ITCL - Preliminary Fourth Quarter and Financial Year 2010 Results
Press release from Independent Tankers Corporation Limited 22.02.2011
Highlights
· Independent Tankers reports net income of $5.5 million, equivalent to earnings per share of $0.07, for the fourth quarter of 2010.
· Independent Tankers reports net income of $15.5 million, equivalent to earnings per share of $0.20, for the twelve months ended December 31, 2010.
· The bareboat charter with Chevron Transport Corporation for the VLCC Antares Voyager terminated on December 8, 2010 at which time the vessel was redelivered to the Company.
· The bareboat charter with BP Shipping Limited for the VLCC Pioneer terminated on January 10, 2011 at which time the vessel was redelivered to the Company.
· In February 2011, BP Shipping Limited extended the charter for the VLCC British Progress for one additional year.
· Independent Tankers recognizes a gain of $3.6 million in the fourth quarter on the termination of a Windsor funding agreement.
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 one vessel is also subject to financial lease arrangements. The main shareholder is Frontline Ltd. ("Frontline") with an ownership of approximately 83 percent.
Preliminary Fourth Quarter and Financial Year 2010 Results
The Board of Independent Tankers announces net income of $5.5 million, equivalent to earnings per share of $0.07, for the fourth quarter of 2010. This compares with net income of $2.8 million, equivalent to earnings per share of $0.04, for the preceding quarter. The increase is primarily due to a gain of $3.6 million in the Windsor group on the termination of a funding agreement, which was partially offset by a $0.9 million decrease in revenues. The fall in revenues is mainly due to the lack of income from Antares Voyager after the termination of the bareboat charter for the vessel, following its redelivery on December 8, 2010.
The average daily bareboat rate earned in the fourth quarter by the Company's VLCCs was approximately $23,600 compared with approximately $24,200 in the preceding quarter.
Net interest expense for the quarter was $4.9 million (preceding quarter: $5.1 million). At December 31, 2010, all of the Company's bond debt of $303.3 million is at fixed interest rates ranging from 7.84% to 8.52%.
For the twelve months ended December 31, 2010 the Company announces net income of $15.5 million, equivalent to earnings per share of $0.20 (2009 comparable twelve months $15.8 million, equivalent to earnings per share of $0.21). Net interest expense was $20.0 million (2009 comparable twelve months: $21.1 million).
In February 2011, the Company has an average cash breakeven rate for its VLCCs of approximately $23,600 per vessel per day.
Chartering Summary
The bareboat charter with Chevron Transport Corporation for the VLCC Antares Voyager terminated on December 8, 2010 at which time the vessel was redelivered to the Company. The Company will seek alternative employment for the vessel in accordance with the requirements of the bond indenture. The vessel is presently trading in the spot market.
The bareboat charter with BP Shipping Limited ("BP") for the VLCC Pioneer (previously British Pioneer) terminated on January 10, 2011 at which time the vessel was redelivered to the Company. The Company will seek alternative employment for the vessel in accordance with the requirements of the bond indenture. The vessel is presently trading in the spot market.
In February 2011, BP extended the charter for the VLCC British Progress for one additional year. As a result, the vessel will trade on a market rate with a minimum of $20,000 per day from February 2, 2011 until February 2, 2013.
Other Matters
On December 8, 2010 Golden State Petroleum Transport Corporation, acting on behalf of Golden State Petro (IOM I-A) PLC, the owner of the double hull VLCC Antares Voyager (1998), re-launched a consent solicitation in order to amend the indenture relating to its 8.04% First Preferred Mortgage Notes due 2019. The purpose of the consent solicitation was, among other things, (a) to seek approval for the proposed sale of the Antares Voyager, one of the VLCCs that serves as part of the collateral for the Notes, (b) to provide for the Antares Voyager's release as collateral under the related collateral agreements and (c) to amend and clarify certain other provisions in the Indenture and management agreements. The consent solicitation also sought approval for the sale in 2013, if necessary, of the Phoenix Voyager (1999), the other VLCC that serves as part of the collateral for the Notes. The consent solicitation was successful and all of the suggested amendments in the consent solicitation were approved.
74,825,166 ordinary shares were outstanding as of December 31, 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 fourth quarter of 2010 was WS 58; equivalent to $15,600/day; representing an increase of approximately WS 6 points or $2,400/day from the third quarter of 2010 and an increase of WS 10 points from the fourth quarter of 2009. Present market indications are approximately $22,000/day for the first quarter of 2011.
