Quarterly Report • Nov 25, 2021
Quarterly Report
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25 November 2021
For the third quarter, the Company achieved an average day rate of approx. USD 21,000 per day through a combination of spot and time charters. Achieved spot rates were USD 12,100 per day, while average time charter rates came in at USD 24.150 per day. Clearly the recovery of the tanker market has taken longer than we anticipated, but we have managed to extend/fix our vessels on shorter TCs at premium rates and with attractive redelivery locations. We believe our fleet is well positioned going forward.
Global oil inventories are now at critically low levels, demand remains strong and oil prices are moving higher. Day rates have increased from the low levels seen this summer and recent spot fixtures for scrubber fitted vessels are now at around USD 22,000, which is enough to put us back in the black. If these trends continue it should be only a matter of time before oil production, seaborne exports and consequently tanker rates and asset values materially pick up from current levels.
During the third quarter we continued to execute on our capital allocation policy and returned in excess of USD 31m (NOK 0.50 per share) to our shareholders through dividends. Since our final vessel delivery of Hunter Frigg in August 2020 we have paid total dividends of 1.50 NOK per share, or close to USD 100m.
| Charter coverage | Q3 '21 | Q4 '21 | Q1 '22 | Q2 '22 |
|---|---|---|---|---|
| Hunter Freya | Spot | |||
| Hunter Disen | TC | Spot | ||
| Hunter Idun | TC | Spot | ||
| Hunter Frigg | TC | Spot | ||
| % days covered | 100% | 94% | 36% | 0% |
| Avg dayrate covered (\$k/d) | 21,000 | 26,600 | 29,000 | |
| - | ||||
Benchmark VLCC rates averaged around \$3,5001 for the third quarter of 2021, continuing one of the most challenging periods in recent history for tanker owners. For modern scrubber fitted VLCCs, however, the quarter resulted in average rates of USD \$11,0001per day. The slight increase compared with the previous quarter reflects continued improvements in tanker market fundamentals. Although the recovery has been slower than previously anticipated, the fundamentals continue to move in the right direction.
Global oil demand increased by almost 2mbd from 96.7mbd on avg. during the second quarter to 98.6mbd during the third. September demand reached 99.2mbd, which is the highest figure seen since December 2019. The recovery in global oil demand continues to outpace expectations and is quickly approaching the 100mbd mark. For reference, monthly all time high global oil demand occurred in July 2019 at 102.5mbd. Global oil production averaged almost 2mbd lower than consumption at 96.8mbd during the quarter, still held back by OPEC+ cuts and over-compliance, leading to inventory draws of around 164 million barrels, or 1.8mbd. Inventories around the world are now well below their 5-year averages and precovid levels and declining, which warrants increased production and seaborne oil exports in the near future.
Positive signs emerged from the supply side of the equation towards the end of the quarter, with 4 VLCCs sent to the scrap yards in September alone. Compared with 6 VLCCs scrapped during the first six months of the year, this represents a significant uptick and bodes well going forward.
The positive developments seen during the latter part of the third quarter have continued into the fourth and we see numerous positive drivers for the tanker market going forward. We believe that the market trough is behind us, and that we are at the beginning of what may be a very interesting and lucrative period for owners of large modern eco design tankers.
First, the demand recovery continues at a strong pace and is expected reach 100mbd during the first quarter of 2022. EIA even expects oil demand of 102.4mbd in December next year.
Secondly, OPEC+ is steadily increasing production according to their stated schedule, and this is beginning to translate into meaningful increases in seaborne crude oil. According to FGE, seaborne crude oil increased by 1.1mbd to 37mbd during October, compared with pre-covid levels of around 41-42mbd. OPEC alone produced around 29.3mbd of oil in October, which is approx. 5mbd below their 2019 average. Political pressure on OPEC to increase production beyond the stated schedule, due to low inventories and high oil prices, has increased dramatically during the past month. Especially from the US and China. Although OPEC has stood their ground so far, this could mean increased production beyond the stated monthly 0.4mbd increase further down the line.
Thirdly, scrapping has picked up materially on the back of high steel prices and renewed talks between Iran and the west. So far in 2021, 14 VLCCs has been sent to the demolition yards, compared with only 4 each year for 2019 and 2020. We expect this trend to continue as the fleet is aging (avg. fleet age over 10 years) and 80-90 VLCCs, which are at or above the historical average scrapping age of 20 years, are clear scrapping candidates. Should talks between Iran and the west come to fruition, this should significantly increase scrapping which would more than offset the return of the Iranian tanker fleet.
