Earnings Call Transcript - ECO Q4 2025

Operator, Operator

Welcome to OET's Fourth Quarter 2025 Financial Results Presentation. We will begin shortly. Aristidis Alafouzos, CEO; and Iraklis Sbarounis, CFO of Okeanis Eco Tankers, will take you through the presentation. They will be pleased to address any questions raised at the end of the call. Matters that are forward-looking in nature will be discussed, and actual results may differ from the expectations reflected in such forward-looking statements. Please read through the relevant disclaimer on Slide 2. I would like to advise you that this session is being recorded. Aristidis will begin the presentation now.

Aristidis Alafouzos, CEO

Thank you. Since August of last year, the large crude tanker market entered the freight cycle that we've been waiting for and prepared for all these years. This is a unique opportunity to have exposure to a fleet that is on the water and able to capitalize today. For a shipping investor, on the water exposure is critical in the current circumstances. As our conviction strengthened after the summer, we executed two opportunistic transactions and acquired four resale Suezmax newbuildings from Korea. The first two have already delivered; one has loaded her first cargo and the other one is about to load, while the remaining two will be delivered in the next two to three months. We have already had a structurally strong freight market with strong asset values. But we added the Venezuelan barrels coming back to normal fleet and the new trade flows that create, India materially reducing Russian imports, the Iranian question looming, and likely, most importantly, Synacor consolidating the VLCC market in a manner that has not been done before. They are currently owning and operating, and waiting to be delivered a fleet of around 150 VLCCs. As a result, our NAV has been consistently and rapidly increasing, and our NAV premium is attempting to continue to catch up, but it has somewhat compressed, especially given these absolutely unique fundamentals in our market. We currently have no additional opportunistic transactions in play. Our focus is clear: disciplined outperformance and maximizing shareholder returns through both dividends and sustainable share price appreciation. We will catch up later, and I'll hand you over to Ira right now.

Iraklis Sbarounis, CFO

Thanks, Aristidis. Let's get started. I’m excited to share the highlights from the fourth quarter of 2025. We achieved a fleet-wide time charter equivalent of about $77,000 per vessel per day, with our VLCCs at $92,000 and Suezmaxes at $53,000. We reported an adjusted EBITDA of $79 million, an adjusted net profit of $60 million, and an adjusted EPS of $1.78 based on our average share count for the quarter. To continue delivering value to our shareholders, our Board declared a dividend of $1.55 per share, marking our 15th consecutive quarterly distribution. This dividend represents 102% of our net income based on our current fully diluted share count after recent equity transactions. Over the last four quarters, we have distributed a total of $3.32 per share, which is approximately 95% of our reported net income for this period. In November, we successfully executed an equity raise of $115 million to fund the acquisition of the Nissos Piperi and Nissos Serifopoula, which were delivered in early January. Recently, we completed another similar transaction, bringing our total gross proceeds raised to $245 million while acquiring two additional Suezmaxes that are expected to be delivered in the second quarter. Since our IPO in Oslo, we have distributed more than double our initial market cap, having paid over $461 million in dividends. Since achieving a fully delivered fleet in 2022, we have paid out 92% of our reported net income, further highlighting our commitment to shareholder value. Our income statement for the quarter and the full year of 2025 shows TCE revenue at $265.4 million, with EBITDA close to $204 million and reported net income around $130 million or $3.77 per share. Our cash balance at the end of the year was $122.5 million, which included some equity set aside for the Nissos Piperi and Nissos Serifopoula acquisitions. We also had roughly $85 million in trade receivables. Our balance sheet debt was $605 million, and we subsequently drew down $90 million for the two Suezmaxes. Our book leverage is at 46%, while the market-adjusted net loan-to-value, based on the latest broker values and recent transactions, stands around 35%. Looking at our fleet, I’m excited to announce the addition of four modern, high-spec vessels. We currently operate 16 vessels in total: eight Suezmaxes and eight VLCCs, with an average age of just six years. This average age will improve when the two Suezmaxes currently under construction in South Korea are delivered in Q2. We have completed our initial dry docking sequence and our only scheduled dry dock for 2026 will be the Milos 10-year survey. Regarding our capital structure, I am very pleased with the recent refinancing and new financings for the acquired vessels. Our margin has improved by approximately 140 basis points, and we expect further reductions as we consider refinancing the Nissos Rhenia and Nissos Despotiko. The Piperi and Serifopoula were financed through the Greek market at favorable terms, with rates at 130 basis points over SOFR for seven- and eight-year terms, respectively. The debt financing market remains open and competitive as we explore options for the four vessels set for the second quarter. In November, we raised $115 million at a price of $35.5 per share, which was around 1.25 times our NAV at that time. In January, we followed up with a $130 million raise at $36 per share, priced at about 1.2 times our NAV. Both transactions were heavily oversubscribed and executed at a significant premium to NAV while locking in third-party vessels for delivery. This achievement is quite rare in the shipping industry, as few companies can raise equity at a premium to NAV while securing modern vessels and creating immediate value for shareholders. Since these two raises, shareholders have realized a return of over 20% alongside dividends. We see this as a strong endorsement of our disciplined approach to capital allocation. We do not raise equity purely for growth; we raise it when it is value-accretive, which reduces breakeven points, strengthens the balance sheet, enhances per share value, and boosts trading liquidity. Both recent transactions met these criteria. For the first transaction, the acquisition price for each vessel was $97 million, but when considering the NAV arbitrage for the equity funding portion, the effective price was $85.5 million. In January, the acquisition price increased to $99.3 million, with an effective price after NAV arbitrage of $88.5 million. We effectively acquired recent vessels for the cost of newbuilds through capital market advantages. This strategy has resulted in immediate NAV accretion. Besides these benefits, the raises have also increased free float and liquidity, diversified our shareholder base, enhanced our credibility in capital markets, and reduced fleet-wide breakeven levels. Notably, we executed these transactions while asset values were on the rise, allowing us to acquire assets at favorable terms before their appreciation. This approach exemplifies our commitment to shareholder-friendly execution, as we believe growth should only occur when it improves per share economics. I’ll now hand it back to Aristidis for the commercial market update.

