Results Q1 - 2017
May 24, 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 \$17.9 million and a loss per share of \$0.17 for the first quarter of 2017
- An improvement of \$50.3 compared with a net loss of \$68.2 million for the first quarter of 2016.
- A decrease of \$24.4 million compared with net income of \$6.5 million in the fourth quarter of 2016
- Adjusted EBITDA in the first quarter was \$17.5 million, compared with a negative adjusted EBITDA of \$14.2 million in the first quarter of 2016 and adjusted EBITDA of \$24.2 million in the fourth quarter of 2016
- Took delivery of two Ultramax newbuildings, Golden Virgo and Golden Libra, and two Capesize newbuildings, Golden Surabaya and Golden Savannah and entered into agreements to postpone the delivery of six remaining newbuildings until 2018
- Entered into agreements to acquire 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
- The Company successfully completed a \$60 million equity offering at NOK 60 per share (or \$6.97 per share based on the prevailing exchange rate at the time) to provide financial support for the vessel acquisitions
- Accumulated deferred debt payments of \$54 million to be paid in the second quarter of 2017 by triggering the cash sweep mechanism in bank loan amendments
Profit & Loss
| (in thousands of \$) |
Q1 |
Q4 |
|
2017 |
2016 |
| Operating revenues |
|
|
| Time charter revenues |
35,081 |
35,343 |
| Voyage charter revenues |
46,270 |
49,887 |
| Other operating income |
2,468 |
992 |
| Total operating revenues |
83,819 |
86,222 |
| Gain (loss) on sale of assets and amortization of deferred gains |
64 |
78 |
| Operating expenses |
|
|
| Voyage expenses |
26,444 |
23,876 |
| Ship operating expenses |
27,291 |
27,201 |
| Charter hire expense |
16,141 |
14,267 |
| Administrative expenses |
2,613 |
3,130 |
| Depreciation |
16,746 |
16,432 |
| Total operating expenses |
89,235 |
84,906 |
| Net operating income/(loss) |
(5,352) |
1,394 |
| Other income (expenses) |
|
|
| Interest income |
347 |
386 |
| Interest expense |
(12,381) |
(12,096) |
| Gain/(Loss) on derivatives |
(23) |
16,734 |
| Equity results of associated companies, including impairment |
(39) |
299 |
| Other financial items |
(407) |
(446) |
| Total other (expenses) income, net |
(12,503) |
4,877 |
| Tax expense |
23 |
(203) |
| Net income/ (loss) |
(17,878) |
6,475 |
| Earnings (loss) per share: basic and diluted |
\$(0.17) |
\$0.06 |
| Adjusted EBITDA |
17,458 |
24,209 |
| TCE per day |
11,304 |
11,809 |
- Operating revenues less voyage expenses (TCE) decreased by \$5.0 million in the first quarter of 2017 compared to the prior quarter, primary due to lower freight rates for the Capesize vessels
- Ship operating expenses were stable compared to previous quarter even with four new vessels and two vessels dry docked during the quarter. Running opex per vessel is down compared to previous quarter.
