First Quarter 2007 - Full Speed Ahead (08.05.07)
After delivery of the first product tanker in February, Aker American Shipping (AKASA) now has activity in both its main business areas. With significant financing facilities and solid order book in place, the main focuses are to leverage the position as a ship owner and improve cost efficiency as a ship builder.
OSLO / PHILADELPHIA (May 7, 2007) – Aker American Shipping had a positive EBITDA result of USD 1.1 million.
Operating revenues for Q1 2007 were USD 1.2 million. The first product tanker was put into service on February 9th and revenues represent bareboat charter rates from OSG. First quarter of 2006 had revenues of USD 18.8 million as the activity in this period comprised work on the last container vessel, in addition to work on the first two product tankers.
Net loss was USD 2.6 million for Q1 of 2007, whereas the Q1 result in 2006 was a profit of USD 2.4 million. Net financial items year to date are negative with USD 3.0 million. This loss includes a USD 2.4 million non recurring charge related to a new financing agreement with Fortis for USD 800 million for the initial 10 product tankers.
The facility finances net USD 80 million per vessel, and replaced the existing USD 350 million facility, which had a financing of net USD 70 million per vessel. Aker American Shipping has also entered into interest swaps to secure the interest rate exposure of the new credit facility. A bond to finance working capital for all 16 tankers, in the amount of NOK 700 million was successfully issued February 16th.
Aker American Shipping and Overseas Shipholding Group (OSG), signed an agreement in principle on February 7, 2007, where Aker Philadelphia Shipyard, will construct up to six additional Veteran Class MT-46 Jones Act Product Tankers (three fixed plus three options), keep ownership through subsidiaries and in line with Aker American Shipping’s business concept bareboat charter them to subsidiaries of OSG for initial terms of 10-15 years. Work is ongoing to finalize the documentation of this deal.
Construction reached 94.4% for the second, 64.3% for the third, 18.2% for the fourth and steel cutting began on the fifth of the initial ten product tankers to be leased to OSG. As this represents construction of own assets, related costs of USD 292.3 million are included in property, plant & equipment (PPE) for product tankers 2 through 5. Also included in this PPE number is the net value of the first product tanker owned by American Shipping Corporation (ASC). The remainder of PPE, USD 72.8 million, is net value of fixed assets.
Following the delivery of container vessel 4 on July 12th 2006, there is no longer any ship under construction in inventories. The USD 19 million represents equipment prepayments related to the last five of the initial ten product tankers, where production has not yet started (USD 12.9 million) and contractual holdbacks related to delivered vessels (USD 6.1 million). The construction loan was paid down with the delivery of the first product tanker to USD 70 million during the first quarter.
Interest bearing long term debt increased with approximately $115 million from the bond issue and the remainder related to the first drawdown of the Fortis facility upon delivery of the first tanker.
Operations
American Shipping Corporation
Aker American Shipping has entered into agreements for the construction and bareboat charter of up to sixteen new build 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 9 of the 10 initial vessels on long term charters.
The first product tanker, the Overseas Houston, was delivered to ASC February 9th, and then leased to OSG which operates it on a long term charter with Shell.
Aker Philadelphia Shipyard
The second product tanker was launched on March 17th and is in the testing and commissioning phase with delivery planned for this summer. The third and fourth product tankers are in the yard’s Building Dock undergoing hull erection and outfitting. The fifth product tanker started construction on March 23rd.
The Technical Services Agreement with Hyundai Mipo Dockyards (HMD) was extended to include additional product tankers as well as exclusive rights to construct HMD containerships for the Jones Act.
The yard continues to focus on completion of the tanker series. The improvement program AIM 200 is being implemented to increase productivity and cost effectiveness.
A continued high demand for skilled construction labor and a temporary interruption in the operation of the yard’s 600t gantry crane add to the challenge of recovering the schedule disruptions previously experienced.
Outlook
The transition from the sale of container vessels to the bareboat charter of product tankers has now been completed. Going forward, revenues will be generated from participation in ship operations in the US Jones Act product tanker market, as with the first product tanker chartered to OSG which went into operation for Shell Oil. The second product tanker is expected to start earning revenues from Q3 of 2007.
Consequently Aker American Shipping will have low revenues in 2007, but expects a positive EBITDA result.
The additional order of up to 6 more product tankers will provide a steady construction backlog into 2012.
It is believed that Jones Act market product tanker rates will continue to strengthen as single hull tonnage is removed from service.
The increasing bareboat charter revenues and ship operation profits together with continuing learning curve gains from building consecutive series of product tankers are expected to more than compensate for material and labor cost increases in today’s market in building of the product tankers.