Fourthly, the extraordinary natural gas prices experienced lately have prompted several power producers to shift from gas to oil. Estimates vary greatly, but many expect additional demand for oil of 0.5-1.5mbd for as long as gas prices stay elevated. Should the winter prove to be colder than usual, there could be additional upside to these estimates.
Finally, there are very few orders for new tankers, but plenty of orders for container and bulk vessels taking up yard capacity, and we expect this trend to continue until there is increased clarity in terms of future propulsion technologies. Coupled with very high steel prices and low rates, fleet growth should be limited for several years.
"We can not direct the wind, but we can adjust the sails."
| Quarters | Year to date | Year | ||||
|---|---|---|---|---|---|---|
| (Unaudited figures in USD 1 000) | 3Q 2021 | 3Q 2020 | Note | 30.09.2021 30.09.2020 31.12.2020 | ||
| Revenues | ||||||
| Pool revenues | 1 114 | 8 669 | 5 747 | 43 379 | 48 567 | |
| Time charter revenues | 6 208 | 26 498 | 22 716 | 42 189 | 60 037 | |
| Other income | 0 | 640 | 280 | 640 | 0 | |
| Net gain on sale of assets | 0 | 0 | 5 | 2 567 | 0 | 2 492 |
| Total Revenues | 7 322 | 35 806 | 31 310 | 86 208 | 111 096 | |
| Operating expenses | ||||||
| Vessel operating expenses | 2 334 | 4 084 | 7 446 | 8 467 | 12 404 | |
| Voyage expenses and commissions | 596 | 703 | 1 | 1 360 | 1 619 | 2 912 |
| Depreciation and amortisation expense | 3 246 | 5 292 | 6 | 10 506 | 11 141 | 16 325 |
| General and administrative expenses | 320 | 456 | 4 | 1 131 | 1 093 | 1 649 |
| Total operating expenses | 6 495 | 10 535 | 20 442 | 22 319 | 33 291 | |
| Operating profit (loss) | 827 | 25 271 | 10 868 | 63 888 | 77 806 | |
| 1 Net financial income (loss) |
-2 539 | -3 581 | -7 611 | -11 592 | -14 723 | |
| Profit (loss) before taxes | -1 712 | 21 690 | 3 257 | 52 296 | 63 083 | |
| Tax on ordinary result | 0 | 0 | 0 | 0 | 0 | |
| Net profit (loss) | -1 712 | 21 690 | 3 257 | 52 296 | 63 083 | |
| Earning per share | 0,00 | 0,04 | 0,01 | 0,09 | 0,11 | |
| Earnings per share diluted | 0,00 | 0,04 | 0,01 | 0,09 | 0,11 | |
| Quarters | ||||||
| (Unaudited figures in USD 1 000) | 3Q 2021 | 3Q 2020 | 30.09.2021 30.09.2020 31.12.2020 | |||
| Net profit (loss) | -1 712 | 21 690 | 3 257 | 52 296 | 63 083 | |
| Other comprehensive income, items to be reclassified to profit & loss | ||||||
| Translation differences | 0 | 0 | 0 | 0 | 0 | |
| Comprehensive income for the period | -1 712 | 21 690 | 3 257 | 52 296 | 63 083 | |
| Total comprehensive income attributable to: | ||||||
| Equity holders of the parent | -1 712 | 21 690 | 3 257 | 52 296 | 63 083 | |
Total comprehensive income -1 712 21 690 3 257 52 296 63 083
| (Unaudited figures in USD 1 000) | Note | 30.09.2021 | 30.06.2021 | 30.09.2020 | 31.12.2020 |
|---|---|---|---|---|---|
| NON-CURRENT ASSETS | |||||
| VLCC vessels | 5, 6 | 335 741 | 338 962 | 597 190 | 427 249 |
| Other tangible assets | 6 | 343 | 145 | 304 | 210 |
| Total tangible assets | 336 084 | 339 107 | 597 495 | 427 459 | |
| TOTAL NON-CURRENT ASSETS | 336 084 | 339 107 | 597 495 | 427 459 | |
| CURRENT ASSETS | |||||
| Trade and other receivables | 9 198 | 8 542 | 8 016 | 5 416 | |
| Other short-term assets | 4 033 | 7 113 | 3 745 | 1 539 | |
| Total current assets | 13 232 | 15 655 | 11 760 | 6 956 | |
| Cash and cash equivalents | 25 931 | 56 138 | 25 397 | 95 146 | |
| TOTAL CURRENT ASSETS | 39 163 | 71 793 | 37 157 | 102 101 | |
| TOTAL ASSETS | 375 247 | 410 900 | 634 652 | 529 560 | |
| Equity and Liabilities | |||||
