Results Q2 - 2017
August 17, 2017
Forward-Looking Statements
- Matters discussed in this presentation may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements, which include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. Words such as "believe," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect," "pending" and similar expressions identify forward-looking statements. The forward-looking statements in this presentation are based upon various assumptions. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. The information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication.
- In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions, including fluctuations in charter hire rates and vessel values, changes in demand in the dry bulk market, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents, political events or acts by terrorists, and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission.
- Certain shipping, steel, Chinese and global industry information, statistics and charts contained herein have been derived from several sources. You are hereby advised that such industry data, charts and statistics have not been prepared specifically for inclusion in these materials and Golden Ocean has not undertaken any independent investigation to confirm the accuracy or completeness of such information
Company update
Highlights
- The Company reports a net loss of \$12.0 million and loss per share of \$0.10 for the second quarter of 2017
- An improvement of \$5.9 million compared with a net loss of \$17.9 million for the first quarter of 2017
- An improvement of \$27.2 million compared with a net loss of \$39.2 million for the second quarter of 2016
- Adjusted EBITDA in the second quarter was \$29.7 million, compared with adjusted EBITDA of \$17.5 million in the first quarter of 2017 and negative adjusted EBITDA of \$0.8 million in the second quarter of 2016
- Completed the acquisitions of 16 modern dry bulk vessels in shipfor-share transactions in exchange for 17.8 million shares and the assumption of \$285.2 million in debt
- 13 vessels delivered in the second quarter and three in July 2017
- Joint venture company agreed to the sale of Golden Opus for \$28.9 million, resulting in estimated net cash proceeds of approximately \$6 million in the third quarter
Profit & Loss
| (in thousands of \$) |
Q2 |
Q1 |
|
2017 |
2017 |
| Operating revenues |
|
|
| Time charter revenues |
50,095 |
35,081 |
| Voyage charter revenues |
49,551 |
46,270
624 |
| Other revenues |
36 |
|
| Total operating revenues |
99,682 |
81,975 |
| Gain (loss) on sale of assets and amortization of deferred gains |
64 |
64 |
| Other operating income (expenses) |
1,149 |
1,844 |
| Operating expenses |
|
|
| Voyage expenses |
28,567 |
26,444 |
| Ship operating expenses |
31,317
13,313
3,515 |
27,291
16,141 |
| Charter hire expense |
|
|
| Administrative expenses |
|
2,613 |
| Depreciation |
19,239 |
16,746 |
| Total operating expenses |
95,951 |
89,235 |
| Net operating income/(loss) |
4,944 |
(5,352) |
| Other income (expenses) |
|
|
| Interest income |
483 |
347 |
| Interest expense |
(14,394) |
(12,724) |
| Gain/(Loss) on derivatives |
(3,772) |
(23) |
| Equity results of associated companies, including impairment |
283 |
(39) |
| Other financial items |
519 |
(65) |
| Total other (expenses) income, net |
(16,881) |
(12,504) |
| Tax expense |
24 |
23 |
| Net income/ (loss) |
(11,961) |
(17,879) |
| Earnings (loss) per share: basic and diluted |
\$(0.10) |
\$(0.17) |
Adjusted EBITDA 29,741 17,458 TCE per day 12,237 11,304
- Operating revenues, including other operating income, less voyage expenses (TCE) increased by \$14.9 million in the second quarter compared to the previous quarter, primary due to improved freight rates and to a \$5.4 million contribution from recently acquired vessels
- Ship operating expenses are up by \$4.0 million compared to the previous quarter, mainly due to vessel additions
- Interest expenses up mainly driven by assumed debt related to newly acquired vessels
- US interest rates decreased in second quarter leading to a loss on interest rate swaps
Balance Sheet
| (in thousands of \$) |
Q2 |
Q1 |
|
2017 |
2017 |
| ASSETS |
|
|
| Short term |
|
|
| Cash and cash equivalents |
122,699 |
209,331 |
| Restricted cash |
4,361 |
413 |
| Other current assets |
107,963 |
99,883 |
| Long term |
|
|
| Restricted cash |
64,168 |
56,378 |
| Vessels, net |
2,243,448 |
1,918,719 |
| Vessels under capital lease, net |
2,512 |
2,735 |
| Newbuildings |
126,506 |
116,746 |
| Other long term assets |
58,413 |
61,395 |
| Total assets |
2,730,070 |
2,465,600 |
| LIABILITIES AND EQUITY |
|
|
| Short term |
|
|
Current portion of long
-term debt |
- |
54,045 |
| Current portion of obligations under capital lease |
5,043 |
4,949 |
| Other current liabilities |
51,898 |
45,274 |
| Long term |
|
|
Long
-term debt |
1,287,498 |
1,057,143 |
| Obligations under capital lease |
10,125 |
11,418 |
| Other long term liabilities |
8,136 |
|
| Equity |
1,367,370 |
1,284,597 |
| Total liabilities and equity |
