First Person: Evangelos Pistiolis, Chief Executive Officer, Top Ships

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Top Ships Chief Executive Evangelos Pistiolis firmly believes in the notion of timing. Knowing when to exit a market and knowing when to re-emerge with a clean slate and fresh ideas ready to make money.

And when it comes to investing his hard earned and hard raised cash after such a long period of shipping market largesse followed by a further six years of severe downturn, then it is important you know the market conditions you are facing. “I believe in the saying that the longer the party, the longer the hangover. So if it was such a long party how can you expect the downturn to last just six to 12 months. It is impossible so I was surprised to see so many people invest so soon.”

It was such a long party which was why he has been adamant in holding back from re-entering the market after he spectacularly sold 18 of his ships only days before the Lehman Brothers crash in 2008.

“It has been a fairly quiet five years as far as investment is concerned and a fairly active latest 18 months as far as investment is concerned,” he said in an exclusive interview with SMI in his stunning London penthouse. “My last big moves were at the beginning to middle of 2008 in selling 18 or so old ships to Fredriksen and many others. I got rid of most of my big ships. It was the best time in the market. I delivered the vessels on Sept 10th, ten days before Lehman Brothers. It was excellent timing and whatever vessels I kept at that time I chartered out for between seven and 10 years. That move put me in a good position when the crisis started. We had no cash flow issues, didn’t need to raise any money, and didn’t need to dilute any shares. So that was very good for me,” he told SMI.

And his intuition didn’t stop there because in his own words he was convinced in ’09, ‘2010 and 2011 that it was still too early to invest in new tonnage (the hangover was far from over, he said). “We shouldn’t forget that time goes very quickly and we are already in the sixth and seventh year of the crisis. So at the end of ‘12 and beginning of ‘13 I felt that as far as historical deals were concerned, newbuilding prices were at their lowest levels so I started ordering in December 2012. This was the best time because we were at the bottom of the curve and we did some very good product tankers deals with Hyundai.”

Evangelos Pistiolis is looking enthusiastically at expanding the company’s stable of medium-range (MR) products tankers and while acknowledging that a 25 strong fleet could be an ultimate goal, being a boutique operator of at least 10 ships certainly has its benefits.

“My target is to get as quickly as I can into 10 + ships because that is a size where you can be more efficient in deriving economies of scale. But in being too large you can also get dis-economies of scale as well. Life is a matter of balance and bigger is not always better. Learning from my experiences, let’s get above 10 so we can have a good efficient management and then let’s hope we can grow to 25 or 30 ships. I am more focused on keeping my strategy rather than size: operating high-end eco ships rather than anything else.”

With a $250m shelf registration filed this summer, Evangelos Pistiolis is looking for opportunities that will fit in with the company’s new policy of focusing purely on medium-range-one (MR1) and MR2 ‘eco’ tankers.

At the moment, Top has just one ship in the water, the 50,000-dwt EShips Taweelah, delivered in June, with a further five due for delivery from the first quarter of 2015 up to the third quarter of 2016. All the vessels have employment in place. EShips has taken three 50,000-dwt units on a firm two-years basis at $16,000 per day, with one optional year at $17,250. BP has fixed two 39,000-dwt units for a firm three years plus a one-year option starting out at $15,200 per day with a possibility of rising to $16,750 per day. The latest fixture of the final 50,000-dwt vessel was concluded with Norden at $16,800 per day, a rate Mr Pistiolis claims is the highest achieved for an MR tanker in recent years.

“We have added $3m worth of options on the product tankers compared to $500,000 industry average. We have gone there with a plan to create a boutique tanker company which reflects ships from a very good ship yard, ultra high spec, very good counterparties and commercial partners. We have BP onboard and Eships and Norden so we are only looking at triple AAA names with very good charter hire so you can also make good money. If you look at the tankers they look like cruise ships, very high spec. Things that are single are double and things that are double are triple. So having said that, my plan is to continue to only focus on eco products tankers.”

