ITCL - Third Quarter 2009 Results

 

Independent Tankers reports net income of $4.3 million, equivalent to earnings per share of $0.06, for the third quarter of 2009.

Independent Tankers reports net income of $11.4 million, equivalent to earnings per share of $0.15, for the nine months ended September 30, 2009.

The UK tax lease for the VLCC British Progress will be terminated in the first quarter of 2010.

 

 

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 in six VLCCs and four 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.

 

 

 

The Board of Independent Tankers announces net income of $4.3 million, equivalent to earnings per share of $0.06, for the third quarter of 2009. This compares with net income of $3.2 million, equivalent to earnings per share of $0.04, for the second quarter of 2009. The main reasons for this increase are a reduction in depreciation expense of $0.5 million following the upward revision of the estimated residual values of the six VLCCs and foreign exchange movements.

 

The average daily bareboat rates earned in the third quarter by the Company's VLCCs and the Suezmax tanker Front Voyager were approximately $25,100 and $7,800, respectively, compared with approximately $25,400 and $7,900, respectively, in the preceding quarter.  The decrease is explained by fluctuations in days between the quarters.

 

Net interest expense was $5.5 million (second quarter 2009: $5.3 million). At September 30, 2009, all of the Company's bond debt of $325.8 million is at fixed interest rates ranging from 6.68% to 8.52%.

 

The Company has reclassified some of its restricted cash balances to long-term. These balances relate to the restricted cash that are segregated for the settlement of long-term lease obligations. The amount reclassified as of September 30, 2008 to conform to the current year presentation was $226.9 million.

 

For the nine months ended September 30, 2009 the Company announces net income of $11.4 million, equivalent to earnings per share of $0.15 (2008 comparable nine months $10.0 million, equivalent to earnings per share of $0.13). Net interest expense was $16.0 million (2008 comparable nine months: $16.7 million).

 

In November 2009, the Company has an average cash breakeven rate for its VLCCs and Suezmax tanker of approximately $19,100 and $4,200 per vessel per day, respectively.

 

 

 

The VLCC British Pioneer is currently on a market related charter to BP Shipping Limited ("BP") under which the Company's ship owning subsidiary receives the greater of $20,000 per day or a spot market rate. The market related rate, while calculated quarterly, is cumulative on a four year basis or shorter if BP terminates the charter earlier. The Company has not accrued any market related hire as of September 30, 2009.

 

 

 

In September 2009, Dresdner Kleinwort Leasing gave notice of termination for the UK tax lease for the VLCC British Progress. The leasing agreement will be terminated effective January 15, 2010. At September 30, 2009 the obligation under the lease was $69.9 million and the termination will be cash neutral for the Company. The Company will acquire the vessel concurrent with the lease termination and the existing bareboat to BP will remain in place.

 

74,825,166 ordinary shares were outstanding as of September 30, 2009, and the weighted average number of shares outstanding for the quarter was also 74,825,166.

 

 

 

The average market rate for VLCCs from MEG to Japan in the third quarter of 2009 was approximately WS 36 or $15,600/day. The second quarter returned $20,600/day at the same WS rate, albeit with an $80/mt lower fuel price. The average rate for Suezmaxes from WAF to USAC in the third quarter of 2009 was approximately WS 52.5 or $13,700 per day compared to approximately WS 59 or $20,000 per day in the second quarter of 2009.

 

Bunkers at Fujairah averaged approximately $426/mt in the third quarter compared to $345/mt in the second quarter of 2009, with a high of $459/mt at the end of August and a low of $378/mt in the middle of July. On November 25, 2009 the quoted bunkers price in Fujairah was $460/mt.

 

The International Energy Agency ("IEA") reported in November 2009 an average OPEC oil production, including Iraq, of 28.8 million barrels per day during the third quarter of the year - an increase of 320.000 barrels per day compared to the second quarter of 2009. At the last OPEC conference on September 10 it was agreed to keep the current production levels unchanged. The next OPEC meeting is scheduled to take place on December 22, 2009.

 

IEA further estimates that world oil demand averaged 85.1 million barrels per day in the third quarter of 2009, an increase of approximately 0.9 million barrels per day compared to the second quarter of the year. IEA predicts that the average demand for 2009 in total will be 84.8 million barrels per day, a 1.7 percent decline from 2008. Additionally, the IEA estimates that the demand will increase by 1.7 percent in 2010 to 86.2 million barrels per day.

 

The VLCC fleet totalled 524 vessels at the end of the third quarter with nine deliveries during the quarter. Throughout 2009 it is estimated that 61 deliveries will take place including 48 made so far. The orderbook counted 188 vessels at the end of the third quarter, down from 197 vessels after the second quarter of 2009. A new order for 12 VLCCs was reported during the quarter, however this is not yet confirmed. The current orderbook represents approximately 35 percent of the VLCC fleet. During the quarter, there were two deletions from the trading fleet with five being sold for demolition and six for conversion purposes. According to Fearnleys, the single hull fleet now stands at 89 vessels.

 

The Suezmax fleet totalled 381 vessels at the end of the quarter, with 11 deliveries taking place during the quarter. Throughout 2009 it is estimated that 57 deliveries will take place including 38 made so far.  The orderbook counted 127 vessels at the end of the quarter, down from 138 vessels at the end of the second quarter and now represents 32 percent of the total fleet. During the quarter, there were two deletions from the trading fleet. According to Fearnleys, the single hull fleet stands at 33 vessels at the end of the quarter.

 

 

 

The Company's strategy is mainly concentrated around long term charters to reputable companies and for the time being BP, Chevron and Frontline. The Company's charter coverage for its six double hull VLCCs is 100 percent for the rest of 2009, 99 percent in 2010 and 24 percent in 2011, if the charterers are not extended. For the one single hull and three double hull Suezmax tankers, the charter coverage is 100 percent for the rest of 2009 and 81 percent in 2010. We are slowly building up our cash position at a comfortable pace from the Company's long term charters.  The long term focus is on restructuring the bond debt and UK leasing arrangements within the Company. 

 

The Company has low cash breakeven rates and the vessels are financed through the US bond market with maturity 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 solid platform for the Company going forward.

 

 

 

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

November 26, 2009

 

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