TEN maintains cost control - bullish going forward

Dec 01 2017


TEN reported that net income for the first nine months of 2017 was $17.7 mill, while operating income was $60.3 mill.

EBITDA totalled $163.3 mill. All of the vessels generated positive EBITDA in the nine months apart from two Aframaxes which underwent drydocking in the second quarter.

 

The daily TCE rate per vessel for the company’s diversified fleet was $19,141 and fleet utilisation was at 96.4%.

 

TEN and its technical managers claimed to have maintained their cost control with average daily operating expenses per vessel of $7,640, a 2.5% reduction compared to the equivalent nine months of 2016. Vessel overhead costs per ship per day also experienced significant reductions - from $1,357 in the 2016 nine-month period to $1,126 in the same period 2017, a 17% reduction.

 

The addition of nine new vessels since 30th September, 2016 increased depreciation and drydocking amortisation costs to $102.5 mill, compared to $81.7 mill for the same period of 2016.

 

Interest and finance costs reached $43.1 mill, mainly due to the increased size of fleet and to general rate of interest increases, while capitalised interest fell as TEN’s newbuilding programme approached its end.

 

“With nine-month profits and an improving fourth quarter, we expect TEN to record another positive year in its 24-year long history,” COO George Saroglou, said. “With 30% fleet expansion concluded in the last 18 months and now the whole fleet in full force, TEN is strategically positioned to take advantage of the improving environment and be a prime beneficiary going forward.”

 

For the third quarter of this year, operating income amounted to $11.3 mill, a 6.2% increase over 3Q16, mainly due to the additional vessels in the fleet.

 

However, the sustained softness in the spot markets during the summer months, the costs associated with the new deliveries and the bringing forward of three drydockings, in order to secure the vessels availability for the seasonally stronger fourth quarter, led to TEN incurring net losses of $3.4 mill.

 

Market conditions in general remained difficult throughout 3Q17, primarily due to a concentrated period of global vessel deliveries in an otherwise light tanker orderbook, seasonal refinery outages, high oil inventories and to an extent OPEC production cuts. Nevertheless, the fleet operated at 95.5% utilisation in 3Q17, during which TEN operated on average a fleet of 63.7 vessels.

 

With such high utilisation rates, underscored by the quality of both vessels and TEN’s operational ability, coupled with the benefit of having all fully employed 15 newbuildings contributing to the bottom line unlike prior quarters, the upcoming periods should be positive.

 

With these 15 vessels expected to increase the company’s revenues by 30%, TEN’s cash build-up and dividend payments will be further solidified, it claimed.

 

Revenues, net of voyage expenses amounted to $96.9 mill, a 18.4% increase from 3Q16, due mainly to the nine newbuilding vessels delivered since the end of 3Q16.

 

Operating costs per day per vessel declined nearly 2% to $7,474 during the quarter with savings accrued on repair spares, insurance costs, lubricants, sundry expenses and general economies of scale associated to the increase of the fleet.

 

Vessels on time charter accounted for 70% of 3Q17 operating days, compared to 59% in 3Q16  and generated enough gross revenue to cover virtually all of the voyage, operating, overhead and net financial costs of the whole fleet, including vessels on spot, TEN said.

 

EBITDA for 3Q17 amounted to $48 mill, an 18.4% increase over the 3Q16 figure.

 

The newbuilding Aframax ‘Stavanger TS’ was delivered in the third quarter and the last vessel in the 15-vessel newbuilding programme, the Aframax ‘Bergen TS’, was delivered in October.

 

These vessels, with their long-term industrial contracts, will provide new sources of revenue in the fourth quarter and beyond, contributing to an expected improvement in overall revenues, resulting from the increases in freight rates already being witnessed, TEN said.

 

Cash balance as of 30th September, 2017 was $225.9 mill. With the newbuilding programme having now been completed, no new debt is expected to be drawn in the foreseeable future.

 

Therefore, it is expected that debt levels and finance costs will decline further. Net debt to capital at the end of 3Q17 was at comfortable 51.5%.

 

With the completion of the largest growth programme in TEN’s 24-year history, management continues to position the Company to take advantage of healthier markets, as the current rate of newbuilding deliveries should be abating over the coming few months, the company explained.

 

Primary focus has been placed on contracts with profit sharing provisions that, on the one hand, cover vessel expenses while on the other secure a notable participation in market upturns. As a result, the number of days in 3Q17 that vessels operated on such flexible contracts increased by over 72%, compared to last year’s third quarter.

 

With 30% revenue expansion expected in 2018 just from the full operations of the new vessels and tangible signs of market improvements, TEN said that it remained well positioned to comfortably navigate the upcoming quarters and take advantage of opportunities as they appear.

 



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