First quarter 2006 – Strong interest from market for new product tankers. (02.05.06)
Now, long term contracts for six of ten product tankers in place.
OSLO / PHILADELPHIA (May 2, 2006) – After close of the first quarter of 2006, another two-ship time charter contract was signed between Overseas Shipholding Group, Inc. (OSG) and Tesoro. The contract is estimated to result in profit sharing contribution for Aker American Shipping (AKASA).
OSLO / PHILADELPHIA (May 2, 2006) – After close of the first quarter of 2006, another two-ship time charter contract was signed between Overseas Shipholding Group, Inc. (OSG) and Tesoro. The contract is estimated to result in profit sharing contribution for Aker American Shipping (AKASA).
During the first quarter of 2006, AKASA has continued to produce a positive result in line with previous expectations. EBITDA was USD 2.8 million for first quarter compared to USD 3.6 million for the same period last year.
Profit after tax was USD 2.4 million for Q1 of 2006, whereas the pro forma Q1 result in 2005 was USD 2.0 million. Positive net financial items is due to reversal of $2.2 million in loss booked last year related to the interest swaps for the long term financing.
Operating revenues for the first quarter of 2006 were USD 18.8 million, which represent the progress achieved on the fourth container vessel in the period. First quarter of 2005 had revenues of USD 140.5 million as a contract for Container Vessels CV 3 and 4 was signed during this period, and no revenues had been recognized earlier.
The first quarter revenues are lower than the previous quarter as the main activity now is related to construction of the first and second product tankers. As previously reported, there will be no revenue from the product tankers before they are in operation (the first at end of this year).
Construction reached 58% complete for the first of the ten product tankers leased to OSG. As this represents construction of own assets, related costs of USD 63 million are included in property, plant & equipment (PPE) with USD 18 million related to the second product tanker as construction commenced in November of 2005. The second product tanker was 9% complete by the end of first quarter.
Interest bearing long-term receivables of USD 15.4 million is a margin call related to securing the interest rates for all ten tankers and restricted cash related to prepayments. Other non-current assets represent prepaid financing fees and other prepaid costs related to construction and long-term financing of the product tankers.
Jones Act Market
In June 2005, AKASA entered into agreements for the construction and bareboat charter of ten newbuild Jones Act product tankers. The vessels have been chartered to OSG which will charter the vessels to end users in the Jones Act market.
The Jones Act product tanker time charter rates have remained firm and healthy during the first quarter, continuing the strong trend seen throughout the past year. Industry experts continue to report spot charter rates at levels 10-20% higher than the same period in 2005.
Operations
Construction continued on the fourth container vessel to be delivered to Matson. An accident during loading of the ship’s main engine in Spain has delayed installation, testing and commissioning activity for the container vessel. Although this event will lead to a later delivery for this vessel, currently expected early July, no negative financial impact is anticipated. The main engine has now been delivered and installed onboard the vessel, and work is on track for delivery early in Q3.
Work on the first product tanker is progressing with all of the steel cut / under assembly and major blocks dock mounted. All of the equipment has been received for this vessel. More than half of the steel for the second tanker is in construction and more than 70% of the equipment has been shipped. Production start on the third tanker is expected to take place mid May.
Outlook
The first quarter result for 2006 was as expected. Profit is recognized according to the percentage of completion of a vessel. Positive margin from construction of product tankers is eliminated in the consolidated accounts as this represents internal sales.
As the transition is made from the sale of container vessels to the bareboat charter of product tankers, revenues from ship sales will end with delivery of the fourth container vessel in Q3 of this year. There will be revenues from participation in ship operations in the US Jones Act product tanker market starting in Q4 of 2006 when the first product tanker chartered to OSG goes into operation. AKASA expects a slightly positive operating result in the first half of 2006 as CV 4 is completed. The second half of the year will be slightly negative as the SG&A cost can not be capitalized to the vessels. The year as a whole is expected to have a positive operating result.
With six of the ten vessels now under charter agreements to Shell, BP and Tesoro, we expect interest to remain strong for other first class users to enter into charter agreements. With the continued strong charter market, such new charter agreements could provide the basis for additional profit sharing contributions to AKASA.
During 2006, AKASA will continue to evaluate the opportunities for securing a build program beyond 2010. Such a build program could, among others, include product tankers, shuttle tankers, container vessels and ro-ro’s.
Definitions
Jones Act - The U.S. coastwise laws, referred to as Jones Act, require all commercial vessels operating between U.S. ports to be built, owned, operated and manned by U.S. citizens and to be registered under the U.S. flag. In 1996 certain amendments were enacted to the U.S. vessel documentations laws, allowing increased non-U.S. participation in the ownership of vessels operating in the Jones Act trade under certain conditions.
