secured employment from less than a year to 15 years and 31 vessels have a earnings tied in pool or up to 50% over and above the minimum base rate with a spot market that is at levels we have experienced back in 2008. The next two slides. Slide 10 and 11 give you a snapshot of the overall market, oil demand continues to grow at about 1% per year and the global economy despite the headwinds in some key regions continues to expand. The supply driven drop in oil prices benefits the tanker market. Rising volumes, longer differences, very modest fleet growth of crude tankers and increased growth in storage are expected to support the market’s solid growth not beyond the first quarter of 2015. If we put a dollar value on the employment of the fleet expense right now, we see that we have fixed 45% of the available 2015 operating days and 31 of the 2016 operating days in time charters. And if we assume only the minimum rates, we have secured 819 months of forward employment or 2.3 years per vessel and 750 million in minimum gross revenue. By choice the Company has currently the highest spot market exposure in order to take advantage of the strong growth freight market. 73% of the 2015 ship available days, from this day are spot or spot related contracts. The sale in vessels has always been a key part of the overall strategy and we expect that this year we’re going to see some more sales of some of our orders of very reliable vessels. Besides the recent acquisitions at attractive price of two modern Suezmax sister vessels, as we said the Company strategically and opportunistically could be seen divesting certain assets that provides capital gains and release cash. Fleet modality while growing responsibly with committed business rather than building on speculations remains key element of our strategy. The next slide shows the history of our cash dividend distributions. We announced today that the next dividend of $0.06 should be paid on May 28th and in total since 2002 we have paid $10 in cash dividend or approximately 405 million and this compares with a listing price in our IPO of $7.5. Although, we floated the Company in 2002 at $7.50, our share price reached $40 in 2007. In comparison to 2007, we have a bigger operating fleet and new building program worked well out of the 13 vessels are tied to long accretive charters, but the current share price doesn’t seem to reflect according to management, the Company’s financial strength, the embedded Company’s growth, and growth prospects and the current state of the booming freight market. The next slide shows the most recent NAV calculation and lists the analysts covering TEN. The management vision is to continue growing the Company responsibly and at the same time having this reality being reflected in the Company’s share price. That concludes the operational part of our presentation. Paul will walk you through the financial highlights for the year. Paul?

Thank you, George. So 2014 gave us the best result in six years, results that could have been $0.12 per share better and for quarter four $0.09 better is the unexpected drop in oil prices had not turned our instead of two perspective bunker hedges against us. But the oil price fall did compensate us with a far more rewarding silver lining in the form of greatly reduced fuel prices and the surging demand for our tankers at robust rates as George has described. The hedges anyway are of a very short-term nature, while we foresee a much longer duration of continued buoyant demand and lower fuel cost. There was no impairment charge in 2014. So when I mention 2013 comparatives, I’ll ignore the 2013 impairment charge. In 2014 therefore, operating income was $76 million double that of 2013, quarter four operating income was $29.2 million, six times above quarter four 2013. Our net income in quarter four was $13.5 million compared to a net loss of $7.3 million for quarter four 2013. 2014 net income was $33.5 million, compared to a 9.2 million loss in 2013. The greatly improved results over 2013 was due to a turmoil prosperous tanker market, especially in crude to the two new Suezmax tankers and because the Shuttle tankers operated for a full year in 2014. 2014 gross revenue at a $0.5 billion was 20% up, while quarter four revenue was up 31%. 2014 daily average TCE was $20,900, a 17% increase over 2013. Quarter four average rates increased 34% to $23,300. For the year all the vessels had positive EBITDA totaling $179 million, $47 million more than in 2013, while quarter four generated EBITDA of $55 million, nearly double that of the prior quarter four. Our Aframaxes and Suezmaxes provided the biggest increases in both the full year and the final quarter, Aframaxes mostly on spot earning average rates over double those of the prior quarter four. Suezmax average rates were up by 40% over the previous quarter four due to lucrative spot voyages and profit share. The product carriers achieved similar overall results in 2014 as in 2013, but at last made a strong recovery in quarter four carrying through into quarter one. Daily vessel average OpEx rose in quarter four partly due to the new Suezmaxes and timing of expenditure on spares, repairs and stores offset by a stronger dollar which will have a positive impact on 2015. 2014 OpEx also increased much due to the Shuttle's working full year to the two new Suezmaxes and our VLCC coming off their boat and so bearing OpEx throughout 2014, but all these vessels earned several times more revenue. Indeed as George has said, the VLCC is now earning $55,000 daily on a six month storage contract. Quarter four finance cost was $15.6 million against $10 million in the prior quarter four and annual finance cost were also $2 million up. The effect of reduced interest margin and expiring interest rate swaps was offset by the increase in non-cash negative valuation on costs on bunker swaps of over $7 million. These costs now capped are greatly outweighed by lower fuel cost. The bunker swap valuations will result in 2015 as hedges expire to offset actual swap payments. The finance costs are expected to return to an average $10 million a quarter in 2015. In quarter four we repaid $34 million of debt and we received $31 million of new pre-delivery debt relating to our LNG new building, leaving $1.42 billion outstanding at the year-end. Net debt to capital fell to 60.6%. Given our over $200 million of cash, strong cash flow, healthy leverage, success in raising debt at competitive terms with pre-delivery installments, flat rising valuations of vessels certain of which we aim to sell, we are in a comfortable position to meet all our capital expenditure commitments. Our managers continue to operate our vessels safely and efficiently and with minimum days lost and the quarter one market continues to generate significant overall earnings and positive EBITDA off each one of our vessels. And this concludes my comments and now I'll pass the call back to Nikolas.

