2011-02-08 13:48:16 -
HIGHLIGHTS
* Knightsbridge reports net income of $6.0 million and earnings per share of
$0.25 for the fourth quarter of 2010.
* Knightsbridge dry docked the VLCC Kensington in the fourth quarter at an
aggregate cost and revenue loss of $3.6 million.
* Knightsbridge reports net income of $38.6 million and earnings per share of
$2.02 for the year ended December 31, 2010.
* Knightsbridge announces a cash dividend of $0.50 per share for the fourth
quarter of 2010.
* Knightsbridge completed a successful equity offering of 4,887,500 new shares
in October generating net cash proceeds of $87.6 million.
* Knightsbridge purchased the Capesize vessel Golden Zhejiang from Golden
Ocean, in October, for a price of $65.5 million. The Company settled $18.5
million of the purchase price by issuing 973,684 restricted common shares to
Golden Ocean.
* Knightsbridge entered into a new $175 million credit facility in November.
PRELIMINARY FOURTH QUARTER 2010 AND FINANCIAL YEAR RESULTS
Knightsbridge Tankers Limited (the "Company" or "Knightsbridge")
reports net
income of $6.0 million and earnings per share of $0.25 for the fourth quarter of
2010. The average daily time charter equivalents ("TCEs") earned by the
Company's VLCCs, excluding bareboat charters, and Capesize vessels were $34,400
and $39,600, respectively, compared with $30,800 and $40,700 in the preceding
quarter. Time charter revenues increased in the quarter due to the acquisition
of Golden Zhejiang. Net income fell by $2.9 million compared with the previous
quarter due mainly to drydock costs for the Kensington of $2.1 million, the loss
of revenue during the drydock period of $1.5 million and an increase in
operating costs due to the Golden Zhejiang and repairs to the Mayfair, offset by
the revenue from the Golden Zhejiang charter of $1.7 million. Earnings per share
in the fourth quarter fell to $0.25 compared with $0.48 in the previous quarter
due to the reduction in net income and the increase in the number of shares
outstanding following the equity offering and purchase of Golden Zhejiang.
The net increase in cash and cash equivalents in the quarter was $35.7 million.
The Company generated cash from operating activities of $12.9 million and
received net cash proceeds of $87.6 million from the equity offering, which
closed in the quarter. The Company paid $47.0 million regarding the purchase of
Golden Zhejiang, used $5.6 million, net, to repay loan facilities and paid $12.2
million in dividends. In February 2011, the Company has an average cash
breakeven rate for its VLCCs, which are on time charter, and Capesize vessels of
$18,700 and $8,500, respectively, per vessel per day. The VLCCs which are on
bare-boat contract have a cash break even rate of $4,300 per vessel per day.
For the year ended December 31, 2010, the Company reports net income of $38.6
million and earnings per share of $2.02, compared with $21.7 million and $1.27,
respectively, in 2009. The average daily TCE for the Company's VLCCs, excluding
bareboat charters, and Capesize vessels in 2010 was $37,700 and $41,100,
respectively.
The net increase in cash and cash equivalents in 2010 was $48.8 million. The
Company generated cash from operating activities of $62.4 million and received
net cash proceeds of $87.6 million from the equity offering, which closed in the
fourth quarter. The Company paid $97.6 million regarding the purchase of vessels
and newbuildings, received $34.8 million, net, from new loan facilities,
increased restricted cash by $5.0 million and paid $33.4 million in dividends.
THE TANKER MARKET
The market rate for a VLCC trading on a standard 'TD3' voyage between The
Arabian Gulf and Japan in the fourth quarter of 2010 was WS 58; equivalent to
$15,600/day; representing an increase of approximately WS 6 points or $2,400/day
from the third quarter of 2010 and an increase of WS 10 points from the fourth
quarter of 2009. Present market indications are approximately $18,000/day in the
first quarter of 2011.
Bunkers at Fujairah averaged $488/mt in the fourth quarter of 2010 compared to
$444.5/mt in the third quarter of 2010; an increase of approximately $44/mt.
Bunker prices varied from a low of $462/mt mid October and a high of $512/mt at
the end of December.
The International Energy Agency's ("IEA") January 2011 report stated an
average
OPEC oil production, including Iraq, of 29.47 million barrels per day (mb/d)
during the fourth quarter of the year. This was an increase of 200,000 barrels
per day compared to the third quarter of 2010 and an increase of 510,000 barrels
per day compared to the fourth quarter of 2009.
