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Articles from 2016 In February


From hero to well below zero - Scorpio Bulkers losses over half a billion in 2015

From hero to well below zero - Scorpio Bulkers losses over half a billion in 2015

Scorpio Bulkers reported a full net loss of $510.79m for 2015 compared to $116.56 a year earlier. Revenues for 2015 were just $62.52m against the $510.79m loss as the company in the same year as company’s operating expenditures outstripped revenues by around nine times.

The final quarter of 2015 was particularly grim as Scorpio Bulkers racked up a $302.02m loss, compared to $71.99m in the same period a year earlier. It last three months of 2015 the company took hefty writedowns on assets held for sale of $271.3m , which was associated with 11 capesizes vessels and newbuildings. Scorpio Bulkers has now effectively exited the capesize sector.

On Monday the Baltic Capesize Index stood at an all time low of 174 point with an average daily TC rate of just $2,356.

The company has 16 newbuildings still to be delivered on which $298.6m remains to be paid. Between the start of 2016 and 25 February Scorpio Bulkers has sold seven vessels.

PacBasin sees $19m 2015 loss in ‘one of the worst years’ for dry bulk

PacBasin sees $19m 2015 loss in ‘one of the worst years’ for dry bulk

During one of the weakest dry bulk markets on record, PacBasin reduced costs, optimized routes and managed to turn around its supramax segment while outperforming the market in both handysize and supramax segments by 54% and 39% respectively.

The positive turnaround in the supramaxes was achieved by focusing on specific trades, especially in the Atlantic Basin and growing parcelling business, especially from Chinese steel exports and significantly reduced charter-in costs due to the weak overall market and a switch to short term and index-linked charters, said Pacifc Basin ceo Mats Berglund.

In addition, reduced vessel opex per day through economies of scale, good cost control, with G&A reduced by $19m, and operating more owned ships and redelivering expiring medium and long-term chartered ships to further reduce daily vessel costs helped with cost control. Meanwhile positive results from the towage division and total divestment of the ro-ro operations also helped.

However the fact remained that handysize TCE earnings fell 16%  to $7,870 per day resulting in a $8.4m loss for the segment and supramax TCE earnings fell 12% to $9,170 per day although the segment managed to turn around to a $22.6m profit due to significantly reduced charter-in costs.

Summing up, Berglund said: "Dry bulk spot market indices in 2015 fell to record lows in February and December, framing one of the worst years overall for dry bulk shipping."

"In this weak and uncertain market, and having invested significantly during the previous downturn in 2013, we are managing our business for a continued weak market in the medium term and are prioritising safety and staying power. However, we will also carefully consider further acquisition opportunities that may emerge at depressed prices and with which we could generate positive cash contributions even in the prevailing weak market conditions," he noted.

"With experienced staff and a strong business model, we are well positioned to navigate this very weak market and to benefit from a cyclical upturn when it comes," Berglund concluded. 

MSC signs MoU to increase Iran port calls

MSC signs MoU to increase Iran port calls

The MoU also makes provision for MSC vessels, which began calling at Iran in January after six years, to carry shipments to Iran from international ports.

Agreed during a three-day visit by Swiss President Johann Schneider-Ammann. The MoU opens Iran up to other Swiss shipping companies to invest in Iranian shipping.

The news follows a deal signed between Iranian shipping company IRISL and CMA CGM in January, to jointly operate routes, vessels and terminals, as well as $85m in planned Indian capacity investments at Chabahar port to allow India to trade with Iran’s landlocked neighbour Afghanistan.

Meanwhile the first four tankers carrying Iranian crude to Europe left Kharg Island oil terminal this month.

Höegh LNG gets $223m in financing for seventh FSRU

Höegh LNG gets $223m in financing for seventh FSRU

Expected to be fixed at 3.8% interest, the new financing is the cheapest in the history of the company, with a 15 year amortization profile increasing to 75% and 20 years, respectively, upon securing a long term contract.

"With this transaction, Höegh LNG has once again secured competitive debt financing for its FSRU fleet expansion, and this time at the lowest cost ever achieved by the Company,” said president and ceo of Höegh LNG Sveinung JS Støhle. “The financing terms reflects the financial strength of Höegh LNG's balance sheet in addition to its position as the market leader in the FSRU segment."