- US interest rates were stable over the quarter compared to steep increase in previous quarter and had a limited impact on the .interest rate swaps this quarter
Balance Sheet
| (in thousands of \$) |
March 31, |
December 31 |
|
2017 |
2016 |
| ASSETS |
|
|
| Short term |
|
|
| Cash and cash equivalents |
209,331 |
212,942 |
| Restricted cash |
413 |
315 |
| Other current assets |
99,883 |
86,674 |
| Long term |
|
|
| Restricted cash |
56,378 |
53,797 |
| Vessels, net |
1,918,719 |
1,758,939 |
| Vessels under capital lease, net |
2,735 |
2,956 |
| Newbuildings |
116,746 |
180,562 |
| Other long term assets |
61,395 |
65,437 |
| Total assets |
2,465,600 |
2,361,622 |
| LIABILITIES AND EQUITY |
|
|
| Short term |
|
|
| Current portion of long-term debt |
54,045 |
- |
| Current portion of obligations under capital lease |
4,949 |
4,858 |
| Other current liabilities |
45,274 |
38,742 |
| Long term |
|
|
| Long-term debt |
1,057,143 |
1,058,418 |
| Obligations under capital lease |
11,418 |
12,674 |
| Other long term liabilities |
8,174 |
8,212 |
| Equity |
1,284,597 |
1,238,718 |
| Total liabilities and equity |
2,465,600 |
2,361,622 |
- \$266.1 million in cash including cash classified as restricted, a decrease of \$0.9 million from December 31, 2016
- \$58.3 million net proceeds from the Equity offering in March included in free cash
- Four vessels delivered to the company in first quarter. Vessels up by \$159.8 net of ordinary depreciation
- Newbuildings decreased due to the four deliveries offset by \$9.8 million paid installments on remaining newbuildings
- Payment of \$54 million following cash sweep is classified as current portion of long term debt
- Long Term debt (net of short term portion) increased by \$50 million with new debt on delivered vessels
Vessel Operating Expenses
Maintaining competitive OPEX levels
- Fully-burdened Opex includes dry docking and management fees
- First quarter 2017 Opex based on 8 Ultramaxes, 19 Panamax / Kamsarmax and 32 Capesize vessels
- Two vessel dry docked in first quarter 2017
- G&A net of management fees below \$11 million for 2016 gives a cost of approximately \$480 per day per vessel for the owned fleet; reduced to approximately \$400 per day following deliveries of recently-acquired vessels
Newbuilding Program Update
Recent delivervies
- Took in January 2017 delivery of two Ultramaxes Golden Virgo and Golden Libra, built at Chengxi shipyard
- Final installments of \$31.8 million in total were paid with available cash at delivery with no financing
- Took in February 2017 delivery of two Capesize newbuildngs, Golden Savannah and Golden Surabaya, built at SWS shipyard
- Final installments of \$69.2 million in total were paid, and \$50.0 million was drawn down in debt
Remaining newbuildings
- All remaining six Capesize newbuildings are scheduled to be delivered in 2018 and are financed with \$25 million each
- Paid installments of \$9.8 million in first quarter 2017 and further \$9.8 million in second quarter 2017
- Remaining capex to be paid at delivery in first quarter 2018. The total cash requirement, net of available financing will be \$24 million
Remaining newbuilding CAPEX (non-recourse)
Newbuilding delivery schedule
|
2017 |
2018 |
| Capesize vessels |
- |
6 |
Acquisition of 16 Modern Vessels in Ship-for-Share Transactions
Acquisition of Quintana Fleet Acquisition of Hemen Fleet
- Fleet of 14 modern dry bulk vessels from Quintana Shipping (the "Quintana Fleet") – average age of ~4 years; built at high quality yards
- Assumption of USD 262.7 million of existing bank debt related to the Quintana Fleet at attractive terms
- Negotiated amortization holiday and covenant waivers through second quarter 2019 subject to pre-payment of three installments totalling USD 17.4 million
- Golden Ocean to issue 14.5 million new shares to Quintana Shipping
- Quintana Shipping pro-forma ownership of approx. 11.0% following all vessel deliveries
-
Quintana Fleet to be owned in wholly owned non-recourse subsidiary of Golden Ocean
-
Two modern ice class Panamax vessels from companies affiliated with Hemen Holdings Ltd. (the "Hemen Fleet") – 2017-built at Pipavav, sister vessels to existing Golden Ocean vessels
- Fleet to be financed with USD 22.5 million seller's credit provided by Hemen Holding Ltd.