IEA further estimates that world oil demand averaged 88.9 mb/d in the fourth
quarter of 2010, representing an increase of approximately 250,000 barrels per
day compared to the third quarter of 2010, and approximately 3.2 mb/d from the
fourth quarter of 2009. Additionally, the IEA estimates that world oil demand
will average approximately 89.1 mb/d in 2011 representing an increase of 1.6
percent or approximately 1.4 mb/d from 2010.
The U.S maintained an average refinery utilization capacity of approximately 85
percent throughout the fourth quarter of 2010. This was a decrease of
approximately 4.2 percent from the previous quarter and an increase of 4 percent
from the fourth quarter of 2009. Additionally, the US refinery crude throughput
averaged approxemately 14.3 million barrels per day in November 2010, 450,000
barrels per day higher than the same month in 2009 according to the IEA.
The VLCC fleet totalled 547 vessels at the end of the fourth quarter of 2010, up
from 539 vessels at the end of the previous quarter. 11 VLCCs were delivered
during the quarter versus an estimated 17 at the beginning of the year. 54
vessels were delivered in 2010 versus an estimate of 67 deliveries, representing
19 percent slippage, and throughout 2011 the current estimate is 79 deliveries.
The orderbook counted 185 vessels at the end of the fourth quarter, down from
189 orders from the previous quarter. Seven new orders were placed during the
quarter and the current orderbook represents about 34 percent of the VLCC fleet.
During the quarter three vessels were removed from the trading fleet for
scrapping or conversion/storage purposes. According to Fearnleys the single hull
fleet now stands at 43 vessels.
THE DRY BULK MARKET
The combination of more than 13.5 per cent net fleet growth during 2010 and
slightly lower iron ore imports to China should under normal circumstances have
resulted in a sharp decline in earnings for dry bulk owners. That did not
materialize and apart from strong growth in transportation of coal and decent
growth for grain and grain products there are other reasons explaining that the
dry bulk market in 2010 more or less was similar to the previous year.
There were big differences in earnings between the different sizes, Capesizes
earned less which was a function of high influx of new buildings and lower iron
ore exports periodically from Brazil resulting in less ton miles.
The relatively healthy 2010 market can be explained from a few reasons outside
the normal supply / demand balance.
- Chinese coastal trade: This is accounting for almost 250 million
tons per quarter and even though sailing distances are short, dry bulk
researchers expect that around six per cent of the total dry bulk fleet is being
utilized along the Chinese coast.
- High Congestion: This remains a challenge in both loading and
discharging areas. Australia is facing the biggest difficulties. We expect that
congestion was tying up between five and nine percent of the fleet at any given
time last year.
- Inefficient utilization of the fleet: Due to higher inter Asian
trade, increased exports from the Western hemisphere to Asia and less dry bulk
transportation from Asia to Europe, many vessels are ending up in the East and
have to ballast back to loading areas in South America and U.S. In addition
piracy, in Gulf of Aden and Indian Ocean is adding waiting time for military
convoys, slower steaming during convoy passages and deviations in general.
Recent developments with natural disasters in Australia and adverse weather in
general in the Southern Hemisphere had a strong negative impact on the dry bulk
market. In addition the filing for bankruptcy protection of Korea Line, a major
dry bulk operator, has added to the negative sentiment.
There is a lot of uncertainty among dry bulk market forecasters both when it
comes to supply and demand. Everybody agrees to the fact that the order book is
massive, around 50 per cent of the existing fleet is on order. In the last two
years, actual deliveries were lagging substantially compared to the official
order book. Just in excess of 60 per cent of the official order book has been
delivered on average during each of the last two years.
On the demand side, Chinese iron ore imports represents the biggest uncertainty.
As stated above, the small decline witnessed last year came as a surprise to
most forecasters. For 2011 the spread between the most optimistic and most
pessimistic analysts is about 150 million tons or approximately 150 capesize
equivalent vessels.
In a fairly optimistic, but not unrealistic demand scenario with a continuation
of two digit growth in ton mile demand the market needs close to 40 per cent
delays / slippage and cancellations of the official order book to bring the
utilization close to 90 per cent.
CORPORATE AND OUTLOOK
In September 2010, the Company agreed to acquire the Capesize vessel, Golden
Zhejiang from Golden Ocean for a purchase price of $65.5 million and took
delivery of the vessel on October 27, 2010. The vessel is employed on a time
charter with a minimum term of 48 months from September 2010 at a gross rate of
$29,900 per day. The Company settled $18.5 million of the purchase price by
issuing 973,684 restricted common shares to Golden Ocean and used cash of $47
million to finance the remaining portion. $3.3 million of the purchase price has
been attributed to the value of the time charter and this amount is being
amortized over the term of the charter, which means that the reported gross rate
is being reduced by approximately $2,000 per day.