The news supports Höegh LNG’s current strategy of mothballing its FLNG business in order to refocus efforts and capital on FSRUs, in response to low demand growth from LNG markets in the Asia coupled with an expected 40-45% capacity growth, to around 400m tons per year, by 2020.

Following the decision, the company made a $37.0m impairment of FLNG investments, wiping out profits and bringing the company to a $32.9m loss in Q4 2015, or a $26.7m loss for the full year, versus $59.2m and $92.9m, respectively, in 2015. Revenues rose to $219.3m for the full year 2015, compared with $161.5m in the previous year.

“We continue to see very favourable market conditions for the FSRU segment, driven by ample LNG supplies and low LNG prices, which is why Höegh LNG will focus on its objective of reaching 12 FSRUs by 2019,” said Støhle.

Frontline upbeat on prospects for the tanker market

Frontline upbeat on prospects for the tanker market

The company completed its merger with Frontline 2012 at the end of November 2015 and if the fourth quarter results of Frontline and Frontline 2012 are combined without adjusting for the impact of the merger, it would have reported a $62.7m net profit.

For 2015 as whole Frontline reported a net profit of $154.6m compared to $149.5m in the previous year.

Frontline and Frontline 2012 reported strong charter rates in Q4 2015 across the VLCC, suezmax, LR2 and MR segments. Spot rates for VLCCs in Q4 were $62,700 per day and in guidance for Q1 2016 is $73,100 per day with 88% coverage.

Robert Hvide Macleod, ceo of Frontline commented: “We are off to a very good start thus far in 2016, buoyed by continued strength in the tanker market, and we are pleased with the earnings we have secured thus far in Q1. The market has corrected downwards over the recent weeks, but overall demand for tankers remains high.”

Looking ahead Frontline said it planned to maintain its market leading role in consolidation.

Commenting on the market outlook it noted rates had dropped “levels moderately lower” than those seen at the start of 2015, after a strong start to 2016. However, it expects demand will remain supported by the muted prospect for a recovery in oil prices.

The low oil price is expected to reduce production in the US, Brazil and the North Sea, which Frontline sees as beneficial to the tanker market.

“These lost volumes will likely be filled by long-haul trade from the Middle East, especially as oil consumption growth continues to rise on the back of lower energy prices, thus increasing ton mile and benefitting the tanker market,” the company said.While newbuilding deliveries are accelerating Frontline noted an aging fleet and that its customers preferred vessels under 15 years old. “As for ships over 20 years, they are virtually impossible to trade in the spot market, and we expect them to go in to permanent storage contracts or conversion projects.”

Although 120 VLCC newbuildings will be delivered by 2018, and scrapping “will be at a minimum”, there would also be some 90 VLCCs in the current fleet that will pass the 20 years in age mark.

Scorpio Bulkers delays eight newbuildings, terminates time charters

Scorpio Bulkers delays eight newbuildings, terminates time charters

The dry bulk shipowner has delayed two ultramaxes and six kamsarmaxes under construction in China from delivery between March and September 2016 to September 2016 and April 2017.

As a result of the delivery delays $41.2m in newbuilding payments due in 2016 will be pushed back to 2017.

Scorpio Bulkers has also reached agreement to reduce the final installments on the ultramax bulkers by $0.9m.

The company has also terminated time charter contracts on four bulkers from 19 March 2016 for a one-time payment of $10m, of which it has paid $8m to date.

Jinhui books $379m full year loss on impairment charge of $325m

Jinhui books $379m full year loss on impairment charge of $325m

The loss of $378.74m in 2015 was in line with the shipowner’s expectations, widening from the deficit of $86.75m in 2014.

At the end of 2015, Jinhui Shipping performed an impairment review on owned dry bulk vessels and recognised impairment loss of $325.01m on owned vessels, compared to the $50.59m impairment in 2014.

Revenue for last year was slashed by 34.7% year-on-year to $86.3m as Jinhui Shipping was impacted by low freight rates for its chartered out vessels.

“Freight rate is now below vessel operating expenses, asset prices have gone in a downward spiral given the lack of confidence,” said Jinhui Holdings, parent firm of Jinhui Shipping.

“We believe the current market cannot be sustainable for all shipowners. So far a number of established shipping companies are already in financial distress, with some others seeking renegotiations of long term charter rates with owners in order to save liquidity,” Jinhui Holdings said.

