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Eagle Bulk Shipping Inc. Looking to Profit From Scrubber-Fitted Fleet As Margins Rise

Eagle Bulk Shipping Inc., one of the world’s largest owner-operators within the Supramax/Ultramax drybulk segment, yesterday reported financial results for the three months and year ended December 31, 2020.

Highlights for the Quarter:

• Revenues, net of $75.2 million

• TCE revenues (1) for the quarter equated to $47.9 million.

• Achieved TCE (1) of $11,190/day for the quarter versus the Adjusted net BSI (2) at $10,229/day

• Realized a net income of $0.1 million, or $0.01 per basic and diluted share

• Adjusted EBITDA(1) of $22.0 million

• Raised $23.5 million, net, in new equity on December 18, 2020

• Executed agreements to purchase three modern scrubber-fitted SDARI-64 Ultramax bulkcarriers constructed at Chengxi Shipyard Co. Ltd. for a total purchase price of $50.2 million

Subsequent Events

• Executed agreements to purchase four additional vessels:

• One 2017-built scrubber-fitted SDARI-64 Ultramax bulkcarrier constructed at Chengxi Shipyard Co. Ltd. for $15.0 million in cash and a warrant for 212,315 EGLE shares (January 28, 2021)

• Three 2011-built CROWN-58 Supramax bulkcarriers constructed at Yangzhou Dayang Shipbuilding Co., Ltd for $21.2 million in cash and a warrant for 329,583 EGLE shares (February 11, 2021)

• Looking ahead, fixed 93% of Q1 2021 available days at an average TCE of $15,085 as of March 4, 2021

Gary Vogel, Eagle Bulk’s CEO, commented, “On the back of an improving macroeconomic landscape and our positive drybulk market outlook, we acquired a total of seven vessels over the past few months, bringing our proforma fleet to 52 ships, the highest in Eagle’s history. We have purchased 27 vessels and sold 19 since we began our fleet renewal and growth initiative. The result is a fleet with significantly increased earnings potential, as well as a lower emissions profile. Importantly, 45 of our vessels, or 87% of our fleet, are fitted with scrubbers, giving us exposure to recently widening fuel spreads.

Vessels sold

• Hawk I (50k DWT / 2001-built) for net proceeds of $4.3 million

• Osprey I (50k DWT / 2002-built) for net proceeds of $4.3 million

• Shrike (53k DWT / 2003-built) for net proceeds of $4.9 million

• Skua (53k DWT / 2003-built) for net proceeds of $5.1 million

Results of Operations for the three months and years ended December 31, 2020 and 2019

For the three months ended December 31, 2020, the Company reported net income of $0.1 million, or $0.01 per basic and diluted share, compared to a net loss of $11.2 million, or $1.09 per basic and diluted share, in the same period for the prior year.

For the year ended December 31, 2020, the Company reported a net loss of $35.1 million, or $3.40 per basic and diluted share, compared to a net loss of $21.7 million, or $2.13 per basic and diluted share, for the year ended December 31, 2019.

Revenues, net

Revenues, net for the three months ended December 31, 2020 were $75.2 million compared with $71.5 million in the comparable quarter in 2019. The increase in revenue was primarily due to an increase in available days as many of our vessels were undergoing scrubber retrofitting in the prior year.

Revenues, net for the year ended December 31, 2020 were $275.1 million compared to $292.4 million for the prior year. Revenues, net decreased by 6% compared to the prior year ended December 31, 2019 primarily due to a decline in fuel prices, which impacted our revenue from voyage charters where the freight rate earned per metric ton of cargo is based on the fuel expense expected to be incurred partly offset by an increase in available days. The available days increased year over year because the scrubber installations were completed by April 2020. The available days including chartered-in days for the year ended December 31, 2020 were 19,612 as compared to 19,214 for the year ended December 31, 2019.

Voyage expenses

Voyage expenses for the three months ended December 31, 2020 were $19.6 million compared to $21.4 million in the comparable quarter in 2019. The decrease was mainly attributable to a decrease in bunker prices year over year.

Voyage expenses for the years ended December 31, 2020 and 2019 were $89.5 million and $87.7 million, respectively. Voyage expenses have primarily increased due to an increase in port expenses and hold cleaning expenses due to an increase in the voyage charter business offset by a decrease in bunker prices in the current year compared to the prior year.

Vessel operating expenses

Vessel operating expenses for the three months ended December 31, 2020 were $20.8 million compared to $22.3 million in the comparable quarter in 2019. The decrease in vessel expenses is mainly attributable to lower owned days, and lower startup costs related to the acquisition of six Ultramax vessels during the third and fourth quarters of 2019. The ownership days for the three months ended December 31, 2020 and 2019 were 4,419 and 4,460, respectively.

Average daily vessel operating expenses for our fleet for the three months ended December 31, 2020 and December 31, 2019 were $4,718 and $5,008, respectively.

