- As Poor TCE Rates Push International Seaways to 2Q Loss
NYSE-listed Overseas Shipholding Group (OSG) has delivered lower earnings in the second quarter of 2017 mainly due to weakening spot markets.
The company’s net income was at USD 3.2 million for the quarter ended June 30, 2017, compared to USD 29.8 million for the quarter ended June 30, 2016.
Shipping revenues were USD 96.2 million for the current quarter, a decrease of 18.7% from USD 118.4 million seen in the prior year quarter. The decrease was also driven by lower charter rates.
Time charter equivalent (TCE) revenues for the second quarter 2017 were USD 91.1 million, down 20.6% compared to the same period in 2016.
“Increasing exposure to weakening spot markets during the just completed quarter weighed on top-line performance,” Sam Norton, OSG’s President and CEO, stated.
“However, cost discipline helped to mitigate the effects of these developments, and, together with earnings from our shuttle tanker and lightering operations, served to produce healthy cash flows. Progress continues strengthening our balance sheet and, with over USD 275 million of available liquidity, OSG remains favorably positioned to respond to opportunities in our markets,” Norton added.
For the first half of 2017, OSG reported a net income of USD 8.6 million, down from USD 80.6 million reported in the first six months of 2016.
Shipping revenues for the period were at USD 204.3 million, a decrease of USD 29.1 million compared to USD 233.4 million seen in the first half of 2016. TCE revenues for the first half of 2017 were USD 193.4 million, dropping by USD 33.6 million from USD 226.9 million reported in the first half of 2016.
Meanwhile, mainly driven by lower TCE revenues, US-based tanker shipping company International Seaways suffered a net loss of USD 11.6 million in the second quarter of 2017, compared to a net income of USD 30.5 million posted in the same period a year earlier.
As explained, apart from the decline in revenues, the net loss also reflects costs associated with the company’s debt refinancing.
In 2Q 2017, TCE revenues decreased to USD 69.3 million from USD 101 million recorded in the same quarter last year.
TCE revenues for the crude tankers segment were USD 45.7 million for the quarter, against USD 66.5 million in the second quarter of 2016. This decrease resulted primarily from the impact of significantly lower average blended rates in the VLCC, Aframax and Panamax sectors, and fewer revenue days in the Panamax sector, resulting from an increase in drydock days.
TCE revenues for the product carriers segment were USD 23.5 million for the quarter, compared to USD 34.4 million in the second quarter of 2016. This drop was primarily due to a decline in average daily blended rates earned by the MR, LR1 and LR2 fleets, according to the company.
Adjusted EBITDA was USD 31.8 million for the quarter, compared to USD 62.3 million in the second quarter of 2016, affected by lower daily rates.
“During the second quarter, we executed on our fleet growth and renewal strategy, enhanced our financial flexibility and strengthened the company’s position to optimize revenue through the current tanker cycle,” Lois K. Zabrocky, International Seaways’ president and CEO, said.
In 2Q 2017, International Seaways acquired two 2017-built Suezmax newbuildings, Seaways Hatteras and Seaways Montauk. Constructed at Hyundai Samho Heavy Industries shipyard, the ships were delivered to the Company in July 2017.
The company also inked an agreement to sell a 2001-built MR, which is expected to be finalized in the third quarter.
“We also completed a USD 550 million refinancing in the quarter, which was recently upsized to USD 600 million… In addition to extending the company’s debt maturities, this successful refinancing … enhances our ability to take advantage of compelling opportunities for shareholders,” Zabrocky added.
Furthermore, International Seaways managed to increase its contracted cash flows in 2Q 2017 by signing two five-year contracts for its FSO joint ventures which are expected to generate in excess of USD 180 million of EBITDA for the company over the contract period.
“We are driven by a disciplined and balanced capital allocation strategy and enter the second half of 2017 with significant liquidity to continue to opportunistically grow and modernize our fleet. We also continue to maintain sizeable contracted cash flows, as well as upside to a market recovery in both the crude and product tanker sectors. We remain positive on crude tanker fundamentals in 2018 and continue to be encouraged by near-term prospects for a strengthening product tanker market,” Zabrocky concluded.
International Seaways owns and operates a fleet of 57 vessels. Through joint ventures, the company has ownership interests in four liquefied natural gas carriers and two floating storage and offloading service vessels.
World Maritime News