Okeanis Eco Tankers Corp. (OET) Earnings Call Transcript & Summary

Welcome to OET's Second Quarter 2026 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.

Thank you for taking the time to join our Q2 2026 call. Q2 was the strongest quarter in our history, and the first half of 2026 was also the strongest 6 months period since our inception. Adjusted EPS was $5.91 for the quarter and $8.28 for the first half of the year. Iraklis will take you through the financial results in detail shortly. I want to thank the whole OET team as well as [indiscernible] for amazing work this quarter, which allowed us to achieve these results. During the period, we also completed the delivery of the 4 Suezmax vessels acquired through our 2 equity raises. With Nissos Tigani delivered in May and Nissos Vous in July, our 18-vessel fleet is now fully delivered. The second half of this year has similarly fantastic prospects, and the team here is focused on continuing to deliver. I will now hand over to Iraklis.

Thank you, Aristidis. I'm pleased to go through our second quarter earnings, a quarter that has been a record in our history, starting with Slide 4. We achieved fleet-wide time charter equivalent of about $181,000 per vessel per day. That's $214,000 per day on our spot and $188,000 on operating VLCC days and $175,000 on our Suezmax operating days, all being spot. We report adjusted EBITDA of $252 million, adjusted net profit of $231 million and adjusted EPS of $5.91. Our Board declared the 17th consecutive quarterly dividend of $5.25 per share. This represents almost 90% of our reported and adjusted net income. This is by far the highest quarterly dividend amount since the company's inception and equals the total dividends paid over the previous 5 quarters together. Including this one, over the last 4 quarters, we have distributed $9.55 per share or 90% of our reported net income for the period. Since our last update in May, we have taken delivery of our 2 remaining Suezmax resale acquisitions, the Nissos Tigani and Nissos Vous. Moving on to Slide 5. Since our IPO in Oslo, we have distributed approximately 3.5x our initial market cap with over $780 million paid in dividends. Since we have had a fully delivered fleet in 2022, we have paid out 90% of our reported net income, clearly demonstrating our commitment to distributing value to our shareholders. On Slide 6, we show the detail of our income statement for the quarter and the first half of the year. TCE revenue for the first 6 months stood at over $400 million. EBITDA was $362 million and net income was about $320 million or $8.28 per share. Moving on to Slide 7 and our balance sheet. At quarter end, we had $248 million of cash. That includes about $35 million earmarked for a portion of the equity for the acquisition of Nissos Vous, which was delivered to us a few days later in early July. Our restricted cash figures as of June 30 include an amount of approximately $17 million we have deposited on short term under certain of our loan facilities, which have the feature that reduced the interest paid, providing a better return than what we would have achieved placing those funds under our time deposit rates for that amount at that time. We may roll forward such cash characterized as restricted or a different amount on a short-term basis depending on our cash flow needs and applicable rates. Our balance sheet debt was $722 million, reflecting the drawdown for the acquisition of the Nissos Tigani in May. Our book leverage stands at 35%, while our market adjusted net LTV basis latest broker values and pro forma for the acquisitions and recent transactions and end of quarter cash balance is now below 25%. On Slide 8, looking at our fleet, I'm pleased to now fully reflect the addition of our most recently acquired modern and high-speced vessels. With the delivery of the Nissos Tigani on May 29 and that of the Nissos Vous on July 8, we now have a total of 18 vessels on the water, 8 modern eco scrubber-fitted Suezmaxes, 10 modern eco scrubber-fitted Suezmaxes and 8 modern Eco scrubber-feed VLCCs with an average age of only 5.6 years. As a reminder, from a CapEx perspective, our only dry dock for 2026 is out of the Milos 10-year survey, which is currently expected to take place in the next couple of months. Slide 9, moving on to our capital structure. With all the financings I updated you on in May now effective, the financing for the delivery of the Tigani and Vous and the refinancing of our legacy leases of the Nissos Rhenia and Nissos Despotiko, we have now reduced our weighted average margin to 1.47%. That's an improvement of over 200 basis points since we commenced our refinancing exercise in 2023. On Slide 10, with a little over half a year past since the delivery of the first 2 Suezmax resale vessels, the Nissos Piperi and Nissos Serifopoula, we wanted to take the opportunity and reflect on those transactions. We look at this from a value creation perspective, and we see 3 pillars that contribute. The first, we have talked about before. We financed the acquisitions with competitive bank debt on one hand and highly accretive equity on the other, having done an equity placement at approximately 30% above our NAV at the time. That implied a benefit or arbitrage in a way against the acquisition cost of the vessels of approximately $12 million in this vessel or $24 million on aggregate. The second pillar and maybe the most important, the vessels in approximately 7 months are estimated to have generated a combined free cash flow of about $43 million. This is realized one-for-one derisking of the investment. Out of approximately $104 million in equity invested in these 2 vessels, $52 million each, we have already got back 41% of that by trading them in this market, $25 million on the Piperi and $18 million on the Serifopoula. The third, yes, unrealized, but with a direct impact in our NAV and subsequently our stock price and indicative of the opportune timing of these transactions. We bought those vessels at $97 million each, while latest asset value estimates marked them at over $120 million each. That's over 25% uplift on an enterprise value basis and over 50% uplift against our rate, all that in a little over half a year. Adding these 3 elements for both vessels gets to $121 million of value creation just from the Nissos Piperi and Nissos Serifopoula. I'm very eager to update this slide in a couple of quarters when the Nissos Tigani and Nissos Vous will also have traded for a few months to reflect on the overall transaction across all 4 vessels. I will now turn it to Aristidis for the commercial market update.