“On the supply capacity front, more shipyards are expected to run into financial distress given buyers have insufficient liquidity to pay the instalments and shipyards also run out of capital. Lenders are doing their best to avoid new exposure to new shipping financing against such backdrop,” it added.

The languid dry bulk shipping market has been affected by the weak demand growth due to the slowdown of Chinese coal and iron ore imports, as well as the lingering oversupply of tonnage in the market.

The Baltic Dry Index (BDI) sank to record lows in 2015 and continued falling to hit a historic low of 290 points on 11 February 2016.

On a positive note, according to Jinhui Holdings, the excess newbuilding orders arising from irrational expectations of financial return by parties with limited operating experience and backed by access to cheap funding seem to have come to a halt.

“In fact, given the reality of the prevailing tough trading environment, delays, conversions, cancellations, and shipyard defaults are leading to much fewer actualy deliveries than previously scheduled. Owners are running out of liquidity and lenders are certainly avoiding new additional exposure to the sector,” Jinhui Holdings commented.

Bumi Armada turns in $235m 2015 loss on bad debt charges

Bumi Armada turns in $235m 2015 loss on bad debt charges

Revenue fell to MYR2.18bn from MYR2.4b previously, the company said in a stock market announcement.

Not only had fourth quarter revenue fallen 16% to MYR589m, it also took on impairment charges that led to a loss of MYR85.1m for the quarter.

These, and earlier impairments taken in the second quarter on falls in the value of selected OSV and T&I vessels, led to the full-year loss Bumi Armada explained. Excluding these charges the group would have reported profits of MYR141.9m and MYR369.7m for the fourth quarter and full-year respectively.

However, full year FPSO and floating gas solutions (FGS) revenue increased by 38% to MYR1.31bn and made up almost two-thirds of total revenue. This made up for the drops in revenue from the offshore support vessel and transport and installation businesses, which saw year-on-year revenues falling 18% and 58% respectively.

The group’s total order book as at end-December 2015 was MYR42.8bn consisting of MYR27.5bn of firm contracts and MYR15.3bn of optional extensions 

Bumi Armada ceo Chan Chee Beng said: "The market remains extremely challenging in the services segment of the offshore O&G business, highlighted by the decline in both utilisation and new chartering and contract activities in both the OSV and T&I segments. In Q4 2015, the Company made allowances for certain overdue accounts, but we will nonetheless seek to recover these amounts, as we have done in the past."

Miclyn Express Offshore swings to loss in first half results

Miclyn Express Offshore swings to loss in first half results

The Singapore-headquartered provider of OSVs reported a loss of $13.54m for its first half ended 31 December 2015, as against the gain of $17.72m in the same period of the previous year.

The swing to a loss was blamed on a $5.1m impairment loss on vessels in other expenses.

Revenue during the reporting period fell by 15.7% year-on-year to $120.47m.

Vard diversifies after it slumps into the red in 2015

Vard diversifies after it slumps into the red in 2015

The NOK1.29bn net loss for 2015 compared to a NOK50m profit in 2014. The company said its 2015 result had been hit by NOK474m in exchange rate losses of which NOK380m were unrealised.

Vard’s revenues dropped 14% in 2015 to NOK11.14bn which was mainly due to decreased activities at its European yards. With slowdown in activity Vard was hit NOK77m in restructuring costs in 2015 including severance pay for lay-offs with the yard group reducing its staff Norway by 8% and by 27% in Romania.

To ride out the slump in offshore markets Vard plans to diversify specialized vessels in the offshore wind and aquaculture markets. It also plans increase its focus on the Middle East where there is a demand for OSCVs and other specialised vessels.

It also plans to leverage off the skills of its parent Fincantieri to enter the cruise shipbuilding sector. “Combining in-house expertise and synergies with its parent group, Fincantieri, Vard sees opportunities in the segment of small and specialty cruise vessels such as exploration cruise ships, as well as in the market for Offshore Patrol Vessels (OPV),” it said.

Vard also intends to build sections of cruise ship hulls for its parent at Vard Tulcea. “The group’s efforts to diversify are well underway, and we believe that we are on the right track to recovery,” said Roy Riete, ceo and executive director of Vard.