Second Quarter 2007 - Building up our Fleet (14.08.07)
The second product tanker was delivered in June expanding Aker American Shipping’s (AKASA) footprint as a market leader in ship construction and leasing. Our shipyard remains focused on productivity and cost improvements as Aker American Shipping continues the build/lease program of the initial ten product tankers.
OSLO / PHILADELPHIA (August 14, 2007) – Aker American Shipping had a positive EBITDA result of USD 1.0 million.
Operating revenues for Q2 2007 were USD 2.2 million. The second product tanker was put into service on June 26th and revenues represent bareboat charter rates from OSG for the first two tankers which are in operation. Second quarter of 2006 had revenues of USD 14.6 million as the activity in this period comprised work on the last container vessel.
The net result was minus USD 1.5 million for Q2 of 2007, whereas the Q2 result in 2006 was a profit of USD 1.0 million.
The Fortis facility finances net USD 80 million per vessel. Aker American Shipping entered into interest swaps to secure the interest rate exposure of this new credit facility. A bond to finance working capital for all tankers, in the amount of NOK 700 million was successfully issued February 16th. The company has entered into forward contracts to mitigate its currency exposure. Additionally, the company closed on a loan of up to USD 20 million with interest-only of 2.75% for five years. This loan will fund further expansion and upgrades at the shipyard.
Aker American Shipping and Overseas Shipholding Group (OSG), signed an agreement in principle in Q1, where Aker Philadelphia Shipyard would 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, and bareboat charter them to subsidiaries of OSG for initial terms of 10-15 years. The company continues to finalize the documentation of this deal, although the inclusion of the three option ships could depend upon the outcome of OSG’s appeal of the recent MSC award.
Construction reached 82.7% for the third, 45.9% for the fourth and 6.8% for the fifth of the initial ten product tankers to be leased to OSG. As this represents construction of own assets, related costs of USD 359.1 million are included in property, plant & equipment (PPE) for product tankers 3 through 5. Also included in this PPE number is the net value of the first two product tankers owned by American Shipping Corporation (ASC). The remainder of PPE, USD 72.1 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 23.6 million represents equipment prepayments related to the last four of the initial ten product tankers, where production has not yet started (USD 17.5 million) and contractual holdbacks related to delivered vessels (USD 6.1 million). The construction loan was further paid down in the second quarter with the delivery of the second product tanker to USD 59 million.
Interest bearing long term debt increased with approximately $121 million from the bond issue and the remainder related to the first two draw downs of the Fortis facility upon delivery of the first tankers.
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 second product tanker, the Overseas Long Beach, was delivered to ASC on June 26th, and then leased to OSG which operates it on a long term charter with BP Shipping. The Overseas Houston was delivered to ASC in February and then leased to OSG which operates it on a long term charter to Shell. Since then it has been serving primarily the West Coast.
Aker Philadelphia Shipyard
The second product tanker commenced sea trials on June 5th and successfully completed all required tests in the allotted time permitting a smooth delivery on June 26th. The third and fourth product tankers are in the yard’s Building Dock undergoing hull erection and outfitting. The third vessel is expected to be floated out of the dock at the end of August. The fifth product tanker started construction on March 23rd and keel laying will take place early this fall. Steel cutting on the sixth product tanker will begin in August.
The yard continues to focus on developing the learning curve. The improvement program AIM 200 continues to target increased productivity and cost effectiveness.
Some success in schedule improvement has been realized with the delivery of the Overseas Long Beach.
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. Revenues reflect the first two product tankers chartered to Shell and BP respectively. The third product tanker is expected to start earning revenues from Q4 of 2007.
Consequently Aker American Shipping will have modest revenues in 2007, but expects a positive EBITDA result.
It is believed that Jones Act market product tanker rates will continue to strengthen as single hull tonnage is removed from service. This has been supported by the recent charter by the Military Sealift Command of two similar vessels, to charter rates reported to be higher than comparable rates seen thus far.
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 both for fleet renewal and also for expansion into new markets. Aker American Shipping sees increasing activity in the shuttle tanker market, and has a tender offer out to lease two shuttle tankers in the Gulf of Mexico.