Aristidis Alafouzos, CEO

Thank you, Iraklis. Again, we had another great quarter. Q4 was a fantastic quarter with a consistent strong freight market and appreciating asset values. We positioned our fleet to take advantage of the seasonal strong quarter, and this year, it worked out for us quite well. The market dipped aggressively right after Christmas on the VLCCs, but we were lucky to have limited exposure during this brief window. Fleet-wide TCE came in around $76,700 per day with $92,000 on our VLCCs and $53,100 on the Suezmaxes. And we achieved 100% utilization across the fleet. Q4 looked like it would be a strong quarter since August when rates in the spot market and futures started moving in a period that is usually quiet. On the Suezmaxes, as usual, we tried to minimize waiting time, fixing shorter voyages as the market was going up through the quarter and triangulating as best as possible. We were penalized by dry docking our two 2020-built Suezmaxes in China. The freight rates to move out East were actually at a discount to the local Western voyages, while the backhauls were also below round trip economics. We have a Suezmax requiring dry dock this year, and we are strongly considering putting her into dry dock in Turkey, which is slightly more expensive as a dry dock cost, but we will be able to earn a lot more as we do not have to position her and reposition her outside of our preferred trading areas. On the VLCCs, we were quite pragmatic. On our Western positions, we fixed long voyages to go east and capture the front haul economics. And on the vessels in the East, we minimized waiting time to optimize TCE while also fixing a couple of backhauls when we were able to find the cargo offer dates and achieve a triangulated outperformance over the equivalent round voyage. The Nissos Rhenia was lucky to fix a voyage loading in the AG and discharging in the U.S. Gulf. Her next voyage had no ballast passage. This was the first quarter where our VLCCs outperformed our Suezmaxes since Q2 2024. Q1 started with a bang. We already had an excellent structural setup in crude tankers. Then as the New Year's gift and Christmas gift as well, two developments reinforced the market. Venezuelan barrels returned exclusively to the compliant fleet and Synacor aggressively consolidating the VLCC market, controlling over 90 ships and now operating roughly 150 vessels. We will elaborate on both shortly. We think that our Q1 guidance is strong. We have very strong fixtures from Q4 flowing into Q1 and even stronger fixtures getting concluded in Q1. We fixed a 12-month charter at $91,140 on the Nissos Nikouria. While I strongly believe our spot vessels will outperform this over this year, we still have another 15 to 17 spot ships, and we deemed it prudent. In addition, the previous batch of fixtures in the mid-70s were quite low, and we took the opportunity to set the bar higher, which has now been set even higher with multiple fixtures done at $100,000 per day for 12 months. At the moment, we do not have any interest in fixing further ships on TCE. But with the volatility and rapidly appreciating market, this could change, even though we really want to continue our current spot exposure. As of today, we have 67% of our VLCC spot days fixed at $104,200 per day and 64% of our Suezmax days fixed at $84,600 per day, giving us a fleet-wide average of about $94,800 per day on the fixed portion, roughly two-thirds of the quarter. On the VLCCs, we fixed a combination of longer and shorter voyages in order to structure their next cargo fixing windows. The Suezmaxes have also been performing wonderfully with many opportunities for them to earn over $100,000 a day. Take note that our Q1 guidance also includes repositioning our two newbuild vessels from South Korea into the West where we like to trade our ships. We secured crude cargoes on both vessels from West Africa, where now they're going to move up into our preferred areas. CPC Black Sea volumes have resumed at full force as the SPM that was damaged earlier is back in use. This is a great support on the Suezmax market as we see around 40 cargoes a month from that port alone. While recently, we have seen these barrels also getting sold into the East, which has not been the case for months. This is very supportive ton miles as a vast majority of the flows usually go into Europe. Another large factor in the strength of the market and our earnings has been the return of Venezuelan oil into the open market. But again, we'll talk about this signed for and sanctions in the following slides. We were able to capitalize on many opportunities in this quarter and look to do so going forward.

