Tsakos Energy Navigation Limited (TEN) Earnings

Management highlights

- Business Model and Strategy * TEN operates as a diversified portfolio of vessels rather than a collection of individual assets, structured to deliver sustainable profitability through both good and bad market cycles while growing dividends and renewing the fleet. * The model allocates revenue from fixed time charters to cover all baseline company operating, financing, and overhead expenses, with all revenue from spot and profit-sharing vessels flowing directly to incremental profit. * Management (the largest shareholder since inception) prioritizes maintaining a strong cash buffer of over $350 million, with flexibility to use excess cash for acquisitions or opportunistic fleet adjustments. * As of Q1 2026, the company has $3.6 billion in booked upfront revenue for the next two years, providing high revenue visibility. Current pro forma total fleet size is 83 vessels. - Fleet Modernization and Composition * Since January 1, 2023, TEN has completed substantial fleet renewal: sold 18 older first-generation vessels (average age 17 years, 1.7 million deadweight tons) and replaced them with 34 contracted and acquired modern, energy-efficient vessels (average age 0.5 years, 4.7 million deadweight tons), including multiple dual-fuel vessels. * TEN is currently one of the largest owners of dual-fuel LNG-powered Aframax tankers, with 6 vessels already in operation, and has an active 26-vessel newbuilding program, the largest among peer groups, with 4 deliveries completed to date. * In Q1 2026, TEN announced the sale of a 10-year-old VLCC and entered an agreement to purchase two in-the-money 2007 Aframax tankers currently held under a sale-leaseback arrangement by the end of July 2026. * 83% of the operating fleet is covered by secured revenue contracts (fixed time charters or time charters with profit sharing), with long-term repeat relationships with major energy clients including ExxonMobil, Equinor, Shell, Chevron, Total Energies, and BP. - Financial Performance Q1 2026 * Fleet utilization reached 98.3% in Q1 2026, up from 97.2% in Q1 2025, with only two vessels in scheduled drydocking during the quarter. * Average time charter equivalent (TCE) rates hit $41,000 per day, a 33% increase from $31,000 per day in Q1 2025, while average operating expenses per vessel per day remained competitive at $9,952. * The balance sheet remains solid: total debt is $2.1 billion, net debt to capitalization is 48.4%, and the fair market value of the operating fleet exceeds $4.6 billion. * The company declared a $1 per common share dividend (to be paid in July 2026), a 67% increase from the year-ago dividend; including a February 50 cent per share payment, total 2026 distributions to date are 36% higher than 2025 full-year distributions, with a total distribution of $45 million.

Guidance

- Management expects the second quarter of 2026 (which is more than half complete as of the call) to be meaningfully stronger than Q1 2026, which already delivered record results, due to the full impact of recent geopolitical market dislocation that has supported already strong tanker fundamentals. * Management maintains a positive long-term outlook for tanker market fundamentals: global oil demand continues to set new annual records, tonnage supply remains balanced, the global order book is only around one-third the size of the fleet over 15 years old, shipyards are at full capacity, and scrapping activity is increasing. * Up to half a dozen older first-generation vessels are expected to be sold at current strong market prices between Q2 and the end of 2026, as part of the ongoing fleet modernization program. * A final decision on whether to exercise the option for a second LNG newbuilding will be made by the board within the next few weeks at the upcoming AGM. * The third new shuttle tanker is scheduled for delivery at the end of July 2026, with sea trials currently underway.

Segment performance

The company operates three core vessel segments: conventional tankers, LNG carriers, and shuttle tankers. Overall consolidated Q1 2026 voyage revenues reached $253 million, a $56 million (32%) increase from Q1 2025. Operating income came in at $110 million, up 93% from $57 million in the prior year quarter, while net income hit $89 million, a 136% increase from $37.7 million in Q1 2025. Adjusted EBITDA for the quarter was $154 million, a 55% increase year-over-year. 37% of the current 63-vessel operating fleet has market exposure (spot trading and time charters with profit sharing), contributing 100% of incremental profitability above baseline company expenses, with profit sharing revenues alone reaching over $40 million in Q1 2026, matching the full-year 2025 total. The remaining 63% of the operating fleet is on fixed-rate time charters, providing secured baseline revenue. Shuttle tankers, of which TEN operates 16 modern vessels, represent a high-visibility, growing revenue segment, with 6 new shuttle tankers already in full operation on long-term charters to major energy clients. LNG currently includes 3 operating vessels plus 1 contracted new building and 1 option, making it a small, strategic growth segment that does not drive overall company results.

Risks & headwinds

- Ongoing geopolitical conflict and the closure of the Strait of Hormuz have trapped more than 20,000 seafarers for three months and blocked approximately 5% of global tonnage, including more than 10% of the global VLCC fleet, creating operational and human risk for the industry. * Geopolitical dislocation has forced major trade route re-routing, and if current conditions do not normalize within the next three months, increasing congestion and delays are expected at the Panama Canal as more cargo transits the route from the Atlantic Basin to the Far East. * A sustained weakening of the U.S. dollar relative to the euro (the currency for many of TEN's major operating expenses) could create moderate upward pressure on general and administrative expenses, though management notes this impact is marginal relative to current revenue levels. * All forward-looking statements related to market performance and future operations are subject to inherent risks and uncertainties that could change actual results, as outlined in the company's safe harbor disclosure.

Analyst Q&A

• Q: How does management view the future of the shuttle tanker segment within TEN? Will it remain integrated, or is a spinoff being considered? /

  A: Currently, shuttle tankers are an integral part of TEN's consolidated business, and management is fully focused on completing the delivery of the current newbuilding program. No decision on separation has been made, and management is open to all options but does not have any immediate plans to carve the segment out. The third new shuttle is scheduled for delivery at the end of July.

• Q: Given current market conditions, what is the outlook for securing long-term charters for the new LNG newbuildings? /

  A: The current LNG market is distorted by ongoing geopolitical turmoil, so current rates do not reflect long-term fundamentals. TEN, as a diversified company with $3.6 billion in existing backlog, does not need to accept unfavorable low long-term rates; the firm can wait for the right opportunity with major clients. Management sees long-term growth in LNG demand and is taking measured, strategic steps rather than rushing into unappealing contracts.

• Q: What was the out-of-the-box operation with the Asahi Princess referenced in the release? /

  A: The operation was developed to bypass risky routes through the Strait of Hormuz and Red Sea for a major client. Product was transported via 7,800 trucks to the Eastern Mediterranean, where it was loaded onto the Asahi Princess for delivery, keeping the energy supply chain moving without endangering crew or vessels. The two-week operation was successful and allowed the client to avoid supply disruptions.

• Q: What was the Q1 2026 contribution from profit-sharing agreements, and what is the outlook for G&A and operating expenses going forward? /

  A: Profit-sharing revenue exceeded $40 million in Q1 2026 alone, matching the entire full-year 2025 total, showing strong upward momentum. Management expects to maintain average daily operating expenses at current levels, and though a weakening dollar will create mild upward pressure on G&A (since many expenses are euro-denominated), the impact will be marginal. TEN has successfully kept average operating expenses under $10,000 per day across its diversified fleet.