On September 27, 2010, the Company announced an underwritten public offering of
4,250,000 common shares and a 30 day option granted to the underwriters to
purchase up to 637,500 additional shares to cover overallotments. The offering
was priced at $19.00 per share and the underwriters exercised the over-allotment
option in full. As a result, 4,887,500 common shares were issued in October and
net proceeds of approximately $87.6 million were received. The proceeds have
been used to fund a portion of the purchase price of the Golden Zhejiang and the
remainder is expected to be used to repay indebtedness, fund future vessel
acquisitions, for working capital and for general corporate purposes.
In October 2010, the VLCC Mayfair commenced a five year bareboat charter at a
rate which is determined by the Company to be equivalent to at least $32,000 per
day on a time charter basis.
In November 2010, the Company entered into a new $175.0 million senior secured
credit facility maturing in May 2015 consisting of a term loan in the amount of
$100.0 million and a revolving credit facility in the amount of $75.0 million.
The Company used $75.0 million available under this facility to refinance $75.0
million of debt under the amended Nordea credit facility and used the remaining
$25.0 million under the term loan to partially finance the acquisition of the
Golden Zhejiang.
The VLCC Kensington was dry docked in the fourth quarter and the Company has
scheduled to dry dock the VLCC Hampstead at the end of the first quarter in
2011. The next scheduled dry dock, thereafter, is in 2013. The Company
recognizes the cost of a drydocking at the time the drydocking takes place, that
is, it applies the "expense as incurred" method rather than accruing and
charging as an expense on a pro-rata basis over the period to the next
drydocking.
Following the completion of the public offering in September 2010 and the
revolving credit facility in November 2010, Knightsbridge has had the ability to
further grow the Company by purchasing one additional vessel without having to
raise additional equity. Henceforth the Board has actively been looking for
tonnage which can contribute to the Company's future dividend capacity. It has
however been a challenge to find the optimal combination of asset price and time
charter rate and so far no acquisition candidate has been found. The Board will
therefore continue to monitor the sale and purchase market for vessels that can
contribute to the Company's future dividend capacity.
On December 29, 2010, the Board granted a total of 59,143 restricted stock units
(RSUs) pursuant to the 2010 Equity Plan to members of the Board and the two
management companies. These RSUs will vest over three years at a rate of one
third of the number of RSUs granted on each anniversary of the date of grant.
On February 7, 2011, the Board declared a dividend of $0.50 per share. The
record date for the dividend is February 17, 2011, ex dividend date is February
15, 2011 and the dividend will be paid on or around March 3, 2011.
FORWARD LOOKING STATEMENTS
Matters discussed in this press release may constitute forward-looking
statements. The Private Securities Litigation Reform Act of 1995 provides safe
harbor protections for forward-looking statements in order to encourage
companies to provide prospective information about their business. Forward-
looking statements include statements concerning plans, objectives, goals,
strategies, future events or performance, and underlying assumptions and other
statements, which are other than statements of historical facts.
Knightsbridge desires to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and is including this
cautionary statement in connection with this safe harbor legislation. The words
"believe," "except," "anticipate," "intends,"
"estimate," "forecast," "project,"
"plan," "potential," "will," "may,"
"should," "expect" "pending" and similar
expressions identify forward-looking statements.
The forward-looking statements in this document are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, our management's examination of historical
operating trends, data contained in our records and other data available from
third parties. Although we believe that these assumptions were reasonable when
made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond our control, we cannot assure you that we will achieve or accomplish
these expectations, beliefs or projections.
In addition to these important factors, important factors that, in our view,
could cause actual results to differ materially from those discussed in the
forward-looking statements include the strength of world economies and
currencies, general market conditions, including fluctuations in charterhire
rates and vessel values, changes in demand in the dry bulk and tanker markets,
as a result of changes in OPEC's petroleum production levels and world wide oil
consumption and storage, changes in Knightsbridge's operating expenses,
including bunker prices, drydocking and insurance costs, the market for
Knightsbridge's vessels, availability of financing and refinancing, 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 Knightsbridge with the Securities and
Exchange Commission.
The full report is available in the link enclosed.
The Board of Directors
Knightsbridge Tankers Limited
Hamilton, Bermuda
February 7, 2011
Questions should be directed to:
Contact:
Ola Lorentzon: Chairman, Knightsbridge Tankers Limited
+ 46 703 998886
Inger M. Klemp: Chief Financial Officer, Knightsbridge Tankers Limited
+47 23 11 40 76
4th Quarter and FY 2010 Results:
hugin.info/132879/R/1486560/421829.pdf
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Knightsbridge Tankers Limited via Thomson Reuters ONE
[HUG#1486560]