The market rate for a Suezmax trading on a standard 'TD5' voyage between West Africa and Philadelphia in the fourth quarter of 2010 was WS 93; equivalent to approximately $21,700/day compared to approximately $14,000/day in the third quarter. There was an increase of about WS 18 points from the third quarter 2010 and an increase of WS 23 points from the fourth quarter of 2009. Present market indications are approximately $15,000/day in the first quarter of 2011.
Fujairah bunker prices averaged $488/mt in the fourth quarter of 2010 compared to $444.5/mt in the third quarter of 2010; an increase of approximately $44/mt. Bunker prices varied from a low of $462/mt mid October and a high of $512/mt at the end of December. On February 18, 2011, the quoted bunker price in Fujairah was 627/mt.
Philadelphia bunker prices averaged $503.5/mt in the fourth quarter, which was an increase of $39/mt from the third quarter of 2010. Bunker prices varied from a low of $475.5/mt at the end of October and a high of $527.5/mt at the end of December. On February 18, 2011, the quoted bunker price in Philadelphia was 600/mt.
The International Energy Agency's ("IEA") February 2011 report stated an average OPEC oil production, including Iraq, of 29.46 million barrels per day (mb/d) during the fourth quarter of the year. This was an increase of 190,000 barrels per day compared to the third quarter of 2010, and an increase of 500,000 barrels per day compared to the fourth quarter of 2009.
IEA further estimates that world oil demand averaged 89.3 mb/d in the fourth quarter of 2010, representing an increase of approximately 680,000 barrels per day compared to the third quarter of 2010, and approximately 3.4 mb/d from the fourth quarter of 2009. Additionally, the IEA estimates that world oil demand will average approximately 89.3 mb/d in 2011 representing an increase of 1.7 percent or approximately 1.5 mb/d from 2010.
The VLCC fleet totalled 547 vessels at the end of the fourth quarter of 2010, up from 539 vessels at the end of the previous quarter. 11 VLCCs were delivered during the quarter versus an estimated 17 at the beginning of the year. 54 vessels were delivered in 2010 versus an estimate of 67 deliveries, representing 19 percent slippage, and throughout 2011 the current estimate is 79 deliveries. The orderbook counted 185 vessels at the end of the fourth quarter, down from 189 orders from the previous quarter. Seven new orders were placed during the quarter and the current orderbook represents approximately 34 percent of the VLCC fleet. During the quarter three vessels were removed from the trading fleet for scrapping or conversion/storage purposes. According to Fearnleys the single hull fleet now stands at 43 vessels.
The Suezmax fleet totalled 409 vessels at the end of the fourth quarter, up from 405 vessels at the end of the previous quarter. Six vessels were delivered during the quarter versus an estimated 17 at the beginning of the year. 37 vessels were delivered in 2010 versus an estimate of 61 deliveries, representing 39 percent slippage, and throughout 2011 the current estimate is 63 deliveries. The orderbook counted 146 vessels at the end of the quarter, down from 151 vessels at the end of the previous quarter. Two new orders were placed during the quarter and the current orderbook now represents 36 percent of the total fleet. During the quarter one newbuilding contract was cancelled two more vessels were removed from the trading fleet. According to Fearnleys the single hull fleet now stands at 14 vessels.
Strategy and Outlook
The Company's strategy is mainly concentrated around chartering out the vessels on 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 67 percent for 2011 and 52 percent in 2012, if the charters are not extended. The charter coverage for the three double hull Suezmax tankers is 100 percent for 2011 until 2015.
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 Pioneer and Antares Voyager, the Company is exposed to market fluctuations for these vessels until they are sold. It is difficult to predict the outcome for Pioneer due to the bondholders' rejection of the proposals in the consent solicitations. Frontline, as manager, is obligated to find potential buyers for the vessel subject to a certain price requirement and a bondholders meeting must be held in order to approve or reject any offers. If there are no buyers or an offer is rejected by the bondholders, Frontline needs to seek bareboat or spot charters for the vessels, which meet the requirements of the indentures. The same uncertainty is applicable for Antares Voyager, however the bondholders have pre approved the sale of the vessel, subject to certain price requirements. The vessel is presently trading in the spot market and is being marketed for sale.
The Company will continue to operate 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 four VLCCs in the years ahead and the fact that all the vessels are financed creates a solid platform for the Company going forward. That said, the uncertainty around a potential sale or charter to a non investment grade counterparty for Antares Voyager and Pioneer, increases the risk of the Company and might have negative influence on our future profit as well as our credit profile.
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
February 21, 2011
Questions should be directed to:
Bengt Neteland: Vice President Finance, Frontline Management AS
+47 23 11 40 37 or +47 924 99 386
