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Articles from 2016 In July


Bahri’s H1 net profit up 50% to $297m

Bahri’s H1 net profit up 50% to $297m

Bahri attribute the jump from SAR 740.89m in 2015 to an increase in operating revenues following the acquisition of “several” VLCCs and chemical tankers in 2016, higher crude oil transportation spot rates compared to the corresponding period, an uptick in performance from its general cargo division as well as a decrease in average bunker prices.

Net profit for the three months to June 30 was SAR 504.18m ($134.44m), an similarly impressive 47.2% surge on the SR 342.48m net profit from Q2 2015.

The same factors that contributed to the half year net profit where in play in Q2 although Bahri also noted a SAR 29.5m increase in its profit share from Petredec Limited. Petredec, 30.3% owned by Bahri, contributed SAR 38.8m in Q2 compared to SAR 9.3m in the corresponding period last year.

The only blip reported was a 17.62% dip in net profit in Q2 compared to Q1, down from SAR 611.99m in Q1 and blamed on a quarter-on-quarter decrease in Time Charter Equivalent (TCE) rate in the crude oil transportation spot market.

“On the other hand, the net income of [Bahri’s] chemicals sector has improved due to the increase in average rates of the chemicals spot market as well as the net income of the general cargo sector due to enhancing the efficiency,” Bahri said in a statement.

Bahri, the exclusive oil-shipper for Saudi Aramco, said that its tanker fleet now stood at 83 vessels, 36 VLCCs and 31 chemical tankers.

It is bullishly eyeing the world’s largest VLCC fleet by 2018. It has 10 more due for delivery from Hyundai Samho Heavy Industries in South Korea in 2017-18 and recently signed a deal with Arab Petroleum Investments Corp (Apicorp) to launch a $1.5bn investment fund for the purchase of up to 15 more.

Some of the newbuilds will replace existing vessels but Naser al-Addulkareem, president of Bahri’s oil sector, has said the Saudi carrier is aiming to increase its VLCC fleet to 46 by Q4 of 2018.

“Oil prices are one thing but the oil demand keep growings, so we have a great opportunity to capitalise on the business,” al-Addulkareem told Reuters.

DP World wins lease agreement in Saint John, Canada

DP World wins lease agreement in Saint John, Canada

This time the Dubai-headquartered terminal operator has signed a long-term lease agreement for the expansion and operation of the multi-purpose Rodney Container Terminal (RTC) at Saint John in New Brunswick, Canada.

DP World will take over existing operations at the port in the south-eastern corner of Canada on January 1 next year before embarking on an expansion programme with the Saint John Port Authority to be completed in 2021. The lease will then run 30 years until 2051.

The RTC is the only Atlantic Canada port served by the country’s Class I railways, Canada National Railway (CN) and Canada Pacific Railway (CP) and is CP’s only Atlantic gateway port. The lease will follow the port authority’s completion of planned expansion works including a 350 metre deep-water berth, an enhanced stacking area and a 12,000 foot intermodal rail yard capable of handling a full train.

It is DP World’s fourth terminal concession in Canada, complementing its operations at CENTERM terminal in Port Metro Vancouver and at the Duke Point Terminal just across the Salish Sea at Nanaimo Port, and at Fairview Container Terminal in Prince Rupert, British Columbia. DP World bolstered its stake in Prince Rupert, a key gateway port for trans-Pacific trade, with the $457m acquisition of Maher Terminal’s operations in April 2015.  

The RTC concession came just a day after DP World announced it had signed a MoU with the state run Taiwan International Ports Corporation (TIPC) for the development of Kaohsiung Port’s Terminal 7. 

Its entry into Saint John will focus on Canada’s trade with Europe and Latin America, increasing sector competition in eastern Canada. It is expected to bring significant benefits to importers and exporters in New Brunswick and the Maritimes, a region of Canada that also includes other Atlantic provinces Prince Edward Island, Nova Scotia and Newfoundland.

“We believe that the future growth prospects for the Port of Saint John are strong and we are excited to be participating with Saint John Port Authority in their expansion plans,” said DP World group chairman and ceo Sultan Ahmed Bin Sulayem.