Evangelos Pistiolis is clearly passionate about the eco option. “It was 2011 when I gave an interview about this and I said eco was the future. When Hyundai and Samsung put their signature under these new consumption levels you can make damn sure they will achieve them. So times went by and Scorpio took on the first eco ships and consumption levels were exactly as described but people are still out there talking about eco modification. How exactly are you going to modify the hull of a non-hydrodynamic ship into a hydrodynamic ship? If someone can explain that to me then I am with you.”

According to the Top boss, yes the engine of an eco ship is electronic but the savings are just a tonne or two. The main savings come from the redesign of the hull. “We are looking at the hydrodynamic design of the hull and while hulls before were like blocks pushing the water, now they are like yachts.

“People say they will eco modify existing ships by putting in a Mewis Duct. Well savings from a Mewis Duct is from zero to maybe one tonne of fuel. But I have a 10 tonne difference on my MRs from the six ships I sold to Molaris in ’09 – 31 tonnes/32 t compared to a 23 t/24 t. That is what it is. You can’t bad mouth the eco designs because you don’t have them? It is a proven thing, done and it is out there, I am only focusing on these ships and that is what we are telling our investors.

“The world fleet is young, I don’t disagree with that, but the same thing happened before with the double hulled ships: things move on and the same thing is happening in cars, it is called technology. Should we stop progress because we have a very young fleet? I don’t get it. This is progress of the human race. No one will stop progress in the world,” he asserted.

Timing was again at the forefront of Evangelos Pistiolis’ thinking when it came to investing in the offshore sector, a move he had been looking at for some time. “I thought it is not only about the market but about yourself being in the right position, right timing, not having any other issues or fire fighting to be concerned with. So it is the overall timing which needs to be taken into account.

“I chose the jack-up market for many reasons such as age profile and others who convinced me this was the right segment to go into, which we finally did after long preparation and specification. I still think it was a good move; still do and that is really good because it was a big investment and not an easy decision because it is a high cost entry industry with very few players in it.

“Offshore is a totally different business, totally. The only thing offshore and shipping share is the ocean. The more you get into it the more you have to change your mind set from what you knew to something that is a very different ball game.

“It is not as much a matter of money; it is more thinking about being around for some time, having the operations and the people in what is a very very sensitive market – far more sensitive than tankers. Before I signed for the rigs, I started looking for the right person to bring onboard as a COO and set this business up. I got onboard David Russell, ex-president of Rowan Drilling. I gave him a call in Houston and he came to Athens to see me and we had a meeting to get to know each other to see if we shared the same values, which was the case. He liked my plans and he joined us five months ago. I opened an office in Houston – Central Offshore Drilling – which is the managing company of the drilling venture and we have Central Offshore Drilling Houston which is heading the operation with David. I also employed a very experienced technical guy from Lloyd’s as part of the team.”

Mr Pistiolis is clear that apart from having the right people in place, this is a new drilling company and not an order he is trying to flip in a year. “I am not saying I will never sell because we are all in it to make money but my plan is not to sell but exercise more of my options. My plan is to stay in the market for some time, a very long time. This market is good at the moment. Market is as per our predictions and keeping up well and is even growing. We will be looking to charter these rigs out in 2015 Q2 and Q3.”

When you are investing so much of your own hard earned money in a sector you may not know that well, are there concerns?

“There are concerns, a lot of concerns: Undertaking such a big step which has never been done before in the sense of not being around a high capital-intensive industry means a lot of sleepless nights and worrying days. But with a very well thought out plan and hard work and sticking to your plan and making it happen and believing in it, we will get there. You must make your business happen. I had a plan to get the right people, set up an office, now make rigs which are well monitored. The charterers ask who is monitoring the rigs so when it comes to chartering them out we will say don’t worry these rigs have been heavily monitored.

What about the investors? “I haven’t approached any yet, it is all private money on the offshore side, but the time will come. I am planning for it to be solid and well thought of so when we go to public markets we will have a very good plan to present, good rigs to present and good charters to present; and for sure very good office personnel to present. It may not be the largest but it will be a very high spec drilling company. In offshore without charterers you can’t do shit. No bank, no public money etc it is your money till you get the charters and then you will make money, lots of it. But until then you have to be very patient.”