ITCL - Second Quarter and Six Month Results 2010
Press release from Independent Tankers Corporation Limited 27.08.2010
Highlights
· Independent Tankers reports net income of $1.0 million, equivalent to earnings per share of $0.01 for the second quarter of 2010.
· Independent Tankers reports net income of $7.1 million, equivalent to earnings per share of $0.09 for the six months ended June 30, 2010.
· In June 2010, Chevron Transport Corporation gave binding notice of termination of the bareboat charter for the VLCC Antares Voyager and gave non-binding notice of termination of the bareboat charter for the VLCC Phoenix Voyager.
· In July 2010, BP Shipping Limited extended the bareboat charter for the VLCC British Purpose for one additional year.
· In July 2010, BP Shipping Limited extended the charter for the double hull VLCC British Pride for one year after the fixed period ends in July 2011.
Introduction
Independent Tankers Corporation Limited (the "Company" or "Independent Tankers") was incorporated in Bermuda on January 18, 2008 and the shares have traded on the Norwegian over-the-counter market, since March 7, 2008. Independent Tankers' business is mainly concentrated on the ownership and operation of crude oil tankers on long term bareboat contracts, which include certain cancellation options, to major oil companies. Independent Tankers owns or leases six VLCC's and three Suezmax tankers. All vessels are financed through bonds in the US market and some of the vessels are also subject to financial lease arrangements. The main shareholder is Frontline Ltd. ("Frontline") with an ownership of approximately 83 percent.
Second Quarter and Six Month Results 2010
The Board of Independent Tankers announces net income of $1.0 million, equivalent to earnings per share of $0.01 for the second quarter of 2010. This compares with a net income of $6.1 million, equivalent to earnings per share of $0.08 for the preceding quarter. The decrease is largely due to reduced income of approximately $2.7 million following the sale of the Front Voyager and costs of approximately $2.7 million incurred regarding the early redemption of the related bond debt.
The average daily bareboat rate earned in the second quarter by the Company's VLCCs was approximately $24,500, compared with approximately $24,800 in the preceding quarter.
Net interest expense for the quarter was $4.9 million (preceding quarter: $5.1 million). At June 30, 2010, all of the Company's bond debt of $310.4 million is at fixed interest rates ranging from 6.68% to 8.52%.
For the six months ended June 30, 2010 the Company announces net income of $7.1 million, equivalent to earnings per share of $0.09 (2009 comparable six months $7.1 million, equivalent to earnings per share of $0.09). Net interest expense was $10.0 million (2009 comparable six months: $10.5 million).
In August 2010, the Company has average cash breakeven rates for its VLCCs of approximately $18,500 per vessel per day.
Chartering Summary
In June 2010, Chevron Transport Corporation ("Chevron") gave binding notice of termination for the bareboat charter for the VLCC Antares Voyager and such termination will take effect in December 2010. The vessel will continue on a bareboat rate of $28,500 per day until December 2010. The Company will seek alternative employment for the vessel in accordance with the requirements of the bond indenture.
In June 2010, Chevron gave non-binding notice of termination for the bareboat charter for the VLCC Phoenix Voyager. If Chevron wishes to terminate the bareboat charter, binding notice of the termination has to be given in September 2010 and such termination will take effect in March 2011. The vessel will continue on a bareboat rate of $28,500 per day until March 2011.
In July 2010, BP Shipping Limited ("BP") extended the charters for the VLCCs British Purpose and British Pride for one additional year. As a result, the British Purpose will trade on a market rate with a minimum of $20,000 per day from mid July 2010 until mid July 2012. British Pride will continue on a bareboat rate of $24,895 per day until the fixed period ends in July 2011 followed by a market rate with a minimum of $20,000 per day until the end of July 2012.
Other Matters
On July 15, 2010, the UK tax lease arrangement between Sandringham Shipping Plc and Dresdner Kleinwort Leasing relating to the VLCC British Purpose was terminated and the outstanding lease obligation was settled in full using restricted cash. At June 30, 2010, the lease obligation was $66.2 million and the termination was cash neutral for the Company. The vessel was sold to Sandringham Petro Limited, a previously dormant subsidiary of the Company, which simultaneously entered into a lease with Sandringham Shipping Plc.
In March 2010, a Memorandum of Agreement was signed regarding the sale of the Front Voyager for net proceeds of $8.3 million and delivery to the buyer occurred on April 8. The Company recorded a gain on sale of approximately $0.1 million in the second quarter.
74,825,166 ordinary shares were outstanding as of June 30, 2010, and the weighted average number of shares outstanding for the quarter was also 74,825,166.
The Market
The market rate for a VLCC trading on a standard 'TD3' voyage between The Arabian Gulf and Japan in the second quarter of 2010 was WS 88; equivalent to $54,500/day; representing a decrease of WS 1.5 points or $1,100/day from the first quarter of 2010 and an increase of WS52 points from the second quarter of 2009. Present market indications are approximately $25,000/day in the third quarter.
