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Hunter Group ASA Investor Presentation 2019
3626_rns_2019-09-11_537f1fc9-7d7d-4fdb-bda7-446ea2c1ba63.pdf
Investor Presentation
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Hunter Group ASA - Pareto Oil & Offshore Conference
11 September 2019
CERTAIN STATEMENTS INCLUDED IN THIS DOCUMENT CONTAIN FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS 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. THE WORDS "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 DOCUMENT ARE BASED UPON VARIOUS ASSUMPTIONS, MANY OF WHICH ARE BASED, IN TURN, UPON FURTHER ASSUMPTIONS, INCLUDING WITHOUT LIMITATION, MANAGEMENT'S EXAMINATION OF HISTORICAL OPERATING TRENDS, DATA CONTAINED IN HUNTER GROUP'S RECORDS AND OTHER DATA AVAILABLE FROM THIRD PARTIES. ALTHOUGH HUNTER GROUP BELIEVES 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 HUNTER GROUP'S CONTROL, YOU CANNOT BE ASSURED THAT HUNTER GROUP WILL ACHIEVE OR ACCOMPLISH THESE EXPECTATIONS, BELIEFS OR PROJECTIONS. THE INFORMATION SET FORTH HEREIN SPEAKS ONLY AS OF THE DATES SPECIFIED AND HUNTER GROUP UNDERTAKES NO DUTY TO UPDATE ANY FORWARD-LOOKING STATEMENT TO CONFORM THE STATEMENT TO ACTUAL RESULTS OR CHANGES IN EXPECTATIONS OR CIRCUMSTANCES. IMPORTANT FACTORS THAT, IN HUNTER GROUP'S VIEW, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION: THE STRENGTH OF WORLD ECONOMIES AND CURRENCIES, GENERAL MARKET CONDITIONS, INCLUDING FLUCTUATIONS IN CHARTERHIRE RATES AND VESSEL VALUES, CHANGES IN DEMAND IN THE TANKER MARKET, INCLUDING BUT NOT LIMITED TO CHANGES IN OPEC'S PETROLEUM PRODUCTION LEVELS AND WORLD WIDE OIL CONSUMPTION AND STORAGE, CHANGES IN HUNTER GROUP'S OPERATING EXPENSES, INCLUDING BUNKER PRICES, DRYDOCKING AND INSURANCE COSTS, THE MARKET FOR HUNTER GROUP'S VESSELS, AVAILABILITY OF FINANCING AND REFINANCING, ABILITY TO COMPLY WITH COVENANTS IN SUCH FINANCING ARRANGEMENTS, FAILURE OF COUNTERPARTIES TO FULLY PERFORM THEIR CONTRACTS WITH US, 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 OR POLITICAL EVENTS, VESSEL BREAKDOWNS, INSTANCES OF OFF-HIRE AND OTHER IMPORTANT FACTORS.
THIS PRESENTATION IS NOT AN OFFER TO PURCHASE OR SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE OR SELL, ANY SECURITIES OR A SOLICITATION OF ANY VOTE OR APPROVAL.
7x ECO scrubber-fitted VLCCs for delivery in 2019-20
- World's only listed scrubber-fitted newbuild VLCC pure play
- Orders placed at historically low levels
- Scrubbers delivered by Wärtsilä, with robust warranties in place
- Dynamic and opportunistic investment strategy
- Open to outright asset sales, M&A, ship for shares long-term time charters, etc.
- Shareholder distributions a top priority
- Industry leading G&A
- No hidden fees, poison pills, related party conflicts, etc.
- Fully aligned incentive structure
- Norwegian shipping taxation
Opportunistic shareholder friendly strategy
Cost leading and fully transparent corporate structure
Apollo Asset Ltd. Other shareholders ~29% ~71% Indicator AS* 100% Hunter GroupASA Oslo Axess ("HUNT") 100% Hunter Tankers AS *Limited activities Future opportunities?