Thank you, Iraklis. Slide 12 shows the commercial performance that drove the record financial results we have just discussed. Fleet-wide TCE for the quarter was $181,200 per day. Our spot VLCCs earned $213,600 per day, while our Suezmaxes earned $174,900 per day. Including the Nissos Nikouria time charter at $90,000 per day and the Greek compensation earned by Nissos Keros while waiting to resume her voyage to the Hormuz, total VLCC earnings were $187,700 per day with fleet utilization at 99%. This quarter was, to a large extent, the realization of commercial decisions made during the first quarter. On the VLCC side, we secured long-haul voyages into the East at premium levels during the strongest part of the market in the frenzy right after the war began. Three vessels were employed on long-haul Eastern voyages, while repeating trading patterns and limited ballast legs allowed us to convert exceptional headline rates into exceptional realized earnings. We also were able to capitalize on the Saudi diversion of crude exports to Yambu and the ensuing market spike that caused. The Suezmax market was also extremely active. Oil traders were competing for cargoes in the Atlantic Basin, which allowed us to maintain very limited waiting time and execute consecutive voyages across the Mediterranean and other preferred Western trading areas. The shorter voyage duration of the Suezmax fleet gave us repeated exposure to a rapidly strengthening market and enabled us to compound the benefit of the rate environment. We also took delivery of Nissos Tigani during the quarter and repositioned her quickly to participate in the strong Eastern market. Nissos Piperi and Nissos Serifopoula contributed for the full quarter, demonstrating, as Iraklis went over on the previous slide, how quickly the vessels acquired through our first equity raise were integrated into our operating platform. It is important to emphasize that this was not the result of one fortunate fixture. It was a cumulative effect of positioning, voice selection, triangulation, minimizing ballast time and maintaining vessel availability. The rates were extraordinary, but operational execution is what converted those rates into earnings. So as previously, we need to thank our technical manager, Kyklades, who have allowed us to operate so well in these challenging times. Turning to our Q3 guidance. The numbers remain exceptionally strong. We have fixed 48% of our VLCC spot days at approximately $207,000 per day and $42,000 of our Suezmax spot rates at $133,000 per day. Across the fleet, the fixed spot portion stands at $166,500 per day on 681 days. We also have 92 time charter days at $90,000 per day, while approximately 52% of total fleet days remain open. For a quarter that is normally softer, these are remarkable levels. They also demonstrate that Q2 is not simply an isolated earnings event. The market has remained highly volatile, and the volatility has continued to create attractive commercial opportunities for our fleet. On the VLCCs, discharge positions developed in the East at a time when available AG capacity remained constrained. We were able to secure AG employment for 2 vessels at premium to prevailing market conditions. We continue to balance the attraction of locking in long-haul earnings against the value of retaining prompt exposure to a market that can move very quickly. On the Suezmaxes, we have maintained a broad Western presence across the Black Sea, Mediterranean and West Africa. This gives us access to several trading markets and allows us to pursue triangulation opportunities while reducing ballast and waiting time. The Milos is also scheduled to undergo dry dock around the end of September, beginning of October, depending on the exact timing of our trading program and yard availability. Finally, we also took delivery of Nissos Vous on July 8, the final vessel in our series of 4 Suezmax acquisitions. We, therefore, entered Q3 with the entire 18 vessel fleet on the water and contributing earning days. There is a meaningful portion of the quarter to fix, which is both an opportunity and a risk for us. We cannot predict every market move. Our aim is to preserve optionality, remain disciplined and position the fleet so they can -- we can quickly respond as cargo flows and vessel availability change. As said before, the tanker market was exceptionally strong in Q2 and was available to all owners. Based on the peers that have reported so far, our spot earnings were approximately 50% above the peer average on the VLCCs and approximately 60% above the peer average on the Suezmaxes. I look forward to seeing how this adjusts over the next reporting period. In a market at these levels, commercial outperformance becomes very meaningful in absolute dollar terms. A relatively modest daily difference multiplied across our spot days and the size of our fleet translates