Paul, thank you very much for explaining the good news, we are all very I think glad and relieved that we have placed the Company in very solid ground in the last three years and we are able right now to take advantage and I hope this will be the start of a much more exciting period for the tanker market. The current oil price and the sale, supply and demand dynamic looks that we are in for at least a couple of good years hopefully long years and as long as most of the owners we are able to protect ourselves by avoiding new buildings and mainly speculate the new buildings I think we will be able to maintain a healthy market. And with that I would ask for any questions from some of our friends and shareholders. Thank you very much.

Thank you. You have a question coming from the line of Michael Webber, so please ask your question.

I wanted to talk first about potential uses of cash obviously the market leverage is paying off right now. And I'm just curious as to how you think about using some of the inbound cash, be it potentially adjusting the dividend policy and/or looking at new assets and I want to delve into the latter there in the second question, but maybe just your thoughts on uses of cash specifically around the dividend?

Yes I mean as I think George mentioned TEN has been a steady dividend payor and we have been an aggressive dividend payor in the past. We have never regretted this, we are a dividend paying company and we pay dividends through thick and thin. We never stopped our dividend policy even through the very difficult periods that Paul referred to between 2010 and 2014. We are looking in the long-term prospects of the market and of the company and of course if the Board will adjudge if further dividend increase within -- after 2015 would be required, but we are a dividend paying company and we like that.

Right but we maybe more likely to see a slight bump as opposed to some sort of special or anything like that is that correct?

I think so, yes, yes there is of course the policy.

And just on the second point around used of cash, around acquisitions, you mentioned avoiding new builds in terms of I guess to speculate new builds is going to hurt remains for demand balance. I am just curiuous on what your thoughts are around asset values here with five year old Suez's up at 70 and Afra’s I think around 55. Whether or not you think those are attractive, given that it seems like they're pricing in pretty affirm rates for quite a while?

Well I think as it has been discussed by George and in our press release, we're always opening the sales and purchase market. We're looking to replace some of our, I would say older, although we have a very young fleet our 202s, 204s and 205 vessels. We will be selling in today's environment some of this. And we will be looking to replace when the time is right. When I say we're not losing that speculation you will never see TEN throughout the TEN product carriers just because it will cost a couple of tonnes less to run them or TEN Suezmaxes in order to try and find and go out and try to find out who is going to charter them. But you might see TEN ordering additional shuttle tankers against 10, five, eight year long-term contracts, well accretive contracts. These are ships that will not put weight in the existing market because shuttle tankers are not participating in the day-to-day spot markets. So we will be looking at that. And you might see us increase our -- after we have showed the significant number of our VLCCs we might see us increase some of our VLCC participation through vessels hopefully more than second hand vessels with long-term employment. I think these are the prospects.

Just one maybe two more, I'll turn it over. Just around that process of an interim what we're seeing in the market, has the spike in rates and the spot profitability in terms of the kind of volume you're seeing on acquisitions for charter tonnage. Does that provide a window where maybe you could go in and buy more charter tonnage at a bit of a maybe say some sort of value dislocation there, where you can go in and get Afra’s and MRs that are on period contracts, because you can get them at a discount where prevailing longer term rates are?

I think the vessels that we're looking to purchase are specialized vessels, so I think from -- in the Aframax market we have nine Aframaxes coming up starting from early next year. So I think we most probably we will be looking at a six for the charter freight.

I think just one more and I'll turn it over. You mentioned the bunker hedges I think Paul I think you said $0.12 in the fourth quarter and there were shorter duration. Do you have a sense on much of that bled through into Q1 on a per share basis?

Bleeding or not bleeding?

Because yes we've kept as I said so we can't bear anymore valuation losses, we'll obviously have to be swapped, payments to be made. Because I pointed out these steep valuations these non-cash valuations will turn around during the course of the year and although they might not match the payments exactly over the period or the next nine of 12 months, they will concentrate each other. We won’t see any significant negative impact in quarter one.

