2Q Presentation in Shippingklubben.
Im back from the presentation. Very glad I went. Lots of information and nice people. Odd and Finn held the presentation. Not enough chairs for everyone so the interest for the company must be rising. (Yes we did get salmon to eat).
I was the second person there. Only a journalist was there when I arrived. I tried to eavesdrop as much as I could. The only things they talked about that they did not mention in the presentation was the possibility for a takeover of another company. Odd said they have meetings about it all the time but did not try to buy any specific companies last quarter. But they had on purpose built an employee organisation that could be easily integrated with another company when the day arrives. Almost everything is outsourced at the moment.
Finn started the presentation with the key financials. You can read them yourselves from the homepage so I will only say what they highlighted.
1 NOK in dividend gives a return of 25%. This means that the stockprice is to low (quote Finn). Its also 40% under Net Asset Value. Operating Margin before EBITDA is now 65%, up from 60% 1Q. More importantly operating costs were the same in 2Q and 1Q despite a 10% larger fleet. They emphasized the importance of keeping the costs low. The financial derivate is a securement of a interest rate connected with the sale/leaseback transaction. I must read more about this before I can say much more, but the essence is if the American interest rate rises the company can book a profit. The rate rose from Q1 to Q2 so there is a profit of 5million. (The loss from Q1 is halved). 2 million dollar penalty for ending the bond is classified as interest rate expenses and is fully included in this quarter. The two ships delivered in Norway comes with financing. They pay the ships using their normal loan facility but keep the loan. This is put in the bank with a fixed interest and will pay itself over the next 12 years, generating a profit of 2 million dollars on the way. Money is money wherever they come from. (This is the CIRR loan).
Norway changed its tax regime last year generating tax liabilities for the 4 ships under Norwegian flag. The supply companies can cut 1 third of this liability if they use it on environmental issues. Sea Lion will have environmental equipment making it possible to cut this liability.
The ordering of new ships have plummeted this quarter. Only 40 ships were ordered. Only two of these were over 12000BHP. The asians are still ordering smaller Ahts around 5000BHP. Most of the existing fleet of this type is ready to be scrapped. Asians are conservative and will continue to use smaller ships and choose to pay high mobilisation fees when they need larger ships for specific charters. The yards can not deliver what they have promised. The old norwegian tax regime awarded newbuilding. The new tax regime does the opposite so the norwegian companies will be likely to order fewer ships in the future. Not very likely that new companies will emerge, but we will see more mergers and acquisitions.
Odd said that the fleet of rigs and FPSO will possibly grow faster than the fleet of supply vessels the next years. The prices we have had the last 18 months will be the lowest for a long time. The next 18 months can reach 2006 levels.
New markeds are opening up. Mediterranien is becoming an important area. Deep Sea now has a large number of ships working for Libya. This is not a problem because Malta is just a short ride away and has good harbour and yard facilities. Other places in Africa can be more difficult (read Kongo).
The PSV marked has never been better and the PSV ships have at the moment a better operating margin than the AHTS. Usually it is the other way around. This is also due to the planned dry docking of some of the AHTS.
Not enough information on the 10 year maintenance i feel, but offhire is propably not what they want to talk about on a presentation. I got the oppurtunity to ask Finn questions after the presentation so I feel that Im less worried now than earlier this week. Leopard was docked in South Amerika for 3 months. No additional equipment installed and lots of delays. Bear is undergoing the same job in Spain with the same result. The subcontractors cant deliver. Will be finnished early September. The rest of the Kmar ships (5) need the same classification but they will be done in Northern Europe where the yards are a bit more reliable. Sea Tiger is doing her classification now and installing DP2 (hooray). Estimated time is 5 weeks but the Danish yard Fredericia is saying it is possible to do it in three weeks if all the subcontractors deliver on time. If they deliver they will probably get the classification for the rest og the KMAR ships. A good thing as they should be familiar with the ship class. A common ship in the North Sea.
ABG have problems delivering ships in time. They have promised to much. Have now tripled their capasity and should now be able to stick to the revised schedule. The remaining PSV from Cochin will be delivered 1 month before schedule. Sea Lion will be delivered in October. I know they are going to show it off in Arendal in the beginning of November so I dont think it will do any work before that date. Sea Hawk And Sea Eagle will be on a 18 month boraboat lease before Deep Sea Supply can buy them. This is for tax reasons. Gives the yard more money for the sale ond Deep Sea gets a discount on the price.
And now to the interesting part.
Sea Leopard: The charter with Vroon/ENI in Italy is finished and will be terminated before originally planned. Sea Leopard will follow the rig to Mauretania with a 65000dollar/day charter. The first part of the contract will not be finished before well into Q1 2009 and they have an additional option for three months that they are likely to use.
Sea Bear: Is sailing to Libya when it is finished in the yard. 6+6 months. 45000 dollar/day
Sea Panther: Will finish her charter in the beginning of september. Will mobilize to the North Sea and do her 10 year classification and will install DP2 (Hooray). After the yard she will enter the North Sea spot market. Panther, Lynx, Tiger and Cougar are the only ships that have the equipment to be used in the North Sea and they need DP2 to competable. Cougar already has it.
Sea Wolf. Mobilising for Africa. Will work with Leopard on the same charter and rates. In addition Wolf got a demobilization fee to the North sea for 500.000 dollar and a mobilization fee to Africa for 850.000 dollar. Instead of taking the long way by the North sea they get 1.350.000 for a 10 day joyride over the Atlantic. Trinidad to Mauretania. Odd was very satisfied with this deal.
Sea Lynx: Starting a 4 month charter now in the mediterranien. 25000 pounds/day. Undecided where it will continue after the charter.
Sea Tiger: Docking at the moment. Will continue to work in the North Sea spot market. Installing DP2. August is usually a slow month because of the holiday on the European continent. Thats the reason they booked the docking for this month. Unfortunately August was not a slow month this year.
Sea Cougar: On a long term charter in Egypt. 22500 pounds/day
Sea Cheetah: Long term charter in Libya. 38000 dollar/day
Sea Jaguar: Started a charter in libya. Aprx 47500 dollar/day
Sea Ocelot: Has been following the same rig the whole time. The new operators demand that the vessel shall follow the rigg every time they change operator. 33000 dollar/day
Sea Otter: Otter is also following her rigg and the operators have demanded she is part of the deal. 20000 dollar/day
Sea Trout: Started the charter for Petrocanada. 12500 pounds/day
Sea Halibut: Is working the spot market for the next week. The week after it will be docked in Malta installing FiFi equipment. Starting Charter in 2 weeks. 27000 dollar/day
Sea Angler: Long term charter in Congo. 22500 dollars/day
Sea Pike: Identical as Angler
Sea Bass: Long term charter in Libya 26000 dollar/day
Sea Pollock: Should have started its charter with Exxon, but the Seadrill Rig it was supposed to support is delayed. New starting date is 1 of November. Has an alternative charter in asia with an equal or better rate while its waiting. Rate from 1 November will be 25000 dollar/day.
Sea Turbot: Same as Pollock. Has an alternative short term charter for 30000 dollars/day in Asia. Will get 25000 dollar/day fron the 1 of November.
That should be all.