Fifteen newbuilding VLCCs hit Gener8’s bottom line

Mar 17 2017

Gener8 Maritime has recorded net income of $5.8 mill for the three months ended 31st December, 2016, compared to $45.5 mill for the same period in 2015.

Recorded adjusted net income was $20.1 mill for 4Q16, compared to $47.7 mill for the same period in the previous year.

The company said that the fall in adjusted net income was primarily due to an increase in interest expense, net and depreciation and amortisation expense during 4Q16, compared to 4Q15 as a result of the delivery of 15 newbuildings last year.

The average daily spot TCE rates earned by the company's VLCCs, including vessels deployed in the Navig8 pools, were $36,282 for 4Q16 and $40,130 for the full year.

During 4Q16, the company's ECO VLCC fleet earned an average daily TCE of $37,430, and the non-ECO VLCC fleet earned an average daily TCE of $32,419. The average daily TCE rate obtained on a full-fleet basis was $28,190. 

Net voyage revenue was $99.6 mill fin 4Q16, substantially flat, compared to $100.7 mill in 4Q15.

Direct vessel operating expenses, which included crew costs, provisions, deck and engine stores, lubricating oil, insurance, and maintenance and repairs, increased by $7.4 mill, or 32%, to $30.3 mill for 4Q16, compared to $22.9 mill for 4Q15, primarily due to an increase of 11.2 vessels, or 40.8%, in the average size of the fleet to 38.6 vessels, compared to 27.4 vessels in 4Q15.

Adjusted EBITDA for 4Q16 was $64.3 mill, compared to $64.6 mill for 4Q15.

Loss on vessel disposals, net increased by $13.4 mill during the period, compared to $0.6 mill for 4Q15, primarily due to losses associated with the sale of Gener8 Spyridon and the agreement to sell the Gener8 Ulysses.

As of 31st December, 2016, the company's cash balance was $94.7 mill, compared to $157.5 mill as at the end of 2015. As of the same date, the company's net debt (calculated as total debt less cash, discounts and deferred financing costs) was $1.4 bill.

For the 12 month period, Gener8 recorded net income of $67.3 mill, compared to $129.6 mill for 2015.

Adjusted net income was $124.8 mill, compared to $154.4 mill for 2015. The large decrease in voyage expenses for the year 2016, compared to the previous year was primarily as a result of the company positioning the majority of its vessels into the Navig8 pools where voyage expenses are borne by the pool and netted out of monthly distributions.

Net voyage revenue increased by $57.5 mill for 2016, compared to $334.6 mill for the previous year. This increase was primarily attributable to the increase in the company's vessel operating days, as a result of the deployment of 15 additional VLCC newbuildings that were delivered during 2016.

Adjusted EBITDA for 2016 increased by $41.3 mill to $256.5 mill, compared to $215.2 mill for 2015.

Gener8 also recorded a goodwill impairment of $26.3 mill during the year. As a result of a test performed, it was determined that the carrying value for each reporting unit was higher than its fair value and therefore goodwill was fully impaired, which resulted in a write-off of $23.3 mill for 2016.

"As we continue to receive vessels from our newbuilding programme, it becomes increasingly apparent that a two-tier market exists favouring modern, ECO vessels. For the second consecutive quarter, our ECO VLCCs earned between 10% and 15% more on an average daily TCE basis than our non-ECO VLCCs," said Peter Georgiopoulos, Chairman and CEO of Gener8 Maritime. "We continued to increase the modernity of our fleet with the delivery of three ECO VLCCs in the fourth quarter and two ECO VLCCs to date in the first quarter of 2017 and the sale of two older vessels during the same periods. 

Following the completion of our newbuilding programme expected this year and assuming no further changes to our fleet, the dwt-weighted average age of our fleet will be 4.9 years, and our VLCCs will have an average age of just 2.7 years, giving us the youngest and most modern VLCC fleet among our public company peers. 

Marine fuel prices have been steadily increasing over the last year, highlighting the fuel efficiency of our ECO design vessels, which have quickly become a significant driver of the favourable TCE rates we have been able to achieve in a relatively weak rate environment.  We believe this advantage will become more pronounced over time," he concluded.

CFO Leo Vrondissis, added, "Following the delivery of the Gener8 Ethos on 9th March, 2017, 20 of the 21 ECO VLCCs from our newbuilding programme have been delivered. Based on recent valuations, the remaining payment due on the final newbuilding VLCC is expected to be fully covered through available borrowings.

Additionally, in conjunction with the sales of the Gener8 Spyridon and Gener8 Ulysses’, we have prepaid $31.7 mill of debt, which will have a positive effect on our average vessel breakeven rates going forward," he explained.  

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