| EQUITY | 2 | 82 625 | 82 625 | 82 625 | 82 625 |
| Share capital (575 362 013 shares) Own shares |
2 | -1 660 | -1 660 | 0 | -1 121 |
| Share premium | 2 | 14 835 | 46 695 | 115 065 | 113 364 |
| Other equity | 80 002 | 81 714 | 65 961 | 76 745 | |
| TOTAL EQUITY | 175 802 | 209 374 | 263 651 | 271 614 | |
| LIABILITIES | |||||
| Interest-bearing debt | 6 | 183 682 | 186 563 | 345 215 | 237 954 |
| Total non-current liabilities | 183 682 | 186 563 | 345 215 | 237 954 | |
| Trade payables | 1 424 | 556 | 3 066 | 2 124 | |
| Accrued public charges and indirect taxes | 57 | 53 | 208 | 68 | |
| Current portion of interest-bearing debt | 13 436 | 13 436 | 21 721 | 16 605 | |
| Other current liabilities | 844 | 916 | 790 | 1 195 | |
| Total current liabilities | 15 761 | 14 962 | 25 785 | 19 992 | |
| TOTAL LIABILITIES | 199 444 | 201 524 | 371 000 | 257 946 | |
| TOTAL EQUITY AND LIABILITIES | 375 247 | 410 900 | 634 652 | 529 560 |
| Quarters | Year to date | Year to date | ||||
|---|---|---|---|---|---|---|
| (Unaudited figures in USD 1 000) | 3Q 2021 | 3Q 2020 | Note | 30.09.2021 30.09.2020 31.12.2020 | ||
| Profit (loss) before tax | -1 712 | 21 690 | 3 257 | 52 296 | 63 083 | |
| Depreciation | 3 246 | 5 292 | 6 | 10 506 | 11 141 | 16 325 |
| Gain on sale of VLCC | 0 | 0 | 5 | -2 567 | 0 | -2 492 |
| Financial income | -3 | 18 | -105 | -84 | -270 | |
| Financial expenses | 1 756 | 3 592 | 6 | 6 668 | 11 571 | 15 074 |
| Change in working capital items | 3 251 | 5 958 | -8 084 | -2 569 | -876 | |
| Net cash flow from operating activities | 6 538 | 36 550 | 9 675 | 72 355 | 90 844 | |
| Investments in VLCC newbuilds and PP & E | -223 | -107 396 | 5, 6 | -230 | -274 369 | -273 805 |
| Sale of VLCC | 0 | 0 | 5 | 84 500 | 0 | 168 400 |
| Investments/sale of other financial investments | 0 | 0 | 0 | 0 | 0 | |
| Net cash flow to investment activities | -223 | -107 396 | 84 270 | -274 369 | -105 405 | |
| Interest received | 3 | -18 | 105 | 84 | 270 | |
| Interest paid | -1 756 | -3 592 | 6 | -6 668 | -11 571 | -14 050 |
| New interest-bearing debt | 0 | 82 743 | 6 | 0 | 186 510 | 254 348 |
| Installment interest-bearing debt | -2 858 | 0 | 6 | -57 371 | 0 | -180 214 |
| Installment leasing-debt (IFRS 16) | -22 | -25 | -69 | -67 | -93 | |
| Purchase of own shares | 0 | 0 | 2 | -1 267 | 0 | -3 010 |
| Dividend paid | -31 889 | 0 | 2 | -97 888 | 0 | 0 |
| Net cash flow from financing activities | -36 522 | 79 108 | -163 158 | 174 956 | 57 252 | |
| Total net changes in cash flow | -30 207 | 8 262 | -69 214 | -27 058 | 42 690 | |
| Currency effect on cash | 0 | 0 | 0 | 0 | 0 | |
| Cash and cash equivalents beginning of period | 56 138 | 17 135 | 95 145 | 52 455 | 52 455 | |
| Cash and cash equivalents end of period | 25 931 | 25 397 | 25 931 | 25 397 | 95 145 |
| Share | Own | Share | Currency | Retained | Total | ||
|---|---|---|---|---|---|---|---|
| (Unaudited figures in USD 1 000) | Note | Capital | Shares | premium | translation | earnings | equity |
| Equity as of 01.01.2020 | 82 625 | 0 | 114 914 | -2 289 | 15 953 | 211 204 | |
| Net profit 3Q YTD 2020 | 0 | 0 | 52 296 | 52 296 | |||
| Other comprehensive income | 0 | 0 | 0 | 0 | |||
| Total comprehensive income 3Q YTD 2020 | 0 | 0 | 52 296 | 52 296 | |||
| Option plan payment | 151 | 0 | 0 | 151 | |||
| Equity as of 30.09.2020 | 82 625 | 0 | 115 065 | -2 289 | 68 249 | 263 652 | |
| Net profit 4Q 2020 | 0 | 10 787 | 10 787 | ||||
| Other comprehensive income | 0 | 0 | 0 | ||||
| Total comprehensive 4Q 2020 | 0 | 0 | 10 787 | 10 787 | |||
| Purchase of own shares | -1 121 | -1 889 | 0 | 0 | -3 010 | ||