2,730,070 |
2,465,600 |
- \$191.3 million in cash including cash classified as restricted, a decrease of \$74.9 million from March 31, 2017
- Net cash used in financing activities was \$69.8 million, including deferred debt repayments of \$54.0 million, and \$14.5 million in down -payments on bank debt related to newly acquired vessels
- Paid pre -delivery installments for two newbuilding vessels of in total \$9.8 million
- 13 vessels delivered to the company in second quarter. The acquisition cost of the vessels primarily comprised 14,950,000 shares of the Company, and \$241.9 million in assumed debt financing prior to down payment
- Long -term debt increased by \$230.3 million in the second quarter of 2017 primarily as a result of new bank debt financing of the 11 vessels delivered from Quintana. In addition, the Company entered into a \$22.5 million seller's credit with affiliates of Hemen Holding Limited
Vessel Operating Expenses
Maintaining competitive OPEX levels
- Fully-burdened Opex includes dry docking and management fees
- Two vessels dry docked in second quarter of 2017 and two more commenced dry docking at the end of the quarter
- Start-up cost for the newly acquired vessels contributed to slightly higher cost in \$ per day terms in this quarter
- G&A net of management fees of about \$11 million per year gives a cost of \$480 per day per vessel for the owned fleet, and estimated to be approximately \$400 per day following deliveries of the recently-acquired vessels
Fleet Development and Newbuildings
Recent deliveries
- Completed the acquisitions of 14 modern dry bulk vessels from Quintana in ship-for-share transactions
- 14.5 million shares issued and \$262.7 million in debt assumed as consideration
- 11 vessels delivered in the second quarter and the remaining three delivered in July 2017
- Took delivery of two Panamax ice-class vessels in June acquired from Hemen, in ship-for-share transactions
- 3.3 million shares issued and \$22.5 million seller's credit assumed
Remaining newbuildings
- All remaining six Capesize newbuildings are scheduled to be delivered in 2018 and are financed with \$25 million per vessel
- Paid installments of \$9.8 million in the second quarter of 2017
- Remaining capex to be paid at delivery in first quarter 2018. The total cash requirement, net of available financing will be \$24 million
Sale of assets
Golden Opus sold by the Joint Venture at a price of \$28.9 million. Expected cash contribution following the sale is approximately \$6 million
Remaining newbuilding CAPEX (non-recourse)
Young, fuel efficient fleet with average age of ~4 years
| Fleet profile |
|
|
|
|
|
|
|
|
Capesize |
Post-Panamax |
Panamax |
Iceclass Panamax |
Ultramax |
Total |
|
|
|
|
|
|
|
|
|
| Golden Ocean Fleet |
38 |
3 |
14 |
12 |
9 |
76 |
|
| Newbuilding |
6 |
- |
- |
- |
- |
6 |
|
|
|
|
|
|
|
|
|
| Total |
44 |
3 |
14 |
12 |
9 |
82 |
|
|
|
|
|
|
|
|
|
Chartering profile
- 10 Capesize vessels on index-linked long term TC-out
- Four Panamax vessels on long term TC out at fixed rate
- Remaining fleet is trading spot, in spot pools or on short term charters expiring within six to nine months
Dry bulk market
Utilization continues to increase, coming off of historically low levels
Supply, demand and utilization rate - dry bulk ships 10,000 dwt +
Seaborne trade of dry bulk commodities (major importers)
China Rest of World
Chinese apparent steel consumption & rebar prices
Gross profit (steel price minus cost of coking coal and iron ore; all prices spot)
Gross profit using Cn coking coal price, Au iron ore price and Tangshan steel billett price
Improvements have come primarily from Asia
Seaborne coal imports by major importing countries
Strong Electricity Consumption Supports Coal Demand
Source: Commodore Research / Narional Bureau of Statistics of China
Grain Exports had a Strong Start to the Year
Soybean and soybean meal exports by source
Source: Fearnresearch
Deliveries Slowed Following First Quarter Surge
Handymax / Supramax Handysize
Downside Case for Supply Growth
- Construction has not even commenced on 22% of the orders (in dwt) scheduled for delivery within end of H2 2017
- Further delays of deliveries are likely based on progress in production
Forecast fleet growth is at its lowest point ever
Fleet growth (assumes no scrapping or new ordering)
S&P Prices Stable (yet still low) Following Strong Increases
Panamax values and earnings
Market has performed according to expectations as supply/demand balance improves
Upside potential Downside risks
Expect to see stronger second half of 2017, but still with rate volatility in the near term. Longer term fundamentals stronger as long as new ordering is minimal.
Breakeven levels well below historical rate environment
Source: Baltic Exchange; Company estimates; breakeven rate excludes debt repayment
Note: Historical Capesize rates displays average of the 4 T/C routes for Baltic Index, 172,000mn\$/Day and through Jan 2014 and average of 5 T/C Routes for Capesize Index \$/Day thereafter
Thank you for your attention!