OPA 90 - The Oil Pollution Act (OPA 90) was enacted in 1990 as a result of the Exxon Valdez oil spill. OPA 90 requires all tankers in U.S. waters to have double hull by 2015.
The total Jones Act Product Carrier fleet consists of 43 vessels, totaling 1,8 million dwt. Some 60% of this fleet is not double hull and will be phased out over the next ten years as a result of the OPA 90 regulations.
This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, and the accounting principles in the report are consistent with the principles which will be used for annual reporting.
The pro forma reporting has retroactively been adjusted for the effects of the fair value purchase price distribution allocating a depreciation expense and other adjustments to the pro forma income statement in the first six months of 2005.
Aker American Shipping ASA (AKASA) commenced operations 28 June 2005, with AKASA taking control of the shares in Kvaerner Philadelphia Shipyard, Inc (KPSI). From a reporting standpoint the takeover date is assumed to be 30 June 2005. The pro forma reported income statements, cash flows, equity reconciliations and balance sheet are historic KPSI accounts adjusted for pro forma equity and converted to IFRS accounting. During the third quarter of 2005, the shipyard was renamed Aker Philadelphia Shipyard (APSI).
May 2nd, 2006
Board of Directors
Aker American Shipping ASA
Contact information:
Aker American Shipping ASA
Fjordalleen 16
Postboks 1423 Vika
0115 Oslo
NORWAY
David Meehan
President & CEO
Tel: + 1 215 875 2601
Cell: + 1 215 203 2708
dave.meehan@phillyshipyard.com
Jan Ivar Nielsen
CFO
Tel: +1 215 875 2678
Cell: +1 215 203 2713
jan-ivar.nielsen@phillyshipyard.com
Bengt A. Rem
Vice President
Tel: +4724130000
Cell: +4791630030
bar@akerasa.com
Disclaimer
This press release includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Aker American Shipping ASA and its subsidiaries and affiliates (the "Aker American Shipping Group") lines of business. These expectations, estimates, and projections are generally identifiable by statements containing words such as "expects,” "believes,” "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the Aker American Shipping Group’s businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. Although Aker American Shipping ASA believes that its expectations and the information in this Press release were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this Press release. Neither Aker American Shipping ASA nor any other company within the Aker American Shipping Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Press release, and neither Aker American Shipping ASA, any other company within the Aker American Shipping Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the Press release.
Aker American Shipping ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the press release, other than what is required by law.
The Aker American Shipping Group consists of many legally independent entities, constituting their own separate identities. Aker American Shipping is used as the common brand or trade mark for most of these entities. In this press release we may sometimes use "Aker American Shipping”," "Group, "we," or "us," when we refer to Aker American Shipping companies in general or where no useful purpose is served by identifying any particular Aker American Shipping company.
Profit after tax was USD 2.4 million for Q1 of 2006, whereas the pro forma Q1 result in 2005 was USD 2.0 million. Positive net financial items is due to reversal of $2.2 million in loss booked last year related to the interest swaps for the long term financing.
Operating revenues for the first quarter of 2006 were USD 18.8 million, which represent the progress achieved on the fourth container vessel in the period. First quarter of 2005 had revenues of USD 140.5 million as a contract for Container Vessels CV 3 and 4 was signed during this period, and no revenues had been recognized earlier.
The first quarter revenues are lower than the previous quarter as the main activity now is related to construction of the first and second product tankers. As previously reported, there will be no revenue from the product tankers before they are in operation (the first at end of this year).
Construction reached 58% complete for the first of the ten product tankers leased to OSG. As this represents construction of own assets, related costs of USD 63 million are included in property, plant & equipment (PPE) with USD 18 million related to the second product tanker as construction commenced in November of 2005. The second product tanker was 9% complete by the end of first quarter.
Interest bearing long-term receivables of USD 15.4 million is a margin call related to securing the interest rates for all ten tankers and restricted cash related to prepayments. Other non-current assets represent prepaid financing fees and other prepaid costs related to construction and long-term financing of the product tankers.
Jones Act Market
In June 2005, AKASA entered into agreements for the construction and bareboat charter of ten newbuild Jones Act product tankers. The vessels have been chartered to OSG which will charter the vessels to end users in the Jones Act market.
The Jones Act product tanker time charter rates have remained firm and healthy during the first quarter, continuing the strong trend seen throughout the past year. Industry experts continue to report spot charter rates at levels 10-20% higher than the same period in 2005.
Operations
Construction continued on the fourth container vessel to be delivered to Matson. An accident during loading of the ship’s main engine in Spain has delayed installation, testing and commissioning activity for the container vessel. Although this event will lead to a later delivery for this vessel, currently expected early July, no negative financial impact is anticipated. The main engine has now been delivered and installed onboard the vessel, and work is on track for delivery early in Q3.