Iraklis Sbarounis, CFO

On Slide 15, apologies for the repetitive slide, and I'll keep this one brief. Since Q4 '19, we've generated approximately $235 million of cumulative outperformance versus our peers. So this is a 22% outperformance on RVs and 39% outperformance on our Suezmaxes over a 5.5-year period. This reflects consistent commercial execution, not just one strong quarter. On the following slide, we look a little bit at the order book and the fleet structure. The order book has grown on the VLCCs since our Q4 report, but context matters. If we consider the 20-year mark as the end of the useful life of a normal fleet vessel, the fleet is declining year-by-year. We saw an interesting development of how a change in sanctions affects oil flows and shipping flows with Venezuela. Oil sanctions are lifted, flows resume in the normal market. The world's best traders and oil managers get involved in the trading and production. What else do we see? That the ships that were sanctioned or engaged in this dark trade remain isolated. They will not be coming back to compete against us. As we look on the next weeks to Iran, is this how it plays out there? Eventually, when the Ukrainian conflict comes to an end, will that be the same pattern? I strongly believe that sanctioned and dark fleet tainted ships do not come back to the normal market. The only window potentially for some to return are those owned by national oil companies, whether it's the National Iranian Tanker Company or others. But this is a very small number in the overall dark fleet. And looking at our fleet, we are sitting exactly where investors want to be. We have a young eco-designed, fully scrubber-fitted fleet and most importantly, in the water, earning today. In our opinion, what does the shipping investor want? Exposure and returns today. This is what OET delivers. And now for the more exciting slides, we have over 20% of the fleet of large tankers sanctioned and even more engaged in trade tainted but not yet sanctioned. Against all oil analysts and traders predictions, we do not have a massive oil blood in the market. What we see instead is an inability for sanctioned barrels to find a buyer and a lot of floating sanctioned cargoes. This inability has stretched the dark fleet, increased freight rates for them and forces them to absorb more tonnage, which further restricts the size of the normal fleet. The result is simple: fewer ships are available for the compliant market. That is structurally bullish. Against this, we have three main noncompliant trades: Venezuela, Iran, and the non-price capped Russian business. Today, Venezuela is gone. The oil exporting from Venezuela is only on the normal fleet. Every single barrel from Venezuela is a cargo that wasn't around in 2025. This is extremely positive for tanker ton-mile demand as the market settles, and the trade grows, it will become even more pronounced. Another sign on the tightening enforcement of sanctions, which many respected oil and political analysts gathered was Trump's ability to impact oil flows. He succeeded and India has materially decreased their purchases of Russian crude. So instead, we are seeing constant market quotes from the Arabian Gulf, from West Africa, from Brazil, from the U.S. Gulf and even flows from Venezuela. Again, every cargo from these places is a new cargo from the compliant fleet that's replacing the Russian crude. And the final and most bullish part of our three-slide tanker dream section is the massive unprecedented consolidation in the VLCC sector by a privately owned non-trader. Synacor has or will take control of over 85 ships since Christmas. Their total fleet footprint should be around 156 ships. This is just unbelievable. They control 17% of the total fleet, while almost 40% of the smaller part of the pie of the fleet, which we actually compete with in the spot market. They have been very effective at pushing up the market. Hats off and congratulations to Synacor for this. They have done the heavy lifting and let the rest of the market reap the rewards.