The next question comes from the line of Fotis Giannakoulis from Morgan Stanley. So please go ahead.

I want to ask you about your growth strategy, you mentioned that you're not interested in ordering any new buildings but you might see some second hand acquisitions mostly to replace all their tonnage. Are you going to need any capital, you already have $200 million in your balance sheet but I see your history you always want to have around this level of cash at every single quarter. Are there any thoughts of issuing any equity at this time or it's something that you completely dismiss?

I think at the levels that we're trading there is no sort of raising any equity, we I think as George very politely said and Paul we have the luxury of being one of -- but actually the few companies that have been able to maintain a stellar band record during the crisis by not even negotiating any of our loans. So there is a lot of very cheap debt out there we're at almost 50% debt to equity right now which is a c comfortable position to be. And so I think we will need to see at least a double-digit share price to start talking to the Board about anything to do with equity.

And regarding the stock price you mentioned, you presented your NAV estimate or $11. Can we assume that this $11 as your NAV is practically the benchmark that you have whether you raise equity or not?

Yes as I said the NAV is a double, as correctly we said it is a double-digit figure and I think this should be the start. Hopefully with your help and all your analysts are doing a very good job educating the shareholders that in this current market the lower the price of the product regarding crude oil the better it is for us. And we expect this to finally move to our share price.

I want to ask you about the two main markets that you're involved crude and the product carrier. It seems that your main focus or your main area of optimism comes from the crude tanker market however we have seen the product tanker rates being quite strong the last four-five weeks. Can you explain to us what is happening there where do you see this market moving and what is the reason that you feel even more confident about the crude tanker market at least for the next two quarters vis-à-vis the product tankers?

Well I think as you rightly said there has been a significant rebound on the product market. We are seeing that the lower price of crude these becomes for a refineries to have higher margins and make refiners make some money. So I think this is leading to more products being refined and moved around a significant growth and that’s why we're seeing in the last six months a much firmer spot market and period market for the product. And I would say we have a 20% increase from a year ago on the handy size and both the LR1s and LR2s.

And regarding the reason why you focused your optimism for the crude tanker market in the first and the second quarter. Is that something that it concerns you after that or is just too soon to be able to have a view? And also if you can comment about the order book how it's developing during the year and if you see any link between the tanker order books with what is happening in the dry bulk market potential slot that they have been kept for dry bulk vessel that they could be sweet pay into tanker that might concern you?

Well the reason we have not -- we usually have a season on first quarter or first quarter is a very strong quarter. Second quarter growth seems to be maintaining its strength a lot of increase in long-term business and time charters offered by the major oil companies so that makes us also quite optimistic. We are optimistic for 2015 but we like to take it a quarter at a time and the closer as we move forward I think we’re looking at a relatively stronger a very strong year. We are seeing a lot of time charters coming out, we have seen last year up to the end of March we had about 10 time charters reported for six months and above for VLCCs today we have 33 up to today in 2015. In last year there was almost none or two or three long-term time charters on Suezmaxes that have been close to 15 so far this year. So you will see that also the major oil companies are taking the view that we are in for at least a three to five year positive and strong period.

And this optimism that you mentioned that the oil majors are showing through period chartering is it in more obvious in any specific sub-segment. You mentioned about a lot of VLCCs but what happens in the other segments and also what happens in the product tankers and how do you explain the potential differences between the inquires for long-term chartering across the different assets classes?

So just to simplify it I think we are seeing much more demand for long period for crude vessels. We are seeing a lot of interest for the Panamax for the LR1s and we are now into a couple of extensions of our ships last month on new buildings and on existing ships. So yes crude carriers so there is much more interest where as on the product carriers because the market just turned as we said about five months ago. It is a little bit more convincing for to go long-term meaning three to five years. There is plenty of business for one year, but nobody would like to fix, I mean today the spot market is at 22,000 why would you fix a vessel at 14,000 or 15,000 for a year.

One last question and I am going to ask about the smaller segment of your investment then and the segment you have two vessels one of which is already in the water and soon will reach for renewal and new building vessel, what is the situation there, have you had any indications of any attractive contracts that especially for the new building that is coming in early 2016?

Well, there is a lot of interest for -- in guide through we will consider that this is the future. However, I would say the starts that they are getting today on the products, the crude and the products carriers, I think what the LNG market is suffering from also the low price of oil making LNG short-term and less attractive despite differential. So, as we speak right now there are interests, there are accretive businesses out there, but our intention is on the existing ship which is in the water has another year, and a bit on charter and on the new building which is coming in the middle of 2016. The cost of the delivery of the time will get a much better rate.

[Operator Instructions] The next question comes from the line of Mark Suarez from Euro Pacific Capital. So please go ahead.

