ITCL - Fourth Quarter and Full Year 2013 Results
Press release from Independent Tankers Corporation Limited 27.02.2014
Highlights
· Independent Tankers reports a net loss of $5.8 million, equivalent to a loss per share of $0.08, for the fourth quarter of 2013.
· Independent Tankers reports a net loss of $16.0 million, equivalent to a loss per share of $0.21, for the year ended December 31, 2013.
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 has three 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. ("Frontline") with an ownership of approximately 83 percent.
Fourth Quarter and Full Year 2013 Results
The Board of Independent Tankers announces a net loss of $5.8 million, equivalent to a loss per share of $0.08, for the fourth quarter of 2013. This compares with a net loss of $4.2 million, equivalent to a loss per share of $0.06, for the preceding quarter. The increase in the net loss is primarily attributable to an increase in operating costs of $1.5 million, of which $0.9 million is attributable to the Ulriken dry docking. This commenced in late December 2013 and ended in early January 2014. Similar dry docking costs for Ulriken are expected in the first quarter. The average daily time charter equivalent rate earned in the fourth quarter by the VLCCs trading in the spot market was $13,100 compared with $11,300 in the preceding quarter. The average daily bareboat rate earned in the fourth quarter by the Company's VLCCs was $20,000, which was the same as in the preceding quarter.
The Board of Independent Tankers announces a net loss of $16.0 million, equivalent to a loss per share of $0.21, for the year ended December 31, 2013. This compares with a net loss of $6.5 million, equivalent to a loss per share of $0.09 for the year ended December 31, 2012. The increase in the loss is primarily attributable to a decrease in earnings from the Ulysses following the termination of the bareboat charter on March 15, 2013 and the commencement of trading in the spot market, an increase in dry dock costs and the amortization of the discount on the issuance of debt. The average daily time charter equivalent rate earned in the year ended December 31, 2013 by the VLCCs trading in the spot market was $12,500, which was the same as in the year ended December 31, 2012. The average daily bareboat rate earned in the year ended December 31, 2013 by the Company's VLCCs was $20,500 compared with $22,100 in the year ended December 31, 2012.
In February 2014, the average cash breakeven rate for the remaining part of 2014 is approximately $32,600 per day for the spot trading VLCCs and $21,300 per day for the three vessels on bareboat charters.
Other Matters
The VLCC British Progress (to be renamed "Progress") is expected to commence trading in the spot market at the beginning of March 2014 when the bareboat charter with BP Shipping Ltd. ("BP") expires.
74,825,166 ordinary shares were outstanding as of December 31, 2013, and the weighted average number of shares outstanding for the fourth 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 2013 was WS 53, representing an increase of WS 17 point from the third quarter of 2013 and WS10 above the fourth quarter of 2012. The flat rate increased by 9.1 percent from 2012 to 2013.
Bunkers at Fujairah averaged $615/mt in the fourth quarter of 2013 compared to $660/mt in the third quarter of 2013. Bunker prices varied between a high of $629/mt on November 1st and a low of $604.5/mt on October 2.
The International Energy Agency's ("IEA") February 2014 report stated an OPEC crude production, including Iraq, of 29.8 million barrels per day (mb/d) in the fourth of 2013. This was a decrease of 0.8 mb/d compared to the third quarter of 2013 due to Libyan production collapsing and Iraq not able to sustain the record levels seen earlier in the year.
The IEA estimates that world oil demand averaged 92.2 mb/d in the fourth quarter of 2013, which is an increase of 0.2 mb/d compared to the previous quarter. IEA estimates that world oil demand in 2014 will be 92.6 mb/d, representing an increase of 1.4 percent or 1.3 mb/d from 2013.
The VLCC fleet totalled 623 vessels at the end of the fourth quarter of 2013, unchanged from the previous quarter. Seven VLCCs were delivered during the quarter, seven were removed. The order book increased by 26 vessels and counted 82 vessels at the end of the fourth quarter which represents 13 percent of the VLCC fleet. According to Fearnleys, the single hull fleet stands unchanged at one vessel.
Strategy and Outlook
The Company's fixed rate charter coverage for its six double hull VLCCs in 2014 is 20 percent, while 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. During 2014, all the Company's VLCCs will be exposed to the spot market fluctuations as the British Progress and British Pride will be redelivered from BP in March and July respectively, and the British Purpose charter is converted from the Minimum Rate Period to the Variable Rate Period in July 2014 in accordance with the terms of the charter agreement with BP.
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. However, with recent earnings being lower than the cash break even rates 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 low spot rates continue.
The broker valuations received for the vessels at December 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 slightly lower 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 Board of Directors
Independent Tankers Corporation Limited
Hamilton, Bermuda
February 26, 2014
Questions should be directed to:
Magnus Vaaler: Vice President Finance, Frontline Management AS
+47 23 11 40 21
WEBSITE: WWW.ITCL.BM
4th Quarter 2013 Results