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ITCL - First Quarter 2013 Results

Press release from Independent Tankers Corporation Limited 06.06.2013


Highlights

  • Independent Tankers reports a net loss of $1.8 million, equivalent to a loss per share of $0.02 for the first quarter of 2013.
  • In January 2013, BP Shipping gave twelve months notice of its intention to terminate the bareboat charter for the VLCC British Progress.
  • In March 2013, the VLCC Phoenix Voyager was redelivered to the Company by Chevron.

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 U.S. market. The main shareholder is Frontline Ltd. with an ownership of approximately 83 percent.

First Quarter 2013 Results

The Board of Independent Tankers announces a net loss of $1.8 million, equivalent to a loss per share of $0.02 for the first quarter of 2013 compared to a net loss of $1.9 million, equivalent to a loss per share of $0.02 for the fourth quarter of 2012. The average daily time charter equivalent rate earned in the first quarter by the Company's VLCCs trading in the spot market was $13,600 compared with $9,800 in the preceding quarter. The average daily bareboat rate earned in the first quarter by the Company's VLCCs was $22,100, which was the same as the preceding quarter.
In May 2013, the average total cash cost breakeven rates for the remaining part of 2013 is approximately $30,600 per day for the three spot trading VLCCs and $21,300 per day for the three vessels on bareboat charters.

Chartering Summary

In January 2013, BP Shipping gave twelve months notice of its intention to terminate the bareboat charter for the VLCC British Progress. Termination will take effect on February 2, 2014.

In March 2013, the VLCC Phoenix Voyager was redelivered to the Company by Chevron. The vessel was renamed Ulysses and commenced trading in the spot market.

Other Matters

In January 2013, the Company sold $6.8 million of the Windsor Notes for proceeds of $4.5 million. In April 2013, the Company sold $1.7 million of the Windsor Notes for proceeds of $1.0 million and in May 2013, the Company sold $8.5 million for proceeds of $5.2 million. The proceeds from the sales were used to partially repay the loan from Frontline Ltd. The difference between the value of the bonds sold and the sale proceeds is recorded as a discount on issuance of debt in the balance sheet and will be amortized over the term of the notes.

74,825,166 ordinary shares were outstanding as of March 31, 2013, 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 first quarter of 2013 was WS 35, representing a decrease of approximately WS 7.8 point from the fourth quarter of 2012 and a decrease of approximately WS 21 points from the first quarter of 2012. The flat rate increased by 9.1% from 2012 to 2013.

Bunkers at Fujairah averaged $633/mt in the first quarter of 2013 compared to $615/mt in the fourth quarter of 2012. Bunker prices varied between a low of $606/mt on January 2 and a high of $663/mt on February 18.

The International Energy Agency's ("IEA") May 2013 report stated an OPEC oil production, including Iraq, of 30.5 million barrels per day (mb/d) in the first quarter of 2013. This was a decrease of 0.4 mb/d compared to the fourth quarter of 2012.

The IEA estimates that world oil demand averaged 89.8 mb/d in the first quarter of 2013, which is a decrease of 1.2 mb/d compared to the previous quarter. IEA estimates that world oil demand in 2013 will be 90.6 mb/d, representing an increase of 0.9 percent or 0.8 mb/d from 2012. 

The VLCC fleet totalled 634 vessels at the end of the first quarter of 2013, up from 622 vessels at the end of the previous quarter. 14 VLCCs were delivered during the quarter, two were removed. The order book counted 81 vessels at the end of the first quarter, unchanged from the previous quarter. The current order book represents approximately 13 percent of the VLCC fleet. According to Fearnleys, the single hull fleet is 15 vessels, two 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 53 percent in 2013 and 20 percent in 2014 if the current 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, Pioneer and Ulysses (ex. Phoenix Voyager) in 2010, 2011 and 2013 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 Windsor Petroleum VLCCs supports the debt of these vessels until the charters expire in 2014 (or potentially longer if contracts are extended). However, with current earnings being around operating expense levels for the spot trading vessels, the Company will have to draw on the restricted cash reserves to operate these vessels. Continued operation in the spot market at rates that do not support the debt of the vessels increases the risk of the Company and will have a negative influence on the Company's future earnings and credit profile if the low spot rates continue, in addition to increasing the net debt of the Company.

The broker valuations received for the vessels at March 31, 2013 indicate that the market values of the Windsor vessels are lower than the net debt of the vessels. The two VLCCs in the Golden State bond structure had combined estimated market values in line with 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. The Company has not given any financial guarantees for any of its subsidiaries.

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 Board of Directors
Independent Tankers Corporation Limited
Hamilton, Bermuda
June 6, 2013

Questions should be directed to:
Magnus Vaaler: Vice President Finance, Frontline Management AS
+47 23 11 40 00

1st quarter 2013 results

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