Work on the first product tanker is progressing with all of the steel cut / under assembly and major blocks dock mounted. All of the equipment has been received for this vessel. More than half of the steel for the second tanker is in construction and more than 70% of the equipment has been shipped. Production start on the third tanker is expected to take place mid May.
Outlook
The first quarter result for 2006 was as expected. Profit is recognized according to the percentage of completion of a vessel. Positive margin from construction of product tankers is eliminated in the consolidated accounts as this represents internal sales.
As the transition is made from the sale of container vessels to the bareboat charter of product tankers, revenues from ship sales will end with delivery of the fourth container vessel in Q3 of this year. There will be revenues from participation in ship operations in the US Jones Act product tanker market starting in Q4 of 2006 when the first product tanker chartered to OSG goes into operation. AKASA expects a slightly positive operating result in the first half of 2006 as CV 4 is completed. The second half of the year will be slightly negative as the SG&A cost can not be capitalized to the vessels. The year as a whole is expected to have a positive operating result.
With six of the ten vessels now under charter agreements to Shell, BP and Tesoro, we expect interest to remain strong for other first class users to enter into charter agreements. With the continued strong charter market, such new charter agreements could provide the basis for additional profit sharing contributions to AKASA.
During 2006, AKASA will continue to evaluate the opportunities for securing a build program beyond 2010. Such a build program could, among others, include product tankers, shuttle tankers, container vessels and ro-ro’s.
Definitions
Jones Act - The U.S. coastwise laws, referred to as Jones Act, require all commercial vessels operating between U.S. ports to be built, owned, operated and manned by U.S. citizens and to be registered under the U.S. flag. In 1996 certain amendments were enacted to the U.S. vessel documentations laws, allowing increased non-U.S. participation in the ownership of vessels operating in the Jones Act trade under certain conditions.
OPA 90 - The Oil Pollution Act (OPA 90) was enacted in 1990 as a result of the Exxon Valdez oil spill. OPA 90 requires all tankers in U.S. waters to have double hull by 2015.
The total Jones Act Product Carrier fleet consists of 43 vessels, totaling 1,8 million dwt. Some 60% of this fleet is not double hull and will be phased out over the next ten years as a result of the OPA 90 regulations.
This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, and the accounting principles in the report are consistent with the principles which will be used for annual reporting.
The pro forma reporting has retroactively been adjusted for the effects of the fair value purchase price distribution allocating a depreciation expense and other adjustments to the pro forma income statement in the first six months of 2005.
Aker American Shipping ASA (AKASA) commenced operations 28 June 2005, with AKASA taking control of the shares in Kvaerner Philadelphia Shipyard, Inc (KPSI). From a reporting standpoint the takeover date is assumed to be 30 June 2005. The pro forma reported income statements, cash flows, equity reconciliations and balance sheet are historic KPSI accounts adjusted for pro forma equity and converted to IFRS accounting. During the third quarter of 2005, the shipyard was renamed Aker Philadelphia Shipyard (APSI).
May 2nd, 2006
Board of Directors
Aker American Shipping ASA
Contact information:
Aker American Shipping ASA
Fjordalleen 16
Postboks 1423 Vika
0115 Oslo
NORWAY
David Meehan
President & CEO
Tel: + 1 215 875 2601
Cell: + 1 215 203 2708
dave.meehan@phillyshipyard.com
Jan Ivar Nielsen
CFO
Tel: +1 215 875 2678
Cell: +1 215 203 2713
jan-ivar.nielsen@phillyshipyard.com
Bengt A. Rem
Vice President
Tel: +4724130000
Cell: +4791630030
bar@akerasa.com
Disclaimer
This press release includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Aker American Shipping ASA and its subsidiaries and affiliates (the "Aker American Shipping Group") lines of business. These expectations, estimates, and projections are generally identifiable by statements containing words such as "expects,” "believes,” "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the Aker American Shipping Group’s businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. Although Aker American Shipping ASA believes that its expectations and the information in this Press release were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this Press release. Neither Aker American Shipping ASA nor any other company within the Aker American Shipping Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Press release, and neither Aker American Shipping ASA, any other company within the Aker American Shipping Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the Press release.
Aker American Shipping ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the press release, other than what is required by law.
The Aker American Shipping Group consists of many legally independent entities, constituting their own separate identities. Aker American Shipping is used as the common brand or trade mark for most of these entities. In this press release we may sometimes use "Aker American Shipping”," "Group, "we," or "us," when we refer to Aker American Shipping companies in general or where no useful purpose is served by identifying any particular Aker American Shipping company.
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