Vessel operating expenses for the years ended December 31, 2020 and 2019 were $86.5 million and $82.3 million, respectively. The increase in vessel expenses is attributable to an increase in ownership days after the purchase of six Ultramax vessels in the second half of 2019, offset by the sale of two vessels Thrasher and Kestrel in the second half of 2019 and sale of five vessels (Goldeneye, Skua, Osprey I, Hawk I, and Shrike) in the later half of 2020. Additionally, the Company incurred $1.0 million in additional costs relating to COVID-19 for procurement of personal protective equipment, test kits and crew changes. The ownership days for the year ended December 31, 2020 were 18,065 compared to 16,945 for the prior year ended December 31, 2019.

Average daily vessel operating expenses for our fleet for the year ended December 31, 2020 were $4,790 compared to $4,859 for the year ended December 31, 2019.

Charter hire expenses

Charter hire expenses for the three months ended December 31, 2020 were $5.5 million compared to $8.2 million in the comparable quarter in 2019. The decrease in charter hire expense was due to a decrease in the number of charter-in days and a decrease in charter hire rates due to COVID-19. The total chartered-in days for the three months ended December 31, 2020 were 515 compared to 646 for the comparable quarter in the prior year.

Charter hire expenses for the years ended December 31, 2020 and 2019 were $21.3 million and $42.2 million, respectively. The decrease in charter hire expenses in 2020 compared with 2019 was mainly due to a decrease in charter-in days as well as a decrease in charter hire rates due to COVID-19. The chartered-in days for the year ended December 31, 2020 were 2,179 compared to 3,583 for the year ended December 31, 2019. The Company currently charters in three vessels on a long-term basis.

Depreciation and amortization

Depreciation and amortization expense for the three months ended December 31, 2020 and 2019 was $12.6 million and $11.3 million, respectively. Total depreciation and amortization expense for the three months ended December 31, 2020 includes $10.7 million of vessel and other fixed asset depreciation and $1.9 million relating to the amortization of deferred drydocking costs. Comparable amounts for the three months ended December 31, 2019 were $9.5 million of vessel and other fixed asset depreciation and $1.8 million of amortization of deferred drydocking costs. The increase in depreciation expense is attributable to the increase in cost base due to the purchase of seven Ultramax vessels during 2019 and the installation of scrubbers and BWTS on our vessels, partially offset by the sale of seven vessels since the second quarter of 2019.

Depreciation and amortization expense for the years ended December 31, 2020 and 2019 was $50.2 million and $40.5 million, respectively. Total depreciation and amortization expense for the year ended December 31, 2020 includes $42.8 million of vessel and other fixed assets depreciation and $7.4 million relating to the amortization of deferred drydocking costs. Comparable amounts for the year ended December 31, 2019 were $34.3 million of vessel and other fixed assets depreciation and $6.2 million of amortization of deferred drydocking costs. The increase in depreciation expense is due to an increase in the cost base of our owned fleet due to the capitalization of scrubbers and BWTS on our vessels, and the acquisition of six Ultramax vessels in the second half of 2019, offset by the sale of two vessels in 2019 and five vessels in the third and fourth quarter of 2020. The increase in drydock amortization is due to the completion of eleven additional drydocks since the end of 2019.

General and administrative expenses

General and administrative expenses for the three months ended December 31, 2020 and 2019 were $8.8 million and $10.1 million, respectively. General and administrative expenses include stock-based compensation of $0.7 million and $1.0 million for the three months ended December 31, 2020 and 2019, respectively. The decrease in general and administrative expenses was mainly attributable to a decrease in certain non recurring legal charges from the prior quarter and decreases in corporate travel and office expenses due to COVID-19.

General and administrative expenses for the years ended December 31, 2020 and 2019 were $31.5 million and $35.0 million, respectively. General and administrative expenses include stock-based compensation of $3.0 million and $4.8 million for 2020 and 2019, respectively. The decrease in general and administrative expenses in 2020 was primarily due to a decrease in stock-based compensation expense. The general and administrative expenses excluding stock-based compensation expense are lower compared to the prior year primarily due to decreases in corporate travel, legal expenses and office expenses due to COVID-19.

Loss/(gain) on sale of vessels

For the three months ended December 31, 2020 and 2019, the Company recorded a loss of $0.1 million and a loss of $0.1 million, respectively. The loss for the three months ended December 31, 2020, includes a loss on the sale of three vessels Shrike, Osprey I and Hawk I.

For the years ended December 31, 2020 and 2019, the Company recorded a loss of $0.5 million and a gain of $6.0 million, respectively. The loss for the year ended December 31, 2020, is in connection with the sales of five vessels Goldeneye, Shrike, Skua, Osprey I and Hawk I. The gain for the year ended December 31, 2019, is in connection with the sales of four vessels Condor, Merlin, Thrasher, and Kestrel.

Interest expense

Interest expense for the three months ended December 31, 2020 and 2019 was $8.5 million and $9.0 million, respectively. The decrease in interest expense is due to a decrease in LIBOR interest rates.

Interest expense for the years ended December 31, 2020 and 2019 was $35.4 million and $30.6 million, respectively. The increase in cash interest expense is primarily due to an increase in our outstanding debt under the Convertible Bond Debt and New Ultraco Debt Facility offset by a decrease in interest rates.

Full Report

Source: Eagle Bulk Shipping

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