directly into substantial incremental cash flow and earnings per share. This quarter reinforces the point we have made consistently since 2019. The value of OET lies not only in our exposure to the crude cycle, but also in the combination of our fleet and a highly skilled operating platform positioned to capitalize on market opportunities. Slide 15 addresses the order book, which is clearly one of the principal questions facing the tanker market today. We should not ignore it. The VLCC order book has reached approximately 32% of the existing fleet, while the Suezmax order book is approximately 30%. Those are high headline numbers, and they represent a genuine medium-term supply consideration. However, the timing and composition of the order book matter. Only a small portion is scheduled to deliver in '26. The largest delivery years are concentrated in '28 and '29. The immediate supply response is, therefore, much more limited than the headline order book percentages imply. At the same time, the existing fleet continues to age, as we mentioned every quarter. Age alone, though, does not force a vessel to leave the market, but it increasingly affects charter acceptance, maintenance requirements, financing, regulatory compliance and vessel trading efficiency. A substantial portion of the older fleet is operating in sanctioned or less transparent trades and is not interchangeable with a complete compliant fleet competing for mainstream cargoes. Our conclusion is not that the order book is irrelevant. It is that a near-term effect is tempered by the delivery schedule and by the aging and fragmentation of the existing fleet. For OET, the key point is that our fleet is now fully delivered, has an average age of approximately 5.5 years and is designed to remain highly competitive across a range of market environments. The final commercial slide brings together the geopolitical and fundamental forces currently shaping the market. We are seeing simultaneous pressures across the 3 of the world's most important energy arteries, the Hormuz, the Red Sea and the Black Sea. The combination is unprecedented in the modern tanker market. The situation remains fluid and conditions can change very quickly. Hormuz transits were recovering under the June memorandum of understanding, but the recovery remains fragile and highly sensitive because of the renewed escalation and have reduced since June. In the Black Sea, attacks on tankers and export infrastructure continues to disrupt loadings and create inefficiencies. In the Red Sea, the threat of renewed attacks is pushing more traffic away from the Red Sea and around the Cape of Good Hope, adding distance and further inefficiency to global trade. For example, a VLCC voyage could be double the duration than it was if it was exiting from the BEMS trades. The oil balance is also important. The IEA currently expects 2026 supply to decline by approximately 3.7 million barrels per day compared with a demand decline of approximately 1 million barrels per day. In other words, supply has fallen almost 4x faster than demand. Since the onset of the conflict, inventories have drawn by approximately 3.8 million barrels per day on average. For tankers, the key dynamic has been volumes down, but distance is up. Atlantic to Asia trades now represent approximately 35% of VLCC liftings compared with only around 22% before the conflict. A voyage from the U.S. Gulf to China is approximately 2.6x the distance of the Arabian Gulf to China, with only around 7.4 million barrels per day of pipeline rerouting capacity available, a meaningful portion of the Middle East exports shortfall can only be replaced by long-haul barrels. Looking further ahead, the expected normalization of Gulf output and increase in OPEC+ production during the 2027 period should allow inventories to be rebuilt. The estimates reflected on this page are approximately 1.8 million barrels per day of crude supply would be required over roughly half a year -- 1.5 years to rebuild stocks. That inventory build translates directly into tanker demand. So the shape of the opportunity may change, but the underlying message remains supportive. Current disruption creates inefficiencies in longer ton miles, while eventual normalization creates a substantial restocking need. Our focus at OET is to position our fleet to respond across a range of outcomes and to try to maximize shareholder returns. To conclude, and as I said at the beginning, this was the strongest quarter and strongest first half of our history. We have returned a record amount to our shareholders, completed the delivery of our expanded fleet and entered the second half with substantial earnings visibility and flexibility. I hope by the end of the year, we can have returned over $1 billion to shareholders since our inception in 2018. I will now hand it back to the moderator for Q&A.