“Our investments and commitment to Canada are for the long term, contributing to trade and the development of its national and local economies as well as providing employment for people with a leader of world trade. Our international experience and expertise will be further enhanced with this project.”

Saint John Port Authority ceo Jim Quinn has hailed the DP World agreement which will see an immediate investment in post-panamax cranes and additional gantry cranes and container handling equipment.

“We are delighted to welcome DP World as the new operator of Rodney Container Terminal and to share in the expansion project for the terminal. The commitments that DP World has made to invest in equipment and systems, commercial promotion and sustainability are critical for the long-term success of the project,” said Quinn.

The transaction is not subject to any pre-closing Canadian regulatory approvals.

Not a wind-up, Swiber surprises with judicial management application

Not a wind-up, Swiber surprises with judicial management application

In statement to the Singapore Exchange Swiber its board of directors and the provisional liquidators had had discussions with the company’s major creditor, “who indicated that they are supportive of an application for the company to place itself into judicial management instead of liquidation”.

On Friday the company and subsidiary Swiber Offshore Construction had applied to be placed under judicial management and interim judicial management.

Swiber has also discharged the provisional liquidators and withdrawn its winding-up application.

The major creditor was not named but on Thursday Singapore's DBS Bank revelaed an SGD700m ($521.9m) exposure to Swiber.

Unlike like winding-up and liquidation, which effectively sound the death knell for a company, judicial management allows it to brought back to financial health via a court supervised process.

Adding to the confusion Swiber also issued a clarification that Thursday’s statement that group cfo Tay Gim Sin Leonard was infact incorrect and he remained in the post.

Rawabi backs Vallianz after Swiber fail

Rawabi backs Vallianz after Swiber fail

Rawabi with an 18.7% stake in Vallianz is the second largest shareholder in the OSV owner following Swiber with 25.2% which filed for winding up early on Thursday morning.

In a statement to the Singapore Exchange, Sheikh Abdulaziz AlTurki, group chairman of Rawabi and chairman of RVOS said, “As a controlling shareholder and business partner of Vallianz, Rawabi would like to express our confidence in the group’s business prospects.

“Through RVOS, the group has grown steadily to become one of the largest offshore support vessel providers in the Middle East region where offshore oil and gas activities continue to be vibrant.”

The two companies said they continued to seek new long term charter contracts in the Middle East for Vallianz.

It is the second time in 24 hours that Vallianz has issued statements saying its business would continue as normal in the wake of Swiber’s collapse.

Pacific Basin dragged down by weak market to $50m H1 loss

Pacific Basin dragged down by weak market to $50m H1 loss

Added to this were a net loss of $1.9m from tug disposals; and release of an exchange loss of $600,000 from reserves upon repayment of shareholder loans by subsidiaries after the tug disposal.

The group said in a stock market announcement that although revenue fell by 23% to $488.4m, the fall was offset by a 15% decrease in the cost of services to $529.7m.

Pacifc Basin ceo Mats Berglund noted that despite the weak conditions, Pacific Basin managed to  generate average handysize and supramax daily TCE earnings of $6,080 and $5,910 per day net, outperforming the BHSI and BSI indices by 56% and 29% respectively.

Repeating a somewhat familiar refrain by now Berglund said: "The TCE premium we generate is due mainly to our ability to draw on our experienced teams, global office network, strong cargo support and large fleet of high-quality substitutable ships in a way that optimises ship and cargo combinations for maximum utilisation."

However despite this expertise, with market conditions such that in early February, undermined by a general seasonal and Chinese New Year slowdown, in demand, lingering oversupply of dry bulk tonnage and lower Chinese imports of coal, average supramax rates actually fell below handysize rates, Pacific Basin was not able to escape the detrimental effects on its bottom line.

Berglund noted that with the average age of the global handysize fleet higher than in other segment, this should help drive scrapping. In addition, the weak freight environment and outlook, and the significant gap between newbuilding and secondhand prices, has led to negligible handysize and supramax new ship ordering this year.

