Tsakos Energy Navigation Limited: FY2021 Form 20-F Summary
Business context and reporting period
Tsakos Energy Navigation Limited is a Bermuda-incorporated international marine transportation company reporting under U.S. GAAP. The filing covers the fiscal year ended December 31, 2021; it is an annual Form 20-F rather than a standalone fourth-quarter filing. The Company transports crude oil, petroleum products and LNG through a diversified fleet managed primarily by affiliated companies.
- At December 31, 2021, the Company operated approximately 65 vessels; subsequent disclosures describe 66 operating vessels totaling approximately 7.3 million dwt as of April 21, 2022.
- 2021 employment mix by operating days: 41% fixed-rate time charter, 19% variable-rate time charter or pool, 2% variable-rate period employment and 39% spot voyage.
- The Company has no salaried employees and relies on Tsakos Energy Management, Tsakos Shipping and Tsakos Columbia Shipmanagement for executive, commercial and technical management.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Voyage revenue | $546.1 million | $644.1 million | Down 15.2% |
| Time charter equivalent revenue | $362.6 million | $507.7 million | Down 28.6% |
| Average TCE per vessel per day | $17,037 | $23,638 | Down 28.0% |
| Fleet utilization | 92.6% | 94.2% | Down 1.6 percentage points |
| Vessel operating expenses | $173.3 million | $179.2 million | Down 3.3% |
| Depreciation and amortization | $143.3 million | $137.1 million | Up 4.5% |
| Operating income/(loss) | $(119.9) million | $96.7 million | Material deterioration |
| Net income/(loss) | $(150.6) million | $27.2 million | Material deterioration |
| Net loss attributable to TEN | $(151.4) million | $24.0 million | Material deterioration |
| Net loss per common share | $(9.53) | $(0.80) | Higher loss |
| Net cash from operating activities | $53.1 million | $205.4 million | Down $152.3 million |
| Cash and cash equivalents | $117.2 million | $160.5 million | Down $43.3 million |
| Total debt before deferred financing costs | $1.381 billion | $1.510 billion | Down $129.1 million |
| Total stockholders’ equity | $1.292 billion | $1.382 billion | Down $90.0 million |
Voyage expenses increased 36.4% to $198.1 million, primarily because more vessels operated in spot or contract-of-affreightment employment and bunker costs increased. Bunkering expense rose to $114.0 million from $74.0 million. The Company reported a $86.4 million impairment charge on seven vessels, compared with $28.8 million in 2020.
Working capital, excluding restricted cash and deferred loan costs, was negative $104.6 million at year-end, compared with negative $74.5 million in 2020. Total cash, including restricted cash, was $127.2 million. Debt represented 51.7% of debt plus equity, or 49.2% on a net-of-cash basis.
Material changes versus the prior comparable period
- Weak tanker markets, COVID-19-related energy demand disruption and higher bunker prices drove lower revenue, TCE and utilization.
- Operating results shifted from $96.7 million of operating income in 2020 to a $119.9 million operating loss in 2021.
- Net cash from operations declined sharply, while cash balances decreased and the working-capital deficit widened.
- Interest and finance costs declined 55.5% to $31.4 million, reflecting lower average debt, lower interest rates and favorable bunker-derivative fair-value movements.
- The Company sold the panamax tanker Maya and completed sale-and-leaseback transactions for Arctic and Antarctic, realizing aggregate vessel-sale losses of $5.8 million.
- The Company issued 6.05 million common shares for net proceeds of $50.5 million and issued Series D, E and F preferred shares for aggregate net proceeds of approximately $23.7 million.
- Approximately 21 vessels underwent dry-docking in 2021 versus nine in 2020, contributing to higher amortization and lower utilization.
Guidance, outlook, risks and unusual items
Management did not provide formal earnings guidance. Management expected tanker rates to improve as global oil demand and production recovered, OPEC+ supply cuts unwound and limited tanker ordering and increased scrapping constrained fleet growth. However, management emphasized that the outlook remained uncertain, particularly because of COVID-19, the conflict in Ukraine, inflation, fuel prices and global financial-market conditions.
- Ten time charters were scheduled to expire during 2022, increasing exposure to weak spot or renewal markets.
- As of April 21, 2022, approximately 61% of the fleet was employed at fixed rates, including time charters with profit-sharing components; 20 vessels were operating in the spot market.
- Six vessels were under construction at December 31, 2021, with approximately $480.0 million of remaining purchase commitments, including $240.5 million due in 2022 and $239.5 million in 2023. Financing for the four dual-fuel LNG-powered aframax tankers was still being arranged.
- Debt principal obligations totaled $175.1 million due in 2022, $243.0 million in 2023 and $283.0 million in 2024. The Company stated that it remained compliant with all 32 loan agreements and had paid scheduled debt service without default.
- Loan agreements require minimum unrestricted liquidity of approximately $105.8 million at December 31, 2021, collateral coverage and other financial covenants. Declining vessel values could pressure loan-to-value and leverage compliance.
- Most debt was floating-rate debt based on LIBOR at year-end, with the Company expecting a transition to SOFR or another benchmark. Interest-rate swaps covered approximately 33.1% of outstanding debt as of March 31, 2022.
- Common-share dividends totaled $2.0 million, or $0.10 per share, in 2021; preferred-share dividends totaled approximately $34.3 million. Future dividends remain subject to board approval, cash availability, results, covenants and Bermuda law.
- The Company recognized a $2.2 million deemed dividend in connection with the partial redemption of Series G convertible preferred shares for Shyris Shipping preferred shares.
- The Company and U.S. authorities were investigating potential FCPA issues involving shipbrokers and charters connected with a major Brazilian state oil entity; the filing does not quantify a probable loss.
- Related-party charges totaled $44.3 million in 2021, including management fees, commissions, insurance premiums, technical services and travel services.
- Environmental regulations, including ballast-water, sulfur, carbon-intensity and greenhouse-gas requirements, may require additional capital and operating expenditures. Pollution liability insurance was $1 billion per incident, but catastrophic liabilities could exceed coverage.
Most important facts for investors to verify
- Whether tanker rates and utilization improved sufficiently after year-end to offset the 2021 revenue and cash-flow decline.
- The refinancing and funding plan for 2022-2024 debt maturities and approximately $480 million of newbuilding commitments.
- Current charter coverage, renewal rates and the financial impact of the ten 2022 charter expirations.
- Current vessel market values, covenant headroom and the potential for additional impairment charges.
- Progress and potential exposure from the FCPA investigation and any related regulatory or legal proceedings.
- Whether unrestricted cash remains above minimum liquidity requirements after debt service, dividends, dry-docking and construction payments.
- The effect of LIBOR transition, rising interest rates, fuel prices, Ukraine-related sanctions and environmental compliance costs.
- The sustainability of common and preferred dividends given negative 2021 earnings, reduced operating cash flow and financing restrictions.