7x VLCC newbuilding orders with delivery between 3Q19- 3Q20
Company overview Top 10 shareholders (as of 27 August 2019)
| Investor | Shares (m) |
Ownership |
|---|---|---|
| APOLLO ASSET LIMITED 1 |
168 | 29.1% |
| SUNDT AS 2 |
41 | 7.1% |
| SONGA TRADING INC 3 |
29 | 5.0% |
| SONGA AS 4 |
20 | 3.5% |
| SWAP INVEST AS 5 |
16 | 2.7% |
| Paribas Securities Services BNP 6 |
14 | 2.5% |
| TITAN OPPORTUNITIES FUND IC SICAV 7 |
14 | 2.4% |
| VERDIPAPIRFONDET DNB SMB 8 |
12 | 2.1% |
| FONDSFINANS NORGE 9 |
12 | 2.0% |
| Bank and State Street Trust Comp 10 |
11 | 2.0% |
| Sum top 10 |
335 | 58.3% |
| Total | 575 | 100.0% |
- Originally ordered 8x ECO scrubber-fitted VLCC newbuilds from DSME, for an avg. all-in price of USD ~86m
- Signed an MoA for the sale of H.No 5457 in June 2019 for USD 98m
- − Closing at delivery end October
- Commercial management by Tankers International, through creation of the worlds largest scrubber-fitted VLCC pool
- Technical management by OSM
Capital expenditure program (Incl. H.No 5457)
- Avg all-in yard cost per vessel of USD ~86m, including Wärtsilä scrubbers
- Newbuild scrubber vs. retrofit ensuring lower capex and warranty benefits
- Paid in yard instalments and Q4 '19 capex including H.No 5457, which has been sold for USD 98m but awaiting transaction close in October '19
Financing strategy
- First class financing offer from the four largest Nordic banks secured, however sale-and-leaseback more appropriate for Hunter Group
- Vessels: Initial 3x
- Amount: USD 180m
- Tenor: 5 years
- Bareboat rate first 6 months: USD 11,500/d
- Flexible repurchase optionality for all vessels
- Cash breakeven first 6 months of USD 18,900 per day, excluding ECO and scrubber savings
- Indicative daily savings of USD 28,000 compared to 2010 built non-eco VLCC
- Higher LTV (70%) and flexible structure eliminating need for additional equity
- Lower all-in cost of capital in first 9-12 months
- Potential for dividends from Q1 2020
| Assumptions: | Laden | Ballast | 50/50 |
|---|---|---|---|
| Eco | 48 ton | 32 ton | 40 ton |
| Eco with scrubber | 50 ton | 34 ton | 42 ton |
| "Kidan" - 2010 non-Eco | 77 ton | 59 ton | 68 ton |
| Fuel prices | HSFO: \$215/ton MGO: \$545/ton Spread: \$330/ton |
Hunter Atla: Illustrative cash breakeven first 6 months
Seaborne US crude to supply Asia driven demand growth
US/MEG oil export growth and VLCCs required
VLCC supply growth will slow from H2 '19
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Sources: EIA, IEA, Energy Aspects, Bloomberg, Fearnleys, Company
Note: 2019 assumed 1 mb/d from second half. Scrubber impact from 30-45 days from offhire days. 2020: 1 mb/d additional OPEC, 2 mb/ of additional crude runs whereof 50% shipped. Assumed 1 mb/d of HFO storage
| CE * Indicative Based on Baltic Parameters |
|||||||
|---|---|---|---|---|---|---|---|
| FFA's | Period | ID3C | ID20 | TC2 | TC14 | TCS | TC6 |
| CURMON | Sep | \$29,765 | \$17,008 | \$7,148 | \$3,490 | \$14,181 | \$4,640 |
| 1+ | Oct | \$43,193 | \$24,799 | \$9,174 | \$4,364 | \$15,394 | \$7,483 |
| 2+ | Nov | \$55,200 | \$30,724 | \$13,814 | \$9,004 | \$18,453 | \$16,796 |
| 34 | Dec | \$62,990 | \$32,802 | \$18,159 | \$12,164 | \$22,071 | \$26,390 |
| 4+ | Jan | \$48,150 | \$23,722 | \$16,788 | \$10,788 | \$20,868 | \$26,820 |
| 0+1 | Q4 2019 | \$53,794 | \$29,442 | \$13,892 | \$8,512 | \$18,369 | \$16,889 |
| Q+2 | Q1 2020 | \$48,640 | \$22,651 | \$15,501 | \$9,010 | \$19,410 | \$19,479 |
| Ca +1 | CAL 20 | \$38,446 | \$17,869 | \$11,891 | \$7,036 | \$20,079 | \$16,803 |
The MGO vs. HSFO spread starting to widen
Significant savings potential vs. 2010 built non-eco VLCC
| Assumptions: | Laden consumption | Ballast consumption | 50/50 |
|---|---|---|---|
| Eco | 48 ton | 32 ton | 40 ton |
| Eco with scrubber | 50 ton | 34 ton | 42 ton |
| "Kidan" - 2010 Korean non-Eco |
77 ton | 59 ton | 68 ton |
Historical VLCC newbuilding prices adjusted for US CPI (Excl. scrubber)
1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Why?
High fleet growth, OPEC production cuts, OECD inventory drawdowns
-
- If the total global shipping fleet ran on scrubbers and consumed 300 million tonnes HSFO p.a., it would take 150 years for the oceans' Sulphur content to increase from 2,700ppm to 2,701ppm
- If all the sulphur in the world's oceans were to be removed, it would form a layer around the earth about 1.7 meters thick. All the sulphur in all the world's known oil reserves would add only one sheet of paper to this layer
- Lower environmental footprint with exhaust cleaning via scrubbers vs. on site at refineries
- No reason why scrubbers should no be a long-term solution, and co-exist with future LNG propelled tankers
Appendix
Going forward, the marginal barrel is 2-3x farther away…
Nautical miles
(0.5)
HSFO LSFO/Blends MGO
Oil production growth next 3-4 years to require ~115 VLCCs
2019-22 incremental world oil supply
VLCC scrubber installation schedule
Illustrative supply impact:
- Remaining 2019 scrubber installations: − 74x VLCCs
- Scrubber installation off-hire − 30-45 days
- Total reduction fleet days: − 2,220 – 3,330
- Current VLCC fleet: − 785x
- Remaining days 2019: − 111
- Total remaining fleet days 2019 − 87,135
- Fleet reduction from scrubber installations:
- − 2.5% - 3.8%
Hunter Group ASA Org. nr. 985 955 107
Dronningen 1 0287 Oslo, Norway +47 975 31 227 [email protected]