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.
August 14th, 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
Jeffrey P. Theisen
CFO
Tel: +1 215 875 2678
Cell: +1 610 517 5943
jeffrey.theisen@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 Q2 2007 were USD 2.2 million. The second product tanker was put into service on June 26th and revenues represent bareboat charter rates from OSG for the first two tankers which are in operation. Second quarter of 2006 had revenues of USD 14.6 million as the activity in this period comprised work on the last container vessel.
The net result was minus USD 1.5 million for Q2 of 2007, whereas the Q2 result in 2006 was a profit of USD 1.0 million.
The Fortis facility finances net USD 80 million per vessel. Aker American Shipping entered into interest swaps to secure the interest rate exposure of this new credit facility. A bond to finance working capital for all tankers, in the amount of NOK 700 million was successfully issued February 16th. The company has entered into forward contracts to mitigate its currency exposure. Additionally, the company closed on a loan of up to USD 20 million with interest-only of 2.75% for five years. This loan will fund further expansion and upgrades at the shipyard.
Aker American Shipping and Overseas Shipholding Group (OSG), signed an agreement in principle in Q1, where Aker Philadelphia Shipyard would 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, and bareboat charter them to subsidiaries of OSG for initial terms of 10-15 years. The company continues to finalize the documentation of this deal, although the inclusion of the three option ships could depend upon the outcome of OSG’s appeal of the recent MSC award.
Construction reached 82.7% for the third, 45.9% for the fourth and 6.8% for the fifth of the initial ten product tankers to be leased to OSG. As this represents construction of own assets, related costs of USD 359.1 million are included in property, plant & equipment (PPE) for product tankers 3 through 5. Also included in this PPE number is the net value of the first two product tankers owned by American Shipping Corporation (ASC). The remainder of PPE, USD 72.1 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 23.6 million represents equipment prepayments related to the last four of the initial ten product tankers, where production has not yet started (USD 17.5 million) and contractual holdbacks related to delivered vessels (USD 6.1 million). The construction loan was further paid down in the second quarter with the delivery of the second product tanker to USD 59 million.
Interest bearing long term debt increased with approximately $121 million from the bond issue and the remainder related to the first two draw downs of the Fortis facility upon delivery of the first tankers.
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 second product tanker, the Overseas Long Beach, was delivered to ASC on June 26th, and then leased to OSG which operates it on a long term charter with BP Shipping. The Overseas Houston was delivered to ASC in February and then leased to OSG which operates it on a long term charter to Shell. Since then it has been serving primarily the West Coast.
Aker Philadelphia Shipyard
The second product tanker commenced sea trials on June 5th and successfully completed all required tests in the allotted time permitting a smooth delivery on June 26th. The third and fourth product tankers are in the yard’s Building Dock undergoing hull erection and outfitting. The third vessel is expected to be floated out of the dock at the end of August. The fifth product tanker started construction on March 23rd and keel laying will take place early this fall. Steel cutting on the sixth product tanker will begin in August.
The yard continues to focus on developing the learning curve. The improvement program AIM 200 continues to target increased productivity and cost effectiveness.
Some success in schedule improvement has been realized with the delivery of the Overseas Long Beach.
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. Revenues reflect the first two product tankers chartered to Shell and BP respectively. The third product tanker is expected to start earning revenues from Q4 of 2007.
Consequently Aker American Shipping will have modest revenues in 2007, but expects a positive EBITDA result.
It is believed that Jones Act market product tanker rates will continue to strengthen as single hull tonnage is removed from service. This has been supported by the recent charter by the Military Sealift Command of two similar vessels, to charter rates reported to be higher than comparable rates seen thus far.
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 both for fleet renewal and also for expansion into new markets. Aker American Shipping sees increasing activity in the shuttle tanker market, and has a tender offer out to lease two shuttle tankers in the Gulf of Mexico.
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.
August 14th, 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
Jeffrey P. Theisen
CFO
Tel: +1 215 875 2678
Cell: +1 610 517 5943
jeffrey.theisen@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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