Nik, you talked about significant demand now for the long-term fixes or the long-term charters for the crude tankers and I am wondering how you think about your employment strategy for the vessels coming up for renewal in 2015? Do you feel that maybe return them on the long-term contracts, DCs with a profit share be more attractive at this point or do you think that maybe ongoing on the spot contract and give you the bit of an upside where I guess especially be the lower bunker cost make sense at this point?

We are maintain the 73% of our available days for 2015, we are spot oriented. So this is -- the most we’ve been spot for a very-very-very long time and I think we do not regret it right now. But we have specific returns that we want to achieve and I think when we are close to them because we are going to be chartering 6 to two, three or five years with profit sharing arrangements. But right now we’re enjoying the $50,000 and $60,000 a day on Suezmaxes and the 1,340 on the Aframaxes and I think our clients are coming to grips that they will have to pay strong numbers to get this under the belt for 55 years, but we’re getting there.

And then now turning to the product segment and given that you have seen a lot of substitutions into the LR1s and LR2s, do you continue to see opportunity to maybe fix your product tanker fleeting to those crude trades if you will to continue to enjoy those high rates over the next 12 to 18 months. How do you see that playing out the substitution effect between the crude and the product?

That’s what we’ve been doing we’ve been keeping as I call it the six derby on the spot the ones that are on the spot market. And in the last couple of months I think it was mentioned before the clean market is doing is creeping up also. So, I think right now we have of course being on the crude side it is still 25% to 30% more profitable than being clean, but the clean is becoming in the 20s for small ships this is not bad.

And then I guess finally just touching on the contango brand forward curves here, I think we have -- I should see some flattening out since December of last year and I am wondering if you guys are seeing any evidence of maybe decrease demand for oil storage in the crude tanker space, I know you mentioned there has been some fixing of for the sole purpose of oil storage. I am wondering how do you see that trend playing out if you continue to see the flattening out of the brand forwards curves here.

Yes, I think the way things are today with the storage craze of the end of the fourth quarter and beginning of the first quarter has slowed down and we were -- I think we’ve got the almost -- we got a big we fixed one of our VLCC at $55,000 for six months. So, we’re enjoying and I think our all in breakeven is about 12,000. So, we’re enjoying -- it's going to be helping you the first two quarters significantly the bottom-line. But right now as the price has dropped, we’re seeing less interest. However, it seems that a lot of the land -- the land storage facilitator getting full and there is not also another way of having ship storage not purely for contango, but as ways to be able to store the product.

[Operator Instructions] Your next question comes from the line of Spiro Dounis from UBS. Please go ahead.

Just want to switch gears to Shuttle tankers if we can. Looks like last night the UK Government started to relax some of the taxes on producers in the North Sea. Just wondering, does it create more opportunities for Shuttles in your view? Does that make you more bullish in that sector? Or do you think that's really just a move to stop the bleeding for now?

I think it is to encourage and help the bleeding of their expenses and not fuel, but I think this is positive news for owners like ourselves of Shuttle tankers. This only happened very recently so we have not seen the effect, but it is a move towards the right direction.

And then just one on the MLP if you don't mind, I think a peer of your has formed an MLP back in November and at the time was a little precarious it was still trying to figure out where the oil price is going to shake out and what that meant for tankers? And even in that time I think they were able will drop down some VLCCs for 20% to 30% prices above the prevailing market rates at the time. Clearly I mean that sounds attractive to us, but it sounds like you're still tracking this market and evaluations aren’t quite where you want them. Would that give in any way any secrets how should we be thinking about what you think is attractive, whether it be yield, multiples just kind of give us some color on when we think you're going to be ready to make that move?

Well I think the MLP time horizon I think it's still on, and it's the drop of the vessels will be starting as early as February in about 10 months, so we are on track. We have done our work with the SEC but I think the way we look at it is that if we are going to do something like that we would like to be able to have a single-digit this time yield, and I think this is right now -- it's not happening, we had some -- told their own reasons, offerings of MLPs in the TEN, neither TEN has no reason to make an MLP that will show dilutive to the main company. So it is there and we're looking at it but if we can see 6%, 7%, 8% perhaps then we can -- the Board might consider doing it, but where it is today I think it is not accretive for the mother company.

[Operator Instructions] It seems there are no further questions at this time. So please continue.

Well again thank you very much for being and listening to us and supporting the company. We have been I think we have navigated the worst part so far and this is a bit calmer. Looking forward to see all of you with the team of our COO, our Chief Financial Controller is going to be there together with our Deputy Chairman in New York next week and so if you have any more questions we'll be very happy to answer face-to-face. Thank you very much from all and good morning from you, from Athens.

That does conclude your conference for today. Thank you for participating. You may all disconnect.