The required renewal of the US Jones Act tonnage persists and accordingly Aker American Shipping continues to evaluate opportunities to secure a new building program beyond 2012. Aker American Shipping‘s first mover advantages, prior experience, and access to modern product tanker and containership designs make it the preferred partner for Jones Act vessel construction.
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.
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.
May 7th, 2007
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.
Operating revenues for Q1 2007 were USD 1.2 million. The first product tanker was put into service on February 9th and revenues represent bareboat charter rates from OSG. First quarter of 2006 had revenues of USD 18.8 million as the activity in this period comprised work on the last container vessel, in addition to work on the first two product tankers.
Net loss was USD 2.6 million for Q1 of 2007, whereas the Q1 result in 2006 was a profit of USD 2.4 million. Net financial items year to date are negative with USD 3.0 million. This loss includes a USD 2.4 million non recurring charge related to a new financing agreement with Fortis for USD 800 million for the initial 10 product tankers.
The facility finances net USD 80 million per vessel, and replaced the existing USD 350 million facility, which had a financing of net USD 70 million per vessel. Aker American Shipping has also entered into interest swaps to secure the interest rate exposure of the new credit facility. A bond to finance working capital for all 16 tankers, in the amount of NOK 700 million was successfully issued February 16th.
Aker American Shipping and Overseas Shipholding Group (OSG), signed an agreement in principle on February 7, 2007, where Aker Philadelphia Shipyard, will construct up to six additional Veteran Class MT-46 Jones Act Product Tankers (three fixed plus three options), keep ownership through subsidiaries and in line with Aker American Shipping’s business concept bareboat charter them to subsidiaries of OSG for initial terms of 10-15 years. Work is ongoing to finalize the documentation of this deal.
Construction reached 94.4% for the second, 64.3% for the third, 18.2% for the fourth and steel cutting began on the fifth of the initial ten product tankers to be leased to OSG. As this represents construction of own assets, related costs of USD 292.3 million are included in property, plant & equipment (PPE) for product tankers 2 through 5. Also included in this PPE number is the net value of the first product tanker owned by American Shipping Corporation (ASC). The remainder of PPE, USD 72.8 million, is net value of fixed assets.
Following the delivery of container vessel 4 on July 12th 2006, there is no longer any ship under construction in inventories. The USD 19 million represents equipment prepayments related to the last five of the initial ten product tankers, where production has not yet started (USD 12.9 million) and contractual holdbacks related to delivered vessels (USD 6.1 million). The construction loan was paid down with the delivery of the first product tanker to USD 70 million during the first quarter.
Interest bearing long term debt increased with approximately $115 million from the bond issue and the remainder related to the first drawdown of the Fortis facility upon delivery of the first tanker.
Operations
American Shipping Corporation
Aker American Shipping has entered into agreements for the construction and bareboat charter of up to sixteen new build 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 9 of the 10 initial vessels on long term charters.
The first product tanker, the Overseas Houston, was delivered to ASC February 9th, and then leased to OSG which operates it on a long term charter with Shell.
Aker Philadelphia Shipyard
The second product tanker was launched on March 17th and is in the testing and commissioning phase with delivery planned for this summer. The third and fourth product tankers are in the yard’s Building Dock undergoing hull erection and outfitting. The fifth product tanker started construction on March 23rd.
The Technical Services Agreement with Hyundai Mipo Dockyards (HMD) was extended to include additional product tankers as well as exclusive rights to construct HMD containerships for the Jones Act.
The yard continues to focus on completion of the tanker series. The improvement program AIM 200 is being implemented to increase productivity and cost effectiveness.
A continued high demand for skilled construction labor and a temporary interruption in the operation of the yard’s 600t gantry crane add to the challenge of recovering the schedule disruptions previously experienced.
Outlook
The transition from the sale of container vessels to the bareboat charter of product tankers has now been completed. Going forward, revenues will be generated from participation in ship operations in the US Jones Act product tanker market, as with the first product tanker chartered to OSG which went into operation for Shell Oil. The second product tanker is expected to start earning revenues from Q3 of 2007.
Consequently Aker American Shipping will have low revenues in 2007, but expects a positive EBITDA result.
The additional order of up to 6 more product tankers will provide a steady construction backlog into 2012.
It is believed that Jones Act market product tanker rates will continue to strengthen as single hull tonnage is removed from service.
The increasing bareboat charter revenues and ship operation profits together with continuing learning curve gains from building consecutive series of product tankers are expected to more than compensate for material and labor cost increases in today’s market in building of the product tankers.
The required renewal of the US Jones Act tonnage persists and accordingly Aker American Shipping continues to evaluate opportunities to secure a new building program beyond 2012. Aker American Shipping‘s first mover advantages, prior experience, and access to modern product tanker and containership designs make it the preferred partner for Jones Act vessel construction.
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.
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.
May 7th, 2007
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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