Highlights
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Independent Tankers reports a net loss of $4.1 million, equivalent to a loss per share of $0.06, for the second quarter of 2013.
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Independent Tankers reports a net loss of $5.9 million, equivalent to a loss per share of $0.08, for the six months ended June 30, 2013.
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In July 2013, BP gave notice of termination of the bareboat charter for the VLCC British Pride to take effect on July 30, 2014.
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 US market. The main shareholder is Frontline Ltd. ("Frontline") with an ownership of approximately 83 percent.
Second Quarter and Six Months 2013 Results
The Board of Independent Tankers announces a net loss of $4.1 million, equivalent to a loss per share of $0.06, for the second quarter of 2013. This compares with a net loss of $1.8 million, equivalent to a loss per share of $0.02, for the preceding quarter. The increase in the loss is primarily attributable to (i) a decrease in earnings from the Ulysses of $1.5 million following the termination of the bareboat charter on March 15, 2013 and the commencement of trading in the spot market, (ii) a net decrease in spot earnings from the Pioneer and the Ulriken of $0.4 million, and (iii) the amortization of the discount on the issuance of debt of $0.6 million. The average daily time charter equivalent rate earned in the second quarter by the VLCCs trading in the spot market was $12,500 compared with $13,600 in the preceding quarter. The average daily bareboat rate earned in the second quarter by the Company`s VLCCs was $20,000 compared with $22,100 in the preceding quarter.
The Board of Independent Tankers announces a net loss of $5.9 million, equivalent to a loss per share of $0.08, for the six months ended June 30, 2013. This compares with a net loss of $3.3 million, equivalent to a loss per share of $0.04 for the six months ended June 30, 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 and the amortization of the discount on the issuance of debt. These factors were partially offset by an improvement in the spot earnings from the Pioneer and the Ulriken. The average daily time charter equivalent rate earned in the six months ended June 30, 2013 by the VLCCs trading in the spot market was $12,900 compared with $14,600 in the six months ended June 30, 2012. The average daily bareboat rate earned in the six months ended June 30, 2013 by the Company`s VLCCs was $21,000 compared with $22,100 in the six months ended June 30, 2012.
In August 2013, the average cash breakeven rate for the remaining part of 2013 is approximately $33,900 per day for the three spot trading VLCCs and $21,300 per day for the three vessels on bareboat charters.
Chartering Summary
In July 2013, BP Shipping Ltd. ("BP") did not exercise its right to terminate the lease for the VLCC British Purpose on July 14, 2013 and so the charter will continue until July 14, 2015, if not further extended. The vessel will trade on a market rate with a minimum of $20,000 per day until July 14, 2014 at which time the charter is converted from the Minimum Rate Period to the Variable Rate Period in accordance with the terms of the charter agreement with BP.
In July 2013, BP gave twelve months irrevocable notice of termination of the bareboat charter for the VLCC British Pride. The vessel will be redelivered to the Company on July 30, 2014.
Other Matters
In April 2013, the Company sold $1.7 million of its Windsor Notes for proceeds of $1.0 million and in May 2013, the Company sold $8.5 million for proceeds of $5.2 million. In June 2013, the Company sold $6.0 million of its Windsor Notes for proceeds of $3.7 million. The difference between the value of the bonds sold and the sale proceeds is recorded as a discount on issuance of debt (reduction of liabilities) in the balance sheet and is being amortized over the term of the notes.
In June 2013, the Company paid principal of $10.0 million to Frontline and Frontline agreed to extend the maturity date of the remaining loan of $14.1 million from June 2013 to June 2014.
74,825,166 ordinary shares were outstanding as of June 30, 2013, 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 second quarter of 2013 was WS 37, representing an increase of WS 2 points from the first quarter of 2013 and a decrease of approximately WS 18 points from the second quarter of 2012. The flat rate increased by 9.1 percent from 2012 to 2013.
Bunkers at Fujairah averaged $614/mt in the second quarter of 2013 compared to $633/mt in the first quarter of 2013. Bunker prices varied between a high of $640/mt on April 2nd and a low of $597/mt on June 28th.
The International Energy Agency`s ("IEA") August 2013 report stated an OPEC oil production, including Iraq, of 30.8 million barrels per day (mb/d) in the second quarter of 2013. This was an increase of 0.4 mb/d compared to the first quarter of 2013.
The IEA estimates that world oil demand averaged 90.4 mb/d in the second quarter of 2013, which is an increase of 0.5 mb/d compared to the previous quarter. IEA estimates that world oil demand in 2013 will be 90.8 mb/d, representing an increase of 1.0 percent or 0.9 mb/d from 2012.
The VLCC fleet totalled 639 vessels at the end of the second quarter of 2013, up from 634 vessels at the end of the previous quarter. 10 VLCCs were delivered during the quarter, five were removed. The order book counted 57 vessels at the end of the second quarter, down 10 from the previous quarter. The current order book represents nine 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 fixed rate charter coverage for its six double hull VLCCs is 53 percent in 2013 and 20 percent in 2014. 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. From July 2014, the two remaining bareboat vessels British Pride and British Purpose will also be exposed to the spot market fluctuations when the bareboat charter for British Pride expires and the British Purpose is converted from the Minimum Rate Period to the Variable Rate Period 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 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.
The broker valuations received for the vessels at June 30, 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 full report is available for download in the link enclosed.
The Board of Directors
Independent Tankers Corporation Limited
Hamilton, Bermuda
September 3, 2013
Questions should be directed to:
Magnus Vaaler: Vice President Finance, Frontline Management AS
+47 23 11 40 21
WEBSITE: WWW.ITCL.BM
2nd quarter 2013 results
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Source: Independent Tankers Corporation Limited via Thomson Reuters ONE
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