Tsakos Energy Navigation On Course To A Record Year

Revenues on a time charter basis for the first nine months of 2001 were $75.12 million, representing an increase of 20.6% over the $62.29 million generated in the first nine months of 2000. Income from operations reached $48.65 million or a 22.2% improvement from the like period of 2000. Income before depreciation rose to $34.09 million for the first nine months of 2001 or 28.7% above the year earlier level. Net income grew to $18.22 million for the first nine months of 2001 versus $11.03 million for the first nine months of 2000, a 65.2% increase.

Revenues on a time charter basis for the third quarter of 2001 were $24.32 million or virtually unchanged from the $24.72 million generated in the third quarter of 2000. Income from operations was $14.53 million in the third quarter of 2001 down 11.8% from levels of the third quarter of 2000. The $1.95 million decline reflected special costs of approximately $1.38 million arising from the revision of two dry docking schedules, repairs and spares, and a provision against insurance claims. Income before depreciation was $7.65 million for the third quarter of 2001 versus $12.46 in the year earlier quarter. Net income for the third quarter of 2001 was $2.29 million versus $7.27 million in the third quarter of 2000. Both Income before depreciation and Net income were impacted by a non cash charge of $3.77 million for fair value adjustments of interest rate swaps as of 30 September 2001.

Net income, but not cash flow, was sharply impacted during the third quarter by a provision for unrealized losses related to interest rate swaps contracted on July 27, 2001. TEN has interest rate swaps under which fixed rates are paid while floating rates are collected in amounts of $45 million (nominal principal) with two years duration and $100 million (nominal principal) with three years duration. These contracts provide certainty of interest paid so long as they remain open. However, in the event of early termination a gain or loss is realized. Since these contracts are not qualified as hedges, IAS 39 requires that changes in the fair value be recognized currently in earnings. The fair value of the interest rate swaps was a negative $3.77 million at 30 September 2001, which has been applied against income for the quarter and nine months ended 30 September 2001.

TEN has a fleet of sixteen tankers (including one chartered-in Aframax) comprising 1,420,000 DWT with an average tonnage age of approximately nine years. Next year it plans to take delivery of four new buildings (three Suezmaxes and one Aframax). Additionally, it has the option to acquire several new building contracts including one Suezmax, one Aframax and four Panamaxes.

The economic outlook for the balance of 2001 has become even hazier and somewhat less positive. The U.S. economy may experience a mild recession while the highly important Japanese economy is clearly in reverse gear. The reversals in these economies have sharply impacted the Pacific Rim and Latin American communities. Europe's growth has also moderated. The combined effects of these developments have reduced present and prospective demand for oil and petroleum products. OPEC has responded with a series of production cuts and is currently proposing worldwide export cutbacks of up to two million barrels per day.

Within this environment of substantial uncertainties our views regarding TEN's prospects for the balance of 2001 remain constructive. Ten of the vessels are on time charter through the end of the year. Three vessels are at floating rates, which adjust periodically based on prevailing spot market rates under evergreen agreements, while the remaining three vessels operate in the spot market. We believe that revenues during the fourth quarter of 2001 should approach those of the fourth quarter of 2000, operating expenses should experience modest increases, and interest costs should be constrained. Overall we anticipate that 2001 results will reflect a successful year for TEN.