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Sovcomflot Q1 2014 results

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SovcomflotStrong start to the year

Q1 2014 Highlights:

  • Gross revenue (freight and hire) increased 16.5 per cent to USD 361.5 million 
  • Time charter equivalent (TCE) revenues increased 34.1 per cent to USD 270.6 million
  • EBITDA increased 65.7 per cent to USD 153.6 million
  • Net profit reached USD 58.1 million (as compared to USD 2.0 million in Q1 2013)
  • Significant growth in the crude oil transportation segment: TCE revenues increased by 56.1 per cent to USD 134.7 million
  • Further expansion of LNG fleet with the delivery of Velikiy Novgorod, tri-fuel 170, 200m³ Atlanticmax ice class LNG carrier – first vessel in a series specially designed for and employed under a long-term charter by Gazprom Group
  • Entry into service of VLCC SCF Shanghai (321, 280 tonnes dwt) engaged on a long-term time-charter agreement with PetroChina International (a subsidiary of China National Petroleum Corporation, CNPC)
  • Successful completion by SCF Group’s company, Novoship, of modernization at the Port of Sochi for 2014 Winter Olympic Games.

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

“Following five years of recession, the tanker market is showing the early signs of a long overdue recoveryThroughout the down-cycle, Sovcomflot’s robust business model has continued to deliver. Our balanced chartering policy whilst being conservative enough makes us well positioned for the upswing in the market. By focusing on servicing the transportation needs of our core clients and on large-scale industrial projects, in the hydrocarbons sector, we have benefited from better vessel utilisation and long-term contracted revenues. The Group’s future contracted revenues of USD 6.7 billion provide welcome protection against volatility in the tanker markets and a solid basis for the further growth of our business.

“During the first quarter of 2014 we continued to implement the Group’s development strategy. This is designed to ensure that we continue to use state-of-the-art technologies across our fleet, in order to serve the evolving needs of our clients. Specifically, we aim to provide safe and reliable transportation for the developing oil and gas fields in the Arctic and sub-Arctic regions.

“As ever, Sovcomflot is indebted to the hard work and expertise of all its crews and shore-based personnel, without whom these positive results would not have been possible.”


Q1 2014 Results

OAO Sovcomflot (“SCF Group”) today announces its financial and operating results for the first quarter ended 31 March 2014.

Q1 2014 Financial Highlights

Financial Highlights 
(1 January – 31 March) USD millions

Q1 2014

Q1 2013



Gross revenue (freight & hire receivable)




Time charter equivalent (TCE)*




Profit on vessels’ trading




Net profit




* Time charter equivalent (TCE) represents shipping revenues less voyage expenses and is commonly used in the shipping industry to measure financial performance and to compare revenue generated from a voyage charter to revenue generated from a time charter
**Earnings before interest, tax, depreciation and amortization.

Gross revenue (freight and hire receivable) increased by 16.5 per cent to USD 365.1 million (Q1 2013: USD 313.2 million). After accounting for voyage costs and commissions, TCE revenues increased by 34.1 per cent to USD 270.6 million (Q1 2013: USD 201.8 million). Earnings before interest, tax, depreciation and amortization (EBITDA) increased by 65.7 per cent to USD 153.6 million (Q1 2013: USD 92.7 million).  Meanwhile, profit for the period rose 29.1 fold to USD 58.1 million (Q1 2013: USD 2.0 million). This good overall performance reflected stronger market dynamics in the crude oil transportation segment and a growing contribution from the gas transportation and offshore segments to the Group’s results.

Total assets at 31 March 2014 were USD 6, 562.5 million (31 March 2013: USD 6, 408.0 million). The Group maintained stable net debt ratios throughout the period, with a slight overall decline in gearing (leverage) at the quarter end to 45.8 per cent (31 March 2013: 46.3 per cent).

At the end of Q1 2014, the Group had contracted future revenues of USD 6.7 billion, reflecting the long-term nature of its chartering arrangements. This earnings visibility is made more significant by the presence of strong chartering counterparties (i.e. significant Russian and international oil and gas companies).