Aristidis Alafouzos, CEO

Looking at utilization on Slide 22, I remember a good friend and respected broker, Chuck Monson, once told me that as you approach the high end of the utilization curve, rates increase exponentially rather than linearly. This is illustrated in the slide. When the market tightens at these levels, even a small change in utilization can lead to a significant impact on earnings. Given the rapid changes in the market recently, I believe that as we present this, we have likely moved out of the light blue box and shifted to the right. This is exactly where our modern, fully spot exposed fleets gain the most advantage. If this trend continues, I'm excited to make our Q1 presentation even more engaging. Thank you for being here today.

Operator, Operator

Your first question comes from the line of Even Kolsgaard with Clarksons Securities.

Even Kolsgaard, Analyst

So you mentioned it yourself as well, but I'm interested in your take on the VLCC market versus the Suezmaxes because I think the market today is mostly focused on the VLCCs. The rates are good and you have the Synacor event. But as you mentioned, the VLCC market has finally begun to outperform the Suezmaxes reversing basically a trend we've seen for the last few years. So how do you think about the Suezmax versus VLCC market going forward, both for earnings and values?

Aristidis Alafouzos, CEO

Even, thanks for your question. I mean, even in Q4 and potentially looking at our guidance in Q1, on a dollar per metric ton or on a relative basis, the Suezmax is still outperforming the VLCC. So I mean, obviously, it's a cheaper ship, but the delta between price and earnings isn't still justified. So we think that the Suezmax is a really attractive asset. And as the VLCC market continues to tighten, charterers do their best to find ways to reduce the cost of transporting oil from A to B. We think that the Suezmax will become a very versatile asset in order to do it. So there are some trades which will never make sense on the Suez instead of the VLCC or rarely, and this is like the really long-haul business, U.S. Gulf to China or a lot of the AG business to China. But a lot of the shorter runs, Suezmaxes can easily jump in and find a lot of opportunities for backhauls or nontraditional Suezmax cargoes, which we would consider like a triangulated bonus over the normal Suezmax market. So for this reason, we think that the strength in VLCCs will be equally beneficial to the Suezmaxes and for savvy owners can give them even more opportunities to creatively trade their ships in this market.

Even Kolsgaard, Analyst

Got it. And just a follow-up. I guess you said you don't want to take on any more time charter contracts at these rates. So you're pretty bullish towards the market. But when it comes to Synacor, it seems like they're bidding for VLCCs from basically every owner. Have you been tempted to sell some of your ships to Synacor?

Aristidis Alafouzos, CEO

In this regard, my personal view is that Synacor will be successful in what they're trying to achieve. So I think that the exposure to the spot market and in the future, potentially TCE or sales market is what we want to have today. Now going forward, once things continue to reprice higher, I can't tell you what's the best choice for us to do. But I think right now there's a lot of upside left in what's happening in the market. And right now, we've seen rates move up 20 points, a little bit more this week. And I still feel like that's just the beginning of the current spike that we're entering. So at the moment, no, we haven't seriously considered selling our Okeanis vessels to Synacor.

Operator, Operator

Your next question comes from the line of Liam Burke with B. Riley.

Liam Burke, Analyst

You're generating a lot of cash at this level. You've got a nice hefty cash balance to support the acquisition of the two new Suezmaxes. Is your capital allocation strategy going to change from how it has been in the past?

Iraklis Sbarounis, CFO

Liam, it's Iraklis here. I don't think it has changed. I mean it has been for some time a key priority for us to distribute as much value as possible to shareholders. The transactions that we did were structured in a way where that was not jeopardized by any means. And this quarter and the distribution we're giving is indicative of such strategy. So not really, we're trying to give out as much as possible, and we're just focusing on extracting as much value as possible from the market to deliver that to shareholders.

Liam Burke, Analyst

Okay. Just a follow-on, on the market. In the prepared comments, the spot market is still continuing to move, I mean, exponentially at this point. But is there any thought to taking some money off the table and moving some vessel or more vessels to term charters?