[Operator Instructions] Your first question comes from the line of Even Kolsgaard with Clarksons Securities AS.

So my first question is on the market in general. So last quarter, you had quite a good analysis on what would happen in different scenarios when it comes to the closure of Strait of Hormuz. And it's basically closed again, I was just wondering how you think about how a reopening of the Strait of Hormuz could look like this time? And if you think there will be any differences compared to last time? And with that in mind, how do you position your fleet today for a potential reopening?

Thank you for your question. Well, I think that we had a pretty good example of how the reopening would work from the previous time in June. I think one difference that we'll see is that in June, some of the more independent oil companies went to lift cargoes for this traditional AG to Far East type run which is difficult because of the open and shut nature of the Hormuz and the dangers and risk for crossing it. So I think what we'll likely see when it reopens -- if it reopens again is that we'll continue to see the more national oil companies and larger oil traders use shuttling services to shuttle crude from inside the AG to right outside of Fujairah. And then the normal mainstream fleet can go and lift cargoes from the ships in Fujairah. And I think the current market is a lot like the middle example we gave in our last quarter where the Hormuz has some oil coming out. I mean there's definitely oil exiting the Kuwaitis, the Iraqis, the Qataris and the Emiratis principally are moving oil and shuttling it out. The Saudis also have found this export path through Yambu. So it's definitely not as closed as it was at the beginning of the war. So there is significant oil being exported, but it's inefficient because of the shuttling. The Saudis crude being exported is even more inefficient than it was because instead of going to Yambu and out of the Red Sea, it has to be shuttled up to Egypt and into the pipeline and through the Suez and then all the way around Africa. And that's why we see continued strong demand for Atlantic crudes on the VLCCs, which is why that portion of VLCC liftings is so much higher than it was before the war started. So all these together are creating excellent ton-mile effects for the Vs.

And then just more on the strategy. So we are seeing that other owners are taking on more time charter coverage and some are also selling more modern tonnage, while you have been largely spot exposed until now and basically 100% spot and it's risk on still. So how do you think about the spot market going forward versus the current time charter rates? And how do you compare that towards the current asset values?

Look, I think we fixed the time charter rate at $90,000 in February. And it was a huge mistake. I mean, we probably -- we've earned just as much on that one ship in less than 6 months -- on one of our spot ships in less than 6 months, and we will have earned on her in a whole year. And I think that goes for every single other VLCC owner who's mistakenly fixed their ships on TCEs because the earnings are so high now that even if you do a 1- or 2- or 3-year time charter, when you're earning $200,000 a day or $150,000 a day for 3 quarters, it just -- what you need to earn for the balance period becomes 0 or negative potentially. So I think that from our perspective for OET, there's no interest at the moment to fix any more time charters. We're very happy with the coverage we have in the short term on the VLCC -- sorry, we're very happy with the spot exposure we have on the VLCC fleet. In terms of asset sales, we're lucky because some of the companies that we haven't seen selling ships are also renewing their fleet. So they're selling some of the older ships and they have newer ships coming in or other companies that have been selling VLCCs, their core fleet composition isn't tankers or they might be funding other sectors that they have on the order book. So I think many owners are doing TCEs and the sales are case by case and depends on each company. But for us, we see a lot of continued upside to this market, and we don't want to reduce our exposure in terms of the number of vessels or number of spot trading vessels.

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

Can we talk about the Atlantic Basin? And I know you touched on normalization, and I'm sure that's -- we're not sure when that's going to happen. But there are a couple of things. With increased production out of the Atlantic Basin and the lifting of sanctions in Venezuela, do you see longer-term lift for Suezmax rates?

Liam, thank you for your question. Look, the Suezmax is a very versatile asset. So anything that will be traded in the shorter haul will be optimized on to Suezmax. So for sure, a lot of Venezuelan flows will move on Suezmaxes. The same is West Africa, Black Sea, Guyana and U.S. Gulf when the cargoes are staying shorter haul. But if the cargoes are -- and the arbs, fuel, the crude oil arbs make sense for the cargo to be transported long distance, you'll see that these cargoes make much more economic sense on VLCCs. So for sure that the lifting of sanctions has been very positive on the Suezmax market in Venezuela as well as the increased production from Guyana as well as the SPR as well as a factor of other -- a number of other factors. But yes, I think that definitely the Suezmax is buoyed by Venezuelan exports.

Great. Aristidis, 90% dividend payout. You've opportunistically reinvested in the fleet, and that's seeing the benefit in terms of asset appreciation. Does it stay the course on the capital structure? Or do you see opportunity to pay down debt faster? Or are you just going to amortize it in a normal -- as it matures?

No, absolutely, we stay the course. we will continue with our strategy to distribute as much as possible. No intention to accelerate paying down debt. We feel pretty comfortable with where we are. It has amortized naturally over quarter-on-quarter. And we think that our leverage position is actually a competitive advantage that we have into such a positive market to be able to crystallize that value to our shareholders. So yes, we stay the course.

Your next question comes from the line of Oliver Dunvold with ABG Sundal Collier.