- Golden Ocean to issue 3.3 million shares to Hemen Holding Ltd
- Hemen Holding pro-forma ownership reduced to approx. 37.7% following all vessel deliveries
- Hemen Fleet to be owned in wholly-owned non-recourse subsidiary of Golden Ocean
| Fleet profile |
|
| --------------- |
-- |
|
Quintana Fleet |
Hemen Fleet |
Total |
| Capesize |
6
(5 delivered) |
- |
6 |
| Post-Panamax |
3
(2 delivered) |
- |
3 |
| Kamsarmax / Panamax |
5
(2 delivered) |
- |
5 |
| Ice class Panamax |
- |
2
(0 delivered) |
2 |
| Total |
14 |
2 |
16 |
Acquisition Facilitated by Strong Lending Relationships
Pro forma debt and remaining capex summary 1)
Attractive amendments to Quitana bank debt
- Amortization holiday throughout Q2 2019, beyond waiver period of GOGL's existing bank debt
- Cash sweep mechanism to enable deleveraging when market improves (cash sweep until deferred amount is repaid)
- Assume current commercial terms, including average margin of LIBOR + 310 bps on debt
- Limited financial covenants through Q2 2019 (MVC of 105%, Minimum cash: USD 10 million, Positive working capital)
Hemen Seller's Credit
- No scheduled debt repayments
- Attractive margin of LIBOR + 300 bps
- Maturity in Q2 2019, after waiver period of Golden Ocean's existing bank debt
Recourse Non-recourse 10
Fleet profile Operating Fleet Newbuildings Acquired from Quintana Acquired from Hemen Total Capesize 33 6 6 - 45 Post-Panamax - - 3 - 3 Kamsarmax / Panamax 9 - 5 - 14 Iceclass Panamax 10 - - 2 12 Ultramax 9 - - - 9 Total 61 6 14 2 83
Young, fuel efficient fleet with average age of ~4 years
Chartering profile
- 10 Capesize vessels on index-linked long term TC-out
- Two Capesize vessels fixed on 1-year time charters at an average daily gross rate of \$14,175
- One Kamsarmax vessel on 1-year time charter at an daily gross rate of \$10,600
- Of the Quintana fleet, five vessels are fixed out at an average gross rate of \$11,940 for second half of 2017
- Four Kamsarmax vessels on long term TC out at fixed rate
- One Panamax vessels on long term TC out expiring in third quarter 2017
- Remaining fleet is trading spot, in spot pools or on short term charters
Dry bulk market
Dry Bulk Rates & Utilization
Utilization improved year-over-year in the first quarter; still at historically low levels
Seaborne Trade Highest First Quarter Volume Observed
Seaborne trade of dry bulk commodities (major importers)
World Steel Production Trends Intact
China Rest of World
Apparent Steel Consumption Rebar Prices
Chinese apparent steel consumption & rebar prices
Chinese Steelmaking Margins Support Demand
Gross profit using Cn coking coal price, Au iron ore price and Tangshan steel billett price
Coal Imports Holding Up
Improvements have come primarily from Asia
Seaborne coal imports by major importing countries
Strong Electricity Consumption Supports Coal Demand
Grain Exports had a Strong Start to the Year
Soybean and soybean meal exports by source
USA Brazil Argentina
Handymax / Supramax Handysize
Downside Case for Supply Growth
- Construction has not even commenced on 25% of the orders (in dwt) scheduled for delivery within end of Q2 2017
- Further delays of deliveries are likely based on progress in production
Order book at Historically Low Levels
The orderbook may be reduced to 4.5% of the global fleet by the end of 2017
S&P Prices Stable (yet still low) Following Strong Increases
0 10 20 30 40 50 60 70 0 10 000 20 000 30 000 40 000 50 000 Asset values (m mUSD) 1 yr-T C (U SD/day) 1 yr-TC 5 yr SH Capesize 10 yr SH Capesize Capesize values and earnings
Panamax values and earnings
Summary Market Outlook
Continue to be cautiously optimistic based on improved supply / demand balance
Upside potential Downside risks
Expect rate volatility in the near term as supply / demand balance is still fragile and single events will impact the market. Longer term fundamentals stronger as long as new ordering is minimal.
Cash Break Even Levels Further Decreased Through Waiver Period
Cash break even levels are very attractive
Increased Leverage to a Dry Bulk Market Recovery
USD 1,000/day increase in spot rates increases annual cash earnings by approx. USD 28m
1) Net cash flow assuming fully delivered fleet and excluding investments and asset sales
2) Cash flow generation is estimated as revenues equal to average fleet spot TCE rate for spot vessels and actual time charter rate for fixed vessels less fleet wide cash break even rates, multiplied with assumed operating days of 360 days per year per vessel. Debt repayment is assumed in accordance with cash sweep agreement if applicable.
Q & A
Thank you for your attention!