PAO Sovcomflot: H1 2018 Results

Accountancy, Shipmanagement — By on August 29, 2018 at 8:53 PM

Sergey Frank President & CEO of Sovcomflot

 PAO Sovcomflot: H1 2018 Results

(Six months to 30 June 2018)

Strong contribution from industrial shipping activities at a time conventional tanker markets test their historic lows

H1 2018 Financial and Operating Highlights

USD millions H1 2018 H1 2017
Gross revenue (Freight and hire) 710.1 710.2
Time Charter Equivalent Revenue 511.3 530.8
EBITDA* 267.7 282.9
Net profit / (loss)

Including non-cash vessel value impairment provision

(57.8)

(42.2)

15.2

 

* Earnings before interest, tax, depreciation and amortization, calculated on an adjusted basis.

A copy of the full consolidated financial statements is available in the investor section of the Group’s website: www.scf-group.com

In the first half of 2018, the tanker freight market remained challenging, with conventional tanker freight rates still well below the average levels seen over the last quarter of a century. Spot tanker earnings in H1 2018 saw a substantial decline and, for some market segments, remained more than 50 per cent below the levels of H1 2017.

  • Gross revenue (freight and hire) was USD 710.1 million (H1 2017: USD 710.2 million). Time charter equivalent (TCE) revenue was USD 511.3 million (H1 2017: USD 530.8 million)
  • EBITDA* for the period was USD 267.7 million (H1 2017: USD 282.9 million)
  • Net loss for the period was USD 57.8 million (H1 2017: USD 15.2 million net profit) which includes a non-cash vessel value impairment provision of USD 42.2 million, in relation to a number of older crude oil and oil product tankers (that reflects a reassessment of their longer-term value in use) given the current historic lows of the freight markets.
  • Offshore services division TCE revenue climbed 17.2 per cent in H1 2018 to USD 212.1 million, as Gas transportation revenue increased by 18.1 per cent to USD 90.2 million in the first half. Fixed income, industrial shipping business, increased to a 59.1 per cent share of TCE revenue from a 48.5 per cent share in H1 2017
  • SCF & Shell pioneer adoption of cleaner-burning LNG as primary fuel for Aframax tankers in February and conclude long-term time-charter agreements for two dual-fuelled Aframax tankers ordered by Sovcomflot (Gagarin Prospect, the first vessel of the series, delivered in July 2018)
  • New multifunctional icebreaking platform supply vessel Yevgeny Primakov enters service supporting Sakhalin-2’s offshore oil and gas platforms, under a 20-year time-charter agreement with Sakhalin Energy
  • A new USD 106 million project financing agreement was concluded with Sberbank in February, with a term of up to 14 years, to finance the construction of an Arctic shuttle tanker of the Shturman Albanov series, serving Gazprom Neft’s Novy Port project
  • In April, the Group signed a USD 252 million seven-year credit facility with a consortium of six leading international banks, comprising: ABN AMRO Bank; BNP Paribas; Citibank; ING Bank; KfW IPEX-Bank, and Société Générale. The funds are being used to finance the six LNG powered Aframax tankers.
  • An agreement was signed with Rosnefteflot in May, whereby SCF Management Services will provide technical supervision during the construction of Rosneft’s new LNG-powered Aframax tankers. This latest step is part of a package of agreements, signed in 2017, involving the construction of dual-fuelled Aframax tankers for Rosneft, using the latest technology, in partnership with Zvezda shipbuilding complex in Russia, and their subsequent long-term chartering.
  • A strategic partnership with NOVATEK was signed in June covering the implementation of various projects, including logistical support for the Yamal LNG, Arctic LNG-2 and others.

Commenting on the Group’s results Sergey Frank, President and CEO of PAO Sovcomflot, said:

“During the first half of 2018, our gas transportation and offshore services returned double digit growth in revenues and operating profits, fully in line with the Group’s development strategy. Fixed income from these industrial shipping businesses grew to account for 59.1 per cent of Sovcomflot’s total TCE revenue compared to 48.5 per cent share in 1H 2018.  The Group continues to pursue its strategic vision of industrializing its business-portfolio, its fleet and developing new fixed revenue streams to sidestep the cyclical nature of the conventional tanker markets, which have hit new lows in 2018 after an already testing 2017.

“During the first half 2018 we achieved a significant milestone with our industry partner Royal Dutch Shell, through signing a long-term time-charter agreement for the first LNG-powered ‘Green Funnel’ Aframax tankers, setting new standards for emissions and making the tanker industry greener. It is industry-leading innovations such as these, together with Sovcomflot’s unique expertise of operating in harsh environments, as well as our highly experienced team of seafarers, that leaves us better positioned for the future. In this extremely challenging year, we will continue our commitment to innovation by delivering to our clients some of the most advanced vessels ever constructed.”

Fleet summary

As at 30 June 2018, the Group’s fleet (including vessels owned, chartered-in, and in joint ownership with third parties) comprised 146 vessels with a combined deadweight of approximately 12.6 million tonnes. At the end of the H1 2018, the Group had eight vessels under construction, scheduled for delivery from July 2018 to February 2020, comprising six ice-class LNG fuelled Aframax tankers, one Arctic shuttle tanker and one LNG carrier.

A detailed fleet list is available at the Group’s website: www.scf-group.com

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