In spite of some good signs Berglund remained cautious going forward and maintained that the group is managing for a continued weak weak market in the medium term. "Despite the boost provided by our rights issue and our belief that supply-side corrections are beginning to lay the foundations for an eventual market improvement, we cannot in any way relax. We are continuing to manage for a weak market in the medium term," he said.

SHI narrows Q2 loss on cost-cutting efforts

SHI narrows Q2 loss on cost-cutting efforts

The South Korean shipbuilder posted a second quarter loss of KRW212.4bn ($189.6m), significantly narrowing from the wider deficit of KRW1.1trn for the same period of 2015, Yonhap reported.

The three-month revenue, however, jumped by 89% year-on-year to KRW2.7trn.

SHI’s KRW1.5trn self-restructuring program included cutting jobs, getting executives to return part of their salaries, selling of shares, suspending part of its yard facilities, and disposing of non-core assets.

The dire state of the global shipbuilding and offshore markets has left Korean shipbuilders struggling with a dearth of new orders and mounting debts.

Are more offshore companies set to fail after Swiber?

Are more offshore companies set to fail after Swiber?

The decision by Swiber to file for a winding-up order as senior management quit stunned the market for its suddenness - in that it wasn’t accompanied by a drawn out period of attempted restructuring or seeking a scheme of arrangement through the courts - it simply went from trading one day to saying it was in provisional liquidation the next and top executives had abandoned ship.

However, it wasn’t also that unexpected in that there had been a slew of bad news around the company recently and things were clearly difficult. And in a wider context many in the offshore market having been talking for some time about the possibility of one bigger listed names in Singapore going under, of which Swiber was one.

It was not surprising to see other listed offshore companies in Singapore were seeking to distance themselves from Swiber on Thursday as their already badly battered stocks took yet another hammering. The spotlight immediately went onto Vallianz – not surprisingly really given its largest shareholder is Swiber owning 25.2% of the company. Vallianz has come out to say it is “business as usual” and indeed its stock price did rebound 4.76% to a grand 2.2 Singapore cents per share.

Others such as Ezion and Swissco saw their share prices continuing to fall on Friday despite their attempts to point out they were not in the same part of the offshore sector as Swiber.

Extremely low stock prices for offshore companies only exacerbate already extremely difficult trading conditions, and potentially create an inexorable spiral downwards in terms of financing and cash to keep companies afloat day-to-day.

Swiber for example went from a market cap of SGD1.5bn ($1.1bn) in 2007 to around SGD50m before it was suspended from trading on Wednesday. Another major listed Singapore offshore company – Ezra Holdings saw its shares fall 3.8% in Friday morning trading and is now priced at just 5 Singapore cents per share, back in December 2013 it was trading at SGD1.39 per share.

Of course financial woes in the offshore sector are not just limited to Singapore and we have seen a slew of restructurings among the listed Norwegian offshore players and indeed on Thursday REM Offshore and Solstad announced a merger, which came out REM Offshore’s attempt to restructure its bonds.

With the fall of Swiber the financial status of other offshore companies will come under even greater scrutiny. Given no-one is forecasting improvement in the market any time soon Swiber is unlikely to be the last fail, not only in Singapore but across the offshore sector as whole.

MOL returns the black in Q1

MOL returns the black in Q1

MOL reported a small profit of JPY1.4bn ($13.6m) after losing $1.51bn in 2015 following JPY179.3bn in losses taken in the fourth quarter relating to the restructuring of its dry bulk and container shipping businesses.

For the first quarter of FY2016 revenues were JPY360bn compared to JPY449bn in the same period a year earlier.

The restructuring of its dry bulk business saw the division bounce back to a profit of JPY8.4bn in Q1 despite the extremely poor market conditions in the sector.

“In the dry bulker division overall, as we saw little chance of fundamental improvement in the market environment for the time being, we focused on reducing the fleet of capesize bulkers under spot operation and fundamentally redesigning our business model for the mid- and small-sized vessels,” MOL said.

“As a result, ordinary profit/loss improved year on year, and we reported black ink in ordinary income for the first three months of the fiscal year.”

