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Sovcomflot reports strong first half 2014 results

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SCF LNG Carrier Pskov naming  ceremony 2

SCF LNG Carrier Pskov naming ceremony 2

OAO Sovcomflot (“SCF Group”), Russia’s largest shipping company and a global leader in seaborne energy transportation and offshore services, today announces its financial and operating results for the six months ended 30 June 2014.

Highlights:

  • Gross revenue (Freight and Hire) up to USD 675.2  million in H1 2014 (H1 2013: USD  628.4 million)
  • Time charter equivalent revenues up 16.7 per cent to USD 490.7 million in H1 2014 (H1 2013: USD 420.4 million)
  • EBITDA increases 30.1 per cent to USD 251.7 million in H1 2014 (H1 2013: USD 193.4 million)
  • Net profit up to USD 63.6 million in H1 2014 (H1 2013: Net loss of USD 14.5 million)
  • Further expansion of LNG fleet as Velikiy Novgorod, tri-fuel 170, 200m³ Atlanticmax ice class LNG carrier delivered – first vessel of series specially designed for and employed under a long-term charter by Gazprom Group
  • VLCC SCF Shanghai (321, 280 tonnes dwt) enters service on long-term time-charter agreement with PetroChina International
  • Arctic shuttle tanker Mikhail Ulyanov transports the first shipment of crude oil from Russia’s first offshore energy project on the Arctic shelf
  • Sovcomflot and France’s CGG establish a new JV marine seismic company to focus on the growing 3D seismic market in the Arctic and sub-Arctic regions
  • Successful completion by SCF Group company Novoship of modernization at the Port of Sochi for 2014 Winter Olympic Games
  • SCF played a key role in organizing the first ever races of tall ships in the Black Sea – “SCF Black Sea Tall Ships Regatta” that took place in May and called on four ports – Varna, Novo, Sochi and Constanta.

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

“The tanker market remains challenging, with freight rates fluctuating near their historic lows during Q2 after a strong start to the year in Q1 from which Sovcomflot benefited from improved conditions within the crude oil segment in particular. With a stronger presence in the higher margin gas transportation and offshore markets, the Group is able to report robust results for the first half, with solid growth in earnings.

“Looking ahead, tanker market conditions remain volatile and so we are cautious about the market outlook for the full year. However a significant and growing portion of Sovcomflot’s revenues comes from long-term charter contracts supporting industrial energy projects in the LNG transportation and offshore services sectors, which will underpin our earnings going forward and these sectors continue to be key areas of focus in our long-term business strategy.”

Evgeny Ambrosov, Senior Executive Vice President of OAO Sovcomflot, Chief Operating Officer, commented:

“Supported by a highly skilled team both at sea and ashore, with a balanced portfolio of modern conventional tanker fleet and technically sophisticated vessels, servicing a growing number of industrial projects, we are well placed to continue serving the evolving energy transportation needs of our clients. This is especially true in heavy ice and harsh environment conditions with a third of our fleet comprising of ice class vessels. During the first half of 2014 we maintained a balanced mix of fixed income and spot market operations. Our chartering policy has proven its worth, enabling Sovcomflot to ride out the significant tanker market volatility of recent years and maintain a steady pace in growing the business.”

Nikolay Kolesnikov, Senior Executive Vice President of OAO Sovcomflot, Chief Financial Officer, commented:

“Our business model continues to provide welcome earnings visibility, at a time of market volatility. Significantly, the Group’s future contracted revenues reached USD 7.2 billion at the end of the first half of 2014. Throughout the first half, our gearing has remained stable, ending the period below 46 per cent and with positive free cash flow. During the first half we continued to manage our assets proactively, with the addition of two new vessels and the disposal of eight older tankers from our fleet. As we report our half year results today, the Group has taken delivery of Pskov, its second 170, 200m³ Atlanticmax ice class LNG carrier on a long-term charter to Gazprom”.

H1 2014 Results Summary

H1 2014 Financial Highlights(1 January – 30 June) USD millions

H1 2014

H1 2013

 

%

 

 

 

 

Gross revenue (freight & hire)

675.2

628.4

+7.4

Time charter equivalent (TCE)* revenues

490.7

420.4

+16.7

EBITDA**

251.7

193.4

+30.1

Net profit

63.6

(14.5)

* 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 amortisation.