The market rate for a Suezmax trading on a standard 'TD5' voyage between West Africa ("WAF") and Philadelphia in the second quarter of 2010 was WS 113.5; equivalent to $32,700/day compared to $32,500/day in the first quarter. There was a decrease of WS 0.5 points from the first to the second quarter and an increase of WS 55 points from the second quarter of 2009. Present market indications are approximately $15,000/day in the third quarter
Bunkers at Fujairah averaged approximately $461/mt in the second quarter of 2010 compared to $468/mt in the first quarter of 2010; a decrease of $7/mt. Bunker prices varied from a low of $422.5/mt at the end of May and a high of $500/mt at the end of April. On August 26th, 2010 the quoted bunker price in Fujairah was $435.5/mt.
Philadelphia bunkers averaged $469/mt in the second quarter, which was a decrease of $7/mt from the first quarter of 2010. Bunker prices varied from a low of $416/mt at the end of May and a high of $519/mt at the beginning of May. On August 26th, 2010 the quoted bunker price in Philadelphia was $448.5/mt.
The International Energy Agency's ("IEA") August 2010 report stated an average OPEC oil production, including Iraq, of 29 million barrels per (mb/d) day during the second quarter of the year. This was a decrease of 80,000 barrels per day compared to the first quarter of 2010 and an increase of 500,000 barrels per day compared to the second quarter of 2009.
IEA further estimate that world oil demand averaged 86.6 mb/d in the second quarter of 2010, representing an increase of 510,000 barrels per day compared to the first quarter of 2010, and approximately 2.6 mb/d from the second quarter of 2009. Additionally, the IEA estimates that world oil demand will average 86.6 mb/d in 2010 representing an increase of 2.2 percent or approximately 1.8 mb/d from 2009.
The VLCC fleet totalled 531 vessels at the end of the second quarter of 2010, up from 527 vessels at the end of the previous quarter. 12 VLCCs were delivered during the quarter versus an estimated 18 at the beginning of the year. Throughout 2010 the current estimate is 74 deliveries. The orderbook counted 174 vessels at the end of the second quarter, down from 179 orders from the previous quarter. Seven new orders were placed during the quarter and the current orderbook represents about 35 percent of the VLCC fleet. During the quarter eight vessels were removed from the trading fleet for scrapping or conversion/storage purposes. According to Fearnleys the single hull fleet now stands at 55 vessels.
The Suezmax fleet totalled 406 vessels at the end of the second quarter, up from 401 vessels at the end of the previous quarter. Eight vessels were delivered during the quarter versus an estimated 14 at the beginning of the year. For 2010 the current estimate is 67 deliveries. The orderbook counted 146 vessels at the end of the quarter, up from 127 vessels at the end of the previous quarter. 29 new orders were placed during the quarter and the current orderbook now represents 36 percent of the total fleet. Two orders were reported cancelled and three vessels were removed from the trading fleet during the quarter. According to Fearnleys the single hull fleet now stands at 23 vessels.
Strategy and Outlook
The Company's strategy is mainly concentrated around long term charters to reputable oil companies and for the time being BP and Chevron. The Company's charter coverage for its six double hull VLCCs is 99 percent for the remaining part of 2010 and 53 percent in 2011, if the charters are not extended. The charter coverage for the three double hull Suezmax tankers is 100 percent for the remaining part of 2010 until 2015. The Company expects to reduce net debt for the remaining part of 2010 by approximately $20.0 million. The long term focus is on restructuring the bond debt and UK leasing arrangements within the Company.
Independent Tankers has historically not been influenced by market exposure due to fixed bareboat contracts on all the vessels. As a consequence of the termination of the bareboat charters for the VLCCs British Pioneer and Antares Voyager and the potential termination of charter for the VLCC Phoenix Voyager in September 2010, the Company will be exposed to market fluctuations on these vessels. Based on the termination and extension of charters in 2010, the Company's fleet represents a good combination of floating and fixed charter exposure.
The Company will continue with low cash breakeven rates and financing through the US bond market with maturities from 2015 to 2021. The combination of fixed bareboat charters and floating market rates for the six VLCCs in the years ahead and the fact that all the vessels are financed creates a potentially solid platform for the Company going forward.
Forward Looking Statements
This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including the Company's management's examination of historical operating trends. Although the Company believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, the Company cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.
Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the tanker market as a result of changes in OPEC's petroleum production levels and world wide oil consumption and storage, changes in the Company's operating expenses including bunker prices, drydocking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by the Company with the Norwegian over-the-counter market in Oslo.
The full report is available in the link enclosed.
The Board of Directors
Independent Tankers Corporation Limited
Hamilton, Bermuda
August 26, 2010
Questions should be directed to:
Bengt Neteland: Vice President Finance, Frontline Management AS
+47 23 11 40 37 or +47 924 99 386
WEBSITE: WWW.ITCL.BM
2nd quarter 2010 results