Aristidis Alafouzos, CEO

Liam, we answered that during the presentation as well. At the moment, the answer is no. I think what we want is to have a vast majority of the fleet in the spot market, especially as we feel that there's a lot more upside to spot rates and charterers' expectations of spot rates over the next considerable period. So I think for now, we need to keep our ships in the spot market, so we have all the optionality we need. And then in a few months, we will look at it again. But for the time being, the answer is clearly no.

Operator, Operator

Your next question comes from the line of Fredrik Dybwad with Fearnley.

Fredrik Dybwad, Analyst

Congratulations on the strong results and bookings. I wanted to follow up on Synacor. I'm interested in hearing your perspective on this. Can you hear me?

Aristidis Alafouzos, CEO

Yes, you got cut off right when you were asking the question.

Fredrik Dybwad, Analyst

I wanted to follow up on the Synacor situation. I'm interested in your perspective on how he plans to dominate the market, especially given that he hasn't repaired that many ships yet, just a couple. Lastly, how long do you think his success can continue if it happens?

Aristidis Alafouzos, CEO

I believe that's a more appropriate question for Synacor. I have noticed that their ships have been fixing. The company has indicated where they believe the market should be, and they have been consistent in fixing at those levels. Therefore, I assume that once rates reach their target, they will fix some ships, evaluate the market conditions, and continue to elevate their expectations and push rates higher, thereby advancing this market. However, the specific strategy of the company should be addressed with Synacor.

Operator, Operator

Your next question comes from the line of Climent Molins with Value Investors Edge.

Climent Molins, Analyst

First of all, congratulations on the two accretive offerings you pursued in recent months. I wanted to start by asking about where you see your maximum fleet size, say, on VLCCs and on Suezmaxes, where you can still capture this kind of premium you've been able to realize in recent years?

Aristidis Alafouzos, CEO

Thank you for the question and for being on the call. We previously mentioned that we would feel comfortable if the VLCC or Suezmax fleet were slightly larger, as long as we could continue achieving similar earnings. However, I can assure you that our current fleet size is ideal for maintaining our performance. It's not solely about fleet size; it's also about having the right team, personnel, and technical management. There are many aspects that contribute to our ability to outperform, and I can confirm that our fleet size is currently perfect for our continued success.

Climent Molins, Analyst

Makes sense. And this one is a bit more on the modeling side, but you mentioned you were thinking about potentially doing a drydocking in Turkey. Could you talk a bit about the delta between doing that in Turkey versus, say, in China?

Aristidis Alafouzos, CEO

Yes. I mean I think that depending on the type of paint specification you want, you might have an expectation of like $0.25 million to $0.5 million more expensive. But in a strong market, you save way more of that by being able to keep your earnings higher and not repositioning all the way out there and all the way back. Some owners prefer to trade in the East. Historically, as a company, we've always had strong relationships in the West and with the more Western-based oil companies and traders. So we really feel that this is the area that we can outperform. And if we have a ship that goes in the East for dry docking or it gets, a Suezmax gets an option declared out there, we never think, okay, let's trade in the East. We always want to bring her back home into the West. And by dry docking in Turkey, we can avoid the whole positioning out there and repositioning her back. Now I think at times, this can be easier, so let's say now like CPC Korea is $9.5 million in freight to go around the cape. So those are great earnings to position your ship out there. But the CPC volumes that I mentioned during our call aren't always flowing east. Sometimes they only flow into Europe. Now I assume that with Venezuela and all the knock-on effects of the Venezuelan oil and what places what and down the line, perhaps that has something to do with why we see more CPC going east. But it's not something consistent. And then you also have the issue of the backhaul. And before the conflict started, the Suezmaxes would be easy to go through the Suez Canal as well. And that was a way to have a backhaul that it was always at a discount to the front haul, but because you're going through the Suez Canal, it wasn't such a long voyage. Now being forced to go around the cape both ways, it becomes an extremely long voyage. So you kind of lengthen those lower rate economics, which is something that we don't prefer for the next dry dock.

Climent Molins, Analyst

Yes. Makes sense. The opportunity cost is simply too high.

Operator, Operator

There are no further questions at this time. I will now turn the call back to Iraklis for closing remarks.

Iraklis Sbarounis, CFO

Thanks, everyone, for attending this call. We look forward to touching base in May for our first quarter update.

Aristidis Alafouzos, CEO

Bye, everyone.

Operator, Operator

This concludes today's call. Thank you for attending. You may now disconnect.