Business Segment Highlights

Crude Oil Transportation

Time charter equivalent (TCE) revenues in the first half (H1) period ended 30 June 2014 were USD 220.9 million (H1 2013 USD 175.9 million), representing an increase of 25.6 per cent over the corresponding period in 2013. The Group’s performance benefited from improved crude oil market dynamics during the first half.

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

TCE revenues for H1 2014 were USD 101.7 million (H1 2013: USD 109.7 million), a decline of 7.3 per cent, reflecting continued challenging conditions in this market segment.

Gas Transportation

TCE revenues for H1 2014 were USD 38.2 million (H1 2013: USD 21.9 million), an increase of 74.4 per cent on the first half of 2013. This performance reflects a robust freight market for gas carriers and continued expansion of the SCF Group fleet.

The Group’s corporate strategy places a priority on the development of its LNG transportation activities. To this end there were four LNG vessels (including one ice-breaking LNG vessel) 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.

On 2 February 2014, Sovcomflot took delivery of Velikiy 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.

Offshore Development Services

The development of this higher margin business segment is identified as a priority in the Group’s business strategy. TCE revenues for H1 2014 were USD 109.8 million (H1 2013: USD 97.7 million), an increase of 12.4 per cent on the corresponding prior period.

In April, the Group’s 70, 000 tonnes DWT Arctic shuttle tanker Mikhail Ulyanov carried the first shipment from the Prirazlomnoye platform,  Russia’s first offshore energy project on the Arctic shelf. The cargo was subsequently discharged at the Port of Rotterdam. Mikhail Ulyanov will work alongside tanker Kirill Lavrov as part of long-term charter agreements between OAO Sovcomflot and OOO Gazprom Neft Shelf (the project operator and a subsidiary of OAO Gazprom).

Other

TCE revenues for the six months ended 30 June 2014 were USD 20.1 million (H1 2013: USD 15.1 million) representing growth of 33.1 per cent over the first half in 2013.

In June the French company CGG,  a world leader in Geoscience,  and Sovcomflot concluded an agreement to establish a joint venture seismic company to conduct high-end 3D marine seismic acquisition services focusing on Arctic and sub-Arctic waters.The joint venture, to be called Arctic Geophysical Exploration (AGE), will see Sovcomflot hold a 51 per cent interest with the balance held by CGG. The company will be incorporated in Russia,  with its headquarters in Moscow.

During the first half, Russia hosted the highly successful Sochi 2014 Winter Olympics. This 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 and commissioning a modern yacht marina, and also partial restoration and modernisation work of a historic building at the sea terminal.

Dividend

A dividend of RUB 0.15 per share was declared on 30 June 2014, amounting to RUB 300.0 million (USD 8.9 million) in total, and was paid on 15 July 2014. This was the same as that of the corresponding period in 2013.

Fleet Summary:

As at 30 June 2014, the SCF Group fleet comprised 153 owned and chartered vessels (including vessels in joint ownership with third parties) comprising over 12.6 million deadweight tonnes in total: 129 owned vessels; two chartered-in vessels; nine escort tugs which have been chartered-out on bareboat charter to an associate company – Rosnefteflot, and four LNG carriers and nine LR1 product carriers in JV.

Assets under construction at the period-end comprised eight vessels, with a total deadweight of 387, 900 tonnes. This included: three LNG carriers; one ice-breaking LNG carrier; one multi-functional ice breaking supply (MIB) vessel; three MIB standby vessels all of which are scheduled for delivery between August 2014 and March 2017 and all of which are contracted to Oil Majors on long term fixed income charters.

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

SCF Press Office

SCF Group (OAO Sovcomflot) is Russia’s largest shipping company and a world leader in the maritime transportation of hydrocarbons as well as the servicing and support of offshore oil & gas production. The company’s fleet numbers 153 vessels with a combined deadweight of 12.6 million tonnes. SCF Group specialises in the shipping of crude oil, liquefied gas and a wide range of oil products. The Group’s vessels perform complex towing operations and geophysical survey work at offshore oil & gas fields. Sovcomflot supports large-scale offshore energy projects in Russia and overseas, including: Sakhalin-I, Sakhalin-II, Varandey, Tangguh, Peregrino, Prirazlomnoye, Yamal LNG, Escobar and others. SCF Group employs over 9, 300 personnel both on land and at sea. The company is registered in Saint-Petersburg and has representative offices in Moscow, Novorossiysk, Murmansk, Vladivostok, Yuzhno-Sakhalinsk, London, Limassol, Madrid, Singapore and Dubai.

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