Performance Shipping Inc. Expecting Tanker Market Rebound in the Post-Pandemic Era
Performance Shipping Inc., a global shipping company specializing in the ownership of tanker vessels, reported net income and net income attributable to common stockholders of $0.4 million for the third quarter of 2020, compared to a net loss and net loss attributable to common stockholders of $18.1 million for the same period in 2019. Earnings per common share, basic and diluted, for the third quarter of 2020 were $0.08, while loss per share for the third quarter of 2019 was $5.58.
Voyage and time charter revenues were $9.5 million ($6.7 million net of voyage expenses) for the third quarter of 2020, compared to $6.3 million ($5.5 million net of voyage expenses) for the same period in 2019. This increase was mainly attributable to the increased time-charter equivalent rates (TCE rates) contributed by the Company’s Aframax tankers. Fleetwide, the average time charter equivalent rate for the third quarter of 2020 was $15,990, compared with an average rate of $12,915 for the same period of 2019. As a result, during the third quarter of 2020, net cash provided by operating activities was $2.3 million, compared with net cash used in operating activities of $3.2 million for the third quarter of 2019.
Net income for the nine months ended September 30, 2020, amounted to $6.3 million, compared to a net loss of $19.8 million for the nine months ended September 30, 2019. Net income attributable to common stockholders for the nine months ended September 30, 2020, amounted to $7.8 million, due to a one-time gain of $1.5 million derived from the repurchase of the Series C preferred shares, and resulted in earnings per common share, basic and diluted, of $1.62 and $1.59, respectively. Net loss attributable to common stockholders for the nine months ended September 30, 2019, was $19.8 million, resulting in a loss per share, basic and diluted, of $7.83.
Third Quarter 2020 and Subsequent Developments:
- Delivery of the last containership M/V Domingo to her new owners in August 2020;
- Appointment of Andreas Michalopoulos as Chief Executive Officer and Anthony Argyropoulos as Chief Financial Officer in October 2020;
- Initiation of new variable quarterly dividend policy and declaration of $0.01 dividend per share to all shareholders in October 2020;
- Introduction of new business strategy and posting of the relevant presentation on the Company’s website in October 2020;
- Effectiveness of one-for-ten reverse stock split to comply with NASDAQ’s minimum price rule in November 2020;
- Acceptance of signed Offer Letter of up to $31.5 million from Piraeus Bank S.A. in November 2020, for the partial refinancing of the existing Nordea loan and additional financing for a fifth Aframax Tanker;
- Acquisition of 2011-built Aframax Tanker for $22.0 million in November 2020.
- As of November 15, 2020, the Company had 5,015,501 shares of common stock issued and outstanding.
Commenting on the results of the third quarter of 2020, Mr. Andreas Michalopoulos, the Company’s Chief Executive Officer, stated:
“During the third quarter of 2020, despite the prevailing deterioration in tanker charter rates, we continued to operate profitably with all four Aframax tankers in aggregate contributing to our operations with the support of our medium term time charter contract for the M/T Blue Moon at $28,000 per day. Midway through the current quarter, the tanker charter market is very low on the back of lower demand due to COVID-19 and low OPEC output. We have a new management team in place, a new business strategy, and initiated a variable quarterly dividend policy coupled with our specific low leverage target. We also secured an additional term loan to refinance part of our existing debt to reduce our quarterly installments and acquired our fifth Aframax tanker, resulting in a significant reduction in our daily cash break- even rate. We believe the low orderbook in conjunction with the gradual resurfacing of oil demand following a return to normality post COVID-19 will result in higher tanker charter rates in the future.”
Tanker Market Update for the Third Quarter 2020:
- Fleet supply was 634.1 million dwt, up 0.8% from 629.0 million dwt from the previous quarter, and up 4.0% from Q3 2019 levels of 609.9 million dwt.
- Demand, however, is estimated to have contracted by 14.5% from the previous quarter but remains up 1.3% from Q3 2019 levels.
- Fleet utilization was estimated at 79.9%, down from 94.4% from the previous quarter and down from Q3 2019 levels of 81.9%.
- Newbuilding contracting at 4.2 million dwt resulted in a further reduction of the orderbook to 8.0% of the fleet, the lowest level since 1996.
- Daily spot charter rates for Aframax Tankers averaged $8,698, down 73.3% from the previous quarter average of $32,624 and down 41.0% from Q3 2019 average of $14,748.
- The value of a 10-year-old Aframax tanker ended the quarter at $23 million, down 11.5% from the previous quarter assessed value of $26 million, and down 2.1% from Q3 2019 assessed value of $23.5 million.
- Tankers used for floating storage was 307 (50.7 million dwt), down 15.4% from 363 (53.2 million dwt) from the previous quarter and up 270.0% from Q3 2019 levels of 83 (19.9 million dwt).
- Global oil consumption was 94.1 million bpd, up 10.2% from the previous quarter level of 85.4 million bpd, and down 8.1% from Q3 2019 levels of 102.4 million bpd.
- Global oil production was 91.1 million bpd, down 1.6% from the previous quarter level of 92.5 million bpd and down 9.0% from Q3 2019 levels of 100.1 million bpd.
- OECD commercial inventories were 3,169.3 million barrels, down 0.1% from the previous quarter level of 3,173.1 million barrels, and up 7.6% from Q3 2019 levels of 2,946.3 million barrels.
Novel Coronavirus Risks:
On March 11, 2020, the World Health Organization declared the recent Novel coronavirus disease (“COVID-19”) outbreak a pandemic. In response to the outbreak, many countries, ports and organizations, including those where the Company conducts a large part of its operations, have implemented measures to combat the outbreak, such as quarantines and travel restrictions. Such measures have, and will likely continue to, negatively affect the global economy. Any prolonged restrictive measures in order to control the spread of COVID-19 or other adverse public health developments in Asia or in other geographies in which the Company’s vessels operate may significantly impact the demand for the Company’s vessels. The extent to which COVID-19 will impact the Company’s results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the virus and the actions to contain or treat its impact or a potential second wave, among others. Accordingly, an estimate of the impact cannot be made at this time. However, if the COVID-19 pandemic worsens, additional restrictions are imposed, or current restrictions are imposed for a longer period of time in response to the outbreak, it may have a material adverse effect on the Company’s future results of operation and financial condition.
Source: Performance Shipping Inc.