Third quarter 2006 - Eight of Ten Product Tankers Now Under Time Charters (03.11.06)
Third quarter 2006 – After close of the third quarter two more product tankers were signed up with Tesoro, leaving only two tankers in the ten ship series not yet secured by external end users. This confirms a strong market for the product tankers.
OSLO / PHILADELPHIA (November 3, 2006) – The fourth container vessel (CV 4) was delivered to Matson on July 12th. The shipyard is from now solely focusing on production of the 10 product tankers. The first product tanker was launched on September 18th, and a Naming Ceremony for the vessel will be held November 11th.
During the third quarter of 2006, AKASA has produced a result in line with previous expectations. EBITDA was USD 0.1 million for third quarter compared to USD 3.0 million for the same period last year.
Profit after tax was USD 2.6 million for Q3 of 2006, whereas the Q3 result in 2005 was a profit of USD 11.2 million. Net financial items year to date are positive with USD 5.6 million, including reversal of $2.2 million in loss booked in Q4 last year related to the interest swaps for the long term financing.
Operating revenues for the third quarter of 2006 were USD 3.4 million, which represents the completion of the fourth container vessel in the period. Third quarter of 2005 had revenues of USD 29.1 million as the main activity in this period was on container vessels 3 and 4, whereas the main activity in third quarter this year was on the 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 90.4% complete for the first, 60.1% for the second and 11.7% for the third of the ten product tankers to be leased to OSG. As this represents construction of own assets, related costs of USD 92 million (PT1), USD 58 million (PT2) and USD 20m (PT3/4) are included in property, plant & equipment (PPE). The remainder, USD 74 million, is net value of fixed assets.
Following the delivery of container vessel 4 on July 12, there is no longer any ship under construction in inventories. The USD 19 million represents equipment prepayments related to all the 10 product tankers. The construction loan is reduced with net USD 52 million in the quarter after delivery of NB 004.
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. To date, OSG has placed 8 of the 10 vessels on long term charters. It is believed that the Jones Act product tanker charter rates will continue to strengthen.
The required renewal of the US Jones Act tonnage persists and accordingly AKASA continues to evaluate opportunities to secure a build program beyond 2010. AKASA‘s first mover advantages and experiences in both the product tanker and containership fleet modernizations will be integral to this analysis.
Operations
Construction has been finalized on the fourth container vessel which was delivered to Matson July 12th. The vessel was originally planned to be delivered during second quarter of 2006, but an accident during loading of the ship’s main engine in Spain delayed installation, testing and commissioning activity for the container vessel, and consequently resulted in a later delivery for this vessel. This delay and related change in building sequence has put extra pressure on the completion period for the first product tanker. Similarly, high activity level in the US construction industry is anticipated to continue to cause strain on human resources, sub-contractors and suppliers
Work on the first product tanker is now in the completion phase with testing and commissioning as the main activities. Production start on the fourth tanker took place mid October as planned. With multiple ships now under construction, developing the capacity and cost efficiency of the yard and the yard‘s suppliers and sub-contractor network will be key focus areas going forward.
Outlook
The third quarter result for 2006 was as expected. Revenues and profit are recognized according to the percentage of completion of a vessel, and only around two weeks of activity on the last CV was included in the third quarter. The contribution 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 ended 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 when the first product tanker chartered to OSG goes into operation. AKASA expects a slightly negative result in the second half of 2006, but the year as a whole is expected to have a positive result.
With eight of the ten vessels now under charter agreements to Shell, BP and Tesoro, we expect interest to remain strong for first class users to enter into charter agreements. With the strengthening charter market, such new charter agreements could provide the basis for additional profit sharing contributions to AKASA.
AKASA has already started working on securing permanent financing for the last 5 of the product tankers with OSG, as well as optimizing the construction financing funding for the remaining product tankers. This also comprises working capital needs for possible further order backlog growth.
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.
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 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 for the first six months of 2005 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).
November 3rd, 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.
During the third quarter of 2006, AKASA has produced a result in line with previous expectations. EBITDA was USD 0.1 million for third quarter compared to USD 3.0 million for the same period last year.
Profit after tax was USD 2.6 million for Q3 of 2006, whereas the Q3 result in 2005 was a profit of USD 11.2 million. Net financial items year to date are positive with USD 5.6 million, including reversal of $2.2 million in loss booked in Q4 last year related to the interest swaps for the long term financing.
Operating revenues for the third quarter of 2006 were USD 3.4 million, which represents the completion of the fourth container vessel in the period. Third quarter of 2005 had revenues of USD 29.1 million as the main activity in this period was on container vessels 3 and 4, whereas the main activity in third quarter this year was on the 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 90.4% complete for the first, 60.1% for the second and 11.7% for the third of the ten product tankers to be leased to OSG. As this represents construction of own assets, related costs of USD 92 million (PT1), USD 58 million (PT2) and USD 20m (PT3/4) are included in property, plant & equipment (PPE). The remainder, USD 74 million, is net value of fixed assets.
Following the delivery of container vessel 4 on July 12, there is no longer any ship under construction in inventories. The USD 19 million represents equipment prepayments related to all the 10 product tankers. The construction loan is reduced with net USD 52 million in the quarter after delivery of NB 004.
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. To date, OSG has placed 8 of the 10 vessels on long term charters. It is believed that the Jones Act product tanker charter rates will continue to strengthen.
The required renewal of the US Jones Act tonnage persists and accordingly AKASA continues to evaluate opportunities to secure a build program beyond 2010. AKASA‘s first mover advantages and experiences in both the product tanker and containership fleet modernizations will be integral to this analysis.
Operations
Construction has been finalized on the fourth container vessel which was delivered to Matson July 12th. The vessel was originally planned to be delivered during second quarter of 2006, but an accident during loading of the ship’s main engine in Spain delayed installation, testing and commissioning activity for the container vessel, and consequently resulted in a later delivery for this vessel. This delay and related change in building sequence has put extra pressure on the completion period for the first product tanker. Similarly, high activity level in the US construction industry is anticipated to continue to cause strain on human resources, sub-contractors and suppliers
Work on the first product tanker is now in the completion phase with testing and commissioning as the main activities. Production start on the fourth tanker took place mid October as planned. With multiple ships now under construction, developing the capacity and cost efficiency of the yard and the yard‘s suppliers and sub-contractor network will be key focus areas going forward.
Outlook
The third quarter result for 2006 was as expected. Revenues and profit are recognized according to the percentage of completion of a vessel, and only around two weeks of activity on the last CV was included in the third quarter. The contribution 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 ended 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 when the first product tanker chartered to OSG goes into operation. AKASA expects a slightly negative result in the second half of 2006, but the year as a whole is expected to have a positive result.
With eight of the ten vessels now under charter agreements to Shell, BP and Tesoro, we expect interest to remain strong for first class users to enter into charter agreements. With the strengthening charter market, such new charter agreements could provide the basis for additional profit sharing contributions to AKASA.
AKASA has already started working on securing permanent financing for the last 5 of the product tankers with OSG, as well as optimizing the construction financing funding for the remaining product tankers. This also comprises working capital needs for possible further order backlog growth.
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.
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 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 for the first six months of 2005 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).
November 3rd, 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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