The following were the significant changes between the two periods:
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TCE revenue decreased by $44.5 mill to $120.3 mill from $164.8 mill for 1Q17 and 1Q16, respectively. This drop was driven by a fall in overall daily TCE revenue to $14,408 from $20,203. TCE revenue decreased across all of the operating segments as unfavourable market conditions which developed during 2H16, driven by the delivery of newbuildings, high product inventories, low refining margins and a lack of arbitrage opportunities, persisted into 1Q17.
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Vessel operating costs increased $0.1 mill to $48.1 mill as the result of an increase in the average number of owned and bareboat chartered-in vessels to 80.6 vessels from 79.8 vessels. This increase was partially offset by an overall decrease in vessel operating costs per day to $6,519 per day from $6,612 per day, which was driven by improvements in the LR2 and MR operating segments.
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Charterhire expense increased $3.8 mill to $19.4 mill primarily driven by an increase in STI's time and bareboat chartered-in fleet to an average of 15.6 vessels from an average of 10.3 vessels.
Below is a summary of the average daily TCE revenue and duration for voyages fixed thus far in the 2Q17:
o For LR2s in the pool: about $17,000 per day for 42% of the days.
o For the LR1 in the pool: around $9,000 per day for 38% of the days.
o For MRs in the pool: about $15,500 per day for 38% of the days.
o For the ice-class 1A and 1B Handymaxes in the pool: around $13,000 per day for 34% of the days.
During 1Q17, the average daily TCE revenue earned was:
o For LR2s in the pool: $16,094 per revenue day.
o For the LR1 in the pool: $13,545 per revenue day.
o For MRs in the pool: $13,203 per revenue day.
o For Handymaxes in the pool: $14,863 per revenue day.
In April 2017, STI executed agreements with Bank of Communications Financial Leasing to sell and leaseback, on a bareboat basis, three 2013-built MRs - ‘STI Beryl’, ‘STI Le Rocher’ and ‘STI Larvotto’.
The selling price is $29 mill per vessel and the company will bareboat charter-in the vessels for a period of up to eight years at $8,800 per day per vessel. These leases will be accounted for as operating leases.
STI said that it had the option to purchase these vessels beginning at the end of the fifth year of the agreements through the end of the eighth year of the agreements. In addition, a deposit of $4.35 mill per vessel will be retained by the buyers and will either be applied to the purchase price of the vessel if a purchase option is exercised, or refunded to STI at the expiration of the agreement.
Two of these sales closed this month and the third is expected to close before 1st May, 2017. The company expects to record a write down of about $14.3 mill in the second quarter of 2017 as a result of these sales, it said.
Upon closing, all amounts outstanding under STI’s 2011 credit facility are expected to be fully repaid, and the company’s liquidity is expected to increase by an aggregate of about $30 mill.
In March 2017, STI completed a $50 mill underwritten public offering of Senior Notes due 2019 and issued an additional $7.5 mill of Senior Notes due 2019 in April 2017 when the underwriters fully exercised their option to purchase additional notes under the same terms and conditions.
This month, the company completed a cash tender offer for its Senior Notes due 2017 and repurchased $6.1 mill aggregate principal amount of the Senior Notes due 2017. As of 26th April, 2017, the outstanding aggregate principal amount of the Senior Notes due 2017 was $45.7 mill.
Also in March, 2017, STI executed a loan facility of up to $81.4 mill with DVB Bank to refinance its previous facility with the same bank. The same month saw STI execute a senior secured term loan facility with a group of financial institutions led by Macquarie Bank for a total loan facility of up to $172 mill.
Last month, $20.4 mill was drawn from this facility to partially finance the purchase of ‘STI Galata’ and this month, $20.4 mill was drawn to partially finance the purchase of ’STI Bosphorus’. The remaining availability is expected to be used to partially finance the purchase of six MRs that are currently under construction at HMD.
In January and February, 2017, the Company refinanced the outstanding debt related to ‘STI Sapphire’ and ‘STI Emerald’ by repaying an aggregate of $26.3 mill on the 2011 credit facility and drawing down an aggregate amount of $27.6 mill from this facility.
In January, 2017, the Company entered into a senior secured credit facility agreement with HSH Nordbank for $31.1 mill. In February, 2017, STI refinanced the outstanding debt related to ‘STI Duchessa’ and ‘STI Onyx’ by repaying an aggregate of $23.7 mill on the 2011 credit facility and drawing down an aggregate of $31.1 mill from this facility.
In February, 2017, STI entered into new timecharter agreements for two 2007-built, Ice Class 1B Handymaxes for one year at $11,250 per day each, one effective March, 2017 and the other effective May, 2017. STI also has options to extend these charters for an additional year, each at $13,250 per day.
In February 2017, STI also chartered in a 2013-built, LR2 for an additional six months at $14,360 per day effective February, 2017. An option is available to extend the charter for an additional six months at $15,385 per day.
As of 31st March, 2017, the company had seven MRs under construction with HMD and took delivery of ‘STI Bosphorus’ in April, 2017.