The same could not be said for its container shipping business which saw losses widen to JPY11.6bn in Q1 compared to JPY5bn loss in the same period a year earlier.

Looking ahead MOL cut its full year profit forecast to JPY15bn for the year ended 31 March 2017, compared to a JPY20bn forecast previously.

Sembmarine sees first half profit dives 69%

Sembmarine sees first half profit dives 69%

Net profit for the six months ended 30 June 2016 was recorded at SGD66.28m ($49.12m), a plunge of 69.2% from SGD215.11m in the same period of 2015.

Revenue for the first half also fell by 27.3% year-on-year to SGD1.83bn due mainly to lower revenue recognition from rigbuilding projects resulting from customers’ delivery deferment requests.

The sluggish offshore oil and gas market has led to delivery delays for several rigs in Sembmarine’s orderbook. But the biggest headache for Sembmarine is its multi-billion dollar deal with Sete Brasil to build seven drillships.

Sembmarine announced that its net orderbook to-date stood at around SGD9.2bn. Excluding the Sete Brasil drillships, its net orderbook will stand at SGD6bn.

“The group had in the last financial year made provisions of SGD329m for the Sete Brasil contracts. We believe that the provisions remain sufficient under the present circumstances,” said Wong Weng Sun, president and ceo of Sembmarine.

Compatriot Keppel Offshore & Marine, however, has removed its Sete Brasil contracts from its net orderbook, reducing the value to SGD4.3bn from SGD8.3bn.

Sembmarine said there has been no significant development since Sete Brasil’s filing for judicial restructuring on 29 April this year, and the group has commenced arbitration proceedings against various subsidiaries of Sete Brasil to preserve its interests under its contracts.

Other project delays included three jack-up rigs for Oro Negro and one jack-up for Perisai. There is also the standstill agreement with North Atlantic Drilling for the delivery of a semi-submersible rig extended to 2 September.

Sembmarine is also involved in arbitration proceedings with Singapore-based Marco Polo Marine on the latter’s failure to make partial payment in relation to an alleged faulty jack-up rig.

Wong pointed out that the group has made provisions of SGD280m in the last financial year in case of prolonged deferment or possible cancellation of these rigs.

“The majority of our current SGD9.2bn orderbook is with progress payment terms. Less than 20% of our orderbook is for drilling rigs which are on back-ended payment terms. As such, the need for fresh working capital to fulfil such orders in the next years will continue to decrease,” Wong explained.

“Looking ahead, we expect conditions in the offshore oil and gas sector to remain challenging in the short to medium term,” he said.

“Day rates and utilisation for drilling rigs have fallen drastically, resulting from sweeping capex cuts in offshore oil and gas exploration. Understandably, with fewer drilling contracts and surplus of rigs, some drillers continue to be unable to take delivery of their new build rigs,” Wong noted.

Vallianz says business as usual as largest shareholder Swiber heads to liquidation

Vallianz says business as usual as largest shareholder Swiber heads to liquidation

Answering queries from the Singapore Exchange (SGX) over the massive plunge in its share price within minutes of the market opening on Thursday morning noted that its 25.2% shareholder Swiber – its largest – had announced before trading that it had filed for a winding-up application.

This along a previously announced resignation of its chairman Raymond Goh the founder of Swiber it said it was not aware of any information that would explain the trading in shares.

Vallianz went onto say: “The board wishes to inform shareholders that the Group’s business and operations are continuing as usual. The group’s core vessel chartering business is focused mainly in the Middle East and its customers comprise primarily national oil companies.”

It flagged up the support of its other major shareholder Rawabi Holding which owns 18.7% of Vallianz.

“Rawabi has extensive knowledge and network in the Middle East oil and gas market. The group’s vessel charter revenue is largely driven by its Middle East operations,” it said.

Vallianz is based in Swiber's headquarter's building in the International Business Park in the west of Singapore.

Listed on SGX’s second board Catalist Vallianz’s shares closed down 41.7% on Thursday at SGD0.021 with the largest volume of the day of 3.3m shares traded.