The Group’s cash position as at 31 March 2014 saw cash of USD 335.7 million (31 March 2013: USD 179.6 million), reflecting the improved performance from the crude oil transportation segment and also a number of vessel sales (see Fleet Summary below).


Q1 2014 Business Segment Highlights

Crude Oil Transportation
This segment performed well in the three months to 31 March 2014, with TCE revenues increasing by 56.1 per cent to USD 134.7 million. This performance reflected stronger underlying dynamics in the crude oil transportation segment in general, and a firming of daily time charter rates, which began in the third quarter of 2013 and continued throughout the first quarter of 2014.

On 25 February 2014 SCF Shanghai, a 321, 280 tonnes DWT Very Large Crude Carrier (VLCC), joined the Groups fleet.  The vessel was constructed at the Bohai shipyard in Huludao China and is the second VLCC in the Svet class – the largest vessels in the Russian merchant fleet. As with her sister ship Svet, the tanker is operating under a long-term time-charter agreement with PetroChina International (a subsidiary of China National Petroleum Corporation, CNPC).

Oil Products Transportation
In contrast to the crude oil transportation market, conditions in the oil products transportation segment were less favourable with operating margins remaining under significant pressure. Against this background, TCE revenues increased by 1.9 per cent to USD 53.1 million during the first quarter, compared with the same period in 2013.

Gas Transportation
The Group’s TCE revenues increased by 81.8 per cent to USD 20.7 million in the three months to 31 March 2014, compared with Q1 2013. On 2 February 2014, Sovcomflot took delivery ofVelikiy Novgorod. This advanced design 170, 000 cubic metres capacity LNG carrier is constructed to ice class Ice2 and is engaged on a 15 year time charter to Gazprom.

The Group’s corporate strategy places a priority on the development of its LNG transportation activities. To this end there were four LNG vessels on order at the period end, each of over 170, 000 cubic metres capacity, for delivery up to Q1 2016. All the vessels have long-term time-charter arrangements in place with Gazprom, Shell or Yamal LNG as charterers.

Offshore Development Services
The offshore segment saw TCE earnings grow by 14.2 per cent in the period to 31 March 2014, compared with Q1 2013, to reach USD 54.8 million. The development of this higher margin business segment is identified as a priority in the Group’s business strategy.

This segment includes the Group’s interests in the operation of dry bulkers and seismic vessels and is by far the smallest business segment within SCF Group. During the period TCE revenues increased by 77.8 per cent over Q1 2013 to USD 8.0 million

The success of the Sochi 2014 Winter Olympics reflected many years of careful planning and investment, involving a significant number of stakeholders including SCF Group. The Group’s subsidiary companies Novoship and Sochi Sea Port invested in developing a modern yachting marina, partial restoration and modernisation work of a historic building at the sea terminal.

Fleet Summary

In the first quarter of 2014, two vessels were delivered – Velikiy Novgorod (LNG carrier of 170, 000 cubic metres capacity) and SCF Shanghai (321, 280 tonnes DWT), the Group’s second VLCC. During the period three vessels were sold, the Suezmax tankers SCF Byrranga and SCF Aldan and the LNG tanker SCF Polar.

As at 31 March 2014, SCF Group’s fleet comprised 158 vessels (including vessels in joint ownership with third parties) with a combined deadweight of over 12.0 million tonnes: 134 owned vessels; two chartered-in vessels; nine escort tugs which have been chartered-out on bareboat charter to an associate company – Rosnefteflot; as well as four LNG carriers and nine LR1 product carriers in joint-venture companies. A total of four vessels, with a total deadweight of 477, 600 tonnes were on order as at 31 March 2014. This included: three LNG carriers (Ice-class Ice2, 170, 000 cubic metres capacity) and a state-of-the-art Arctic LNG carrier (Ice class Arc7, 172, 000 cubic metres capacity).

A detailed fleet list is available on the Group’s website (www.scf-group.com).


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