ITCL - Third Quarter and Nine Months 2012 Results
Press release from Independent Tankers Corporation Limited 29.11.2012
Highlights
· Independent Tankers reports a net loss of $1.4 million, equivalent to a loss per share of $0.02, for the third quarter of 2012.
· Independent Tankers reports a net loss of $4.7 million, equivalent to a loss per share of $0.06, for the nine months ended September 30, 2012.
· In September 2012, Chevron Transport Corporation gave six months irrevocable notice of termination of the bareboat charter for the VLCC Phoenix Voyager.
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 to major oil companies and two vessels operating in the spot market. Independent Tankers owns six VLCC's and three Suezmax tankers. All vessels are financed through bonds in the US market. The main shareholder is Frontline Ltd. ("Frontline") with an ownership of approximately 83 percent.
Third Quarter and Nine Months 2012 Results
The Board of Independent Tankers announces a net loss of $1.4 million, equivalent to a loss per share of $0.02, for the third quarter of 2012. This compares with a net loss of $0.4 million, equivalent to a loss per share of $0.006, for the preceding quarter. The increase in the loss is primarily due to a decrease in the earnings from the two vessels operating in the spot market. The average daily time charter equivalent rate earned in the third quarter by the two VLCCs trading in the spot market was $11,200 compared with $23,200 in the preceding quarter. The average daily bareboat rate earned in the third quarter by the Company's VLCCs was $22,100, which was the same as the preceding quarter.
The Board of Independent Tankers announces a net loss of $4.7 million, equivalent to a loss per share of $0.06, for the nine months ended September 30, 2012. This compares with net income of $5.8 million, equivalent to earnings per share of $0.08 for the nine months ended September 30, 2011. The decrease is primarily due to the absence of a gain of $8.8 million in the Golden State group, which was recognized in the first quarter of 2011 on the termination of a funding agreement and a $1.3 million reduction in the earnings from the two vessels operating in the spot market. The average daily time charter equivalent rate earned in the nine months ended September 30, 2012 by the two VLCCs trading in the spot market was $13,400 compared with $14,200 in the nine months ended September 30, 2011. The average daily bareboat rate earned in the nine months ended September 30, 2012 by the Company's VLCCs was $22,100 compared with $23,100 in the nine months ended September 30, 2011.
In November 2012, the Company has average total cash cost breakeven rates for the remaining part of 2012 for its two spot traded VLCCs of $30,000 per day and $21,250 per day for the four VLCC bareboat vessels.
Chartering Summary
In June 2012, Chevron Transport Corporation ("Chevron") gave nine months non-binding notice of termination for the bareboat charter for the VLCC Phoenix Voyager. Six months binding notice of termination was given by Chevron in September 2012 and the termination will take effect in March 2013. The vessel currently earns a bareboat rate of $28,500 per day.
In July 2012, BP Shipping Ltd ("BP") extended the bareboat charters for the VLCCs British Purpose and British Pride for one additional year. British Purpose will trade on a market rate with a minimum rate of $20,000 per day until July 14, 2014. British Pride will trade on a market rate with a minimum rate of $20,000 per day until July 30, 2014.
Other Matters
74,825,166 ordinary shares were outstanding as of September 30, 2012, and the weighted average number of shares outstanding for the first 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 third quarter of 2012 was WS 36, representing a decrease of approximately WS 19 points from the second quarter of 2012 and a decrease of approximately WS 22 points from the third quarter of 2011. Present market indications are approximately $11,500 per day in the fourth quarter of 2012.
Bunkers at Fujairah averaged $650/mt in the third quarter of 2012 compared to $662/mt in the second quarter of 2012. Bunker prices varied between a low of $590/mt on July 2 and a high of $697/mt on September 4.
The International Energy Agency's ("IEA") November 2012 report stated an OPEC oil production, including Iraq, of 31.4 million barrels per day (mb/d) in the third quarter. This was unchanged compared to the second quarter of 2012.
The IEA estimates that world oil demand averaged 90.1 mb/d in the third quarter of 2012, which is an increase of 1.3 mb/d compared to previous quarter and the IEA estimates that world oil demand will average approximately 89.7 mb/d in 2012, representing an increase of 0.9 percent or 0.8 mb/d from 2011. 2013 demand is expected to be 90.5 mb/d.
The VLCC fleet totalled 617 vessels at the end of the third quarter of 2012, up from 610 vessels at the end of the previous quarter. Ten VLCCs were delivered during the quarter, three were removed. The order book counted 91 vessels at the end of the third quarter, down from 95 orders from the previous quarter. The current order book represents approximately 15 percent of the VLCC fleet. According to Fearnley's, the single hull fleet is 22 vessels, one less than last quarter.
Strategy and Outlook
The Company's strategy is mainly concentrated on chartering out vessels on long term charters to reputable oil companies, for the time being BP and Chevron. The Company's charter coverage for its six double hull VLCCs is 67 percent for 2012, 53 percent in 2013 and 20 percent in 2014 if the charters are not extended further. The charter coverage for the three double hull Suezmax tankers is 100 percent until 2015.
Following the termination of the bareboat charters for the VLCCs Ulriken and Pioneer in 2010 and 2011, respectively, these vessels are trading in the spot market and are exposed to earnings fluctuations.
The Company's assets are financed through the US bond market with maturities from 2015 to 2021. The fixed minimum bareboat rates of $20,000 per day for three of the VLCCs and the fixed bareboat contract for Phoenix Voyager supports the debt of these vessels until the charters expire in 2013 and 2014 (or potentially longer if contracts are extended). However, with current earnings being around operating expense levels for the two spot trading vessels Ulriken and Pioneer, the Company will have to draw on the restricted cash reserves to operate these vessels. Continued operation in the spot market for Ulriken and Pioneer at rates that do not support the debt of the vessels increases the risk of the Company and might have a negative influence on the Company's future profit and credit profile.
The broker valuations received for the vessels at September 30, 2012 indicate that the market values of the Windsor vessels are lower than the net debt relating to the vessels. The two VLCCs in the Golden State bond structure had combined estimated market values slightly higher than the net debt of the vessels. Whether the estimated market values can be achieved through actual transactions is highly uncertain due to the lack of liquidity in the secondhand sale and purchase market for VLCCs.
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 for download in the link enclosed.
The Board of Directors
Independent Tankers Corporation Limited
Hamilton, Bermuda
November 28, 2012
Questions should be directed to:
Magnus Vaaler: Vice President Finance, Frontline Management AS
+47 23 11 40 21
WEBSITE: WWW.ITCL.BM
3rd quarter 2012 results