| Option plan payment | 188 | 0 | 0 | 188 | |||
| Equity as of 31.12.2020 | 82 625 | -1 121 | 113 364 | -2 289 | 79 034 | 271 614 | |
| Net profit 3Q YTD 2021 | 0 | 0 | 3 257 | 3 257 | |||
| Other comprehensive income | 0 | 0 | 0 | 0 | |||
| Total comprehensive income 3Q YTD 2021 | 0 | 0 | 3 257 | 3 257 | |||
| Dividend paid | -97 888 | 0 | 0 | -97 888 | |||
| Purchase of own shares | -539 | -728 | 0 | 0 | -1 267 | ||
| Option plan payment | 86 | 0 | 0 | 86 | |||
| Equity as of 30.09.2021 | 82 625 | -1 660 | 14 834 | -2 289 | 82 291 | 175 802 |
These condensed interim financial statements of Hunter Group where authorized for issue by the Board of Directors on 24 November 2021.
The interim condensed consolidated financial statements for the three and nine months ending 30 September 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual consolidated financial statements as at 31 December 2020.
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2020.
The net cost of the VLCCs (less estimated residual value) is the basis for a straight-line depreciation over the estimated remaining economic useful lives (25 years). Other equipment (excluding vessel upgrades) are depreciated over its estimated remaining useful life (5 years). The estimated residual value for the VLCCs is calculated by multiplying the lightweight tonnage with the market price of scrap per ton. Residual values are reviewed annually.
Voyage expenses relates to fuel and other costs incurred before the vessel joins the Tankers International pool.
On 15 December 2020, Hunter Group ASA purchased 7,691,404 of its own shares at NOK 3.35 per share, on 5 February 2021, the Company purchased 517,000 own shares in the market at an average price of NOK 2.5106 per share and on 12 May 2021, the Company purchased 3,034,702 of its own shares at NOK 2.9998 per share.
The board of directors of Hunter Group ASA decided 12 July 2021 to distribute a dividend of NOK 0.50 per share (excluding treasury shares), based on authority granted by the general meeting held 3 June 2021. The distribution was conducted as a reduction of the Company's share premium.
The management monitors the operating results in 1 segment which develops and operates the VLCCs.
The following table provides the total amount of transactions with related parties controlled by the members of the executive management of Hunter Group for 2021. All related party transactions have been entered into on an arm's length basis.
| Transactions with related parties | 30.09.2021 | 31.12.2020 |
|---|---|---|
| Purchased services in USD 1 000 | 54 | 38 |
The Group has used the services of the law firm Ro Sommernes DA for legal advice in 2020 and 2021; USD 38t in 2020 and USD 54t as per 30.09.2021. The Company's chairman Henrik Christensen is a partner in Ro Sommernes DA.
From 1 November 2018 the Company rents office space from Dronningen Eiendom AS. The rental agreement is for 36 months. The contract was renewed for an additional 36 months as from 1 November 2021. One of the Company's shareholder is also a shareholder of Dronningen Eiendom AS.
All VLCC were completed and delivered by 2020, and the acquisition cost of the delivered VLCCs were transferred from VLCC under construction to VLCC vessels.
| (Unaudited figures in USD 1 000) | ||||
|---|---|---|---|---|
| Per 30 September 2021 | IFRS 16 PP&E | gible assets | VLCC vessels | Total |
| Cost at 1 January 2021 | 273 | 10 | 439 102 | 439 462 |
| Additions in the period | 223 | 8 | 0 | 230 |
| Sale of VLCC | -25 | 0 | -81 075 | -81 100 |
| Cost at 30 September 2021 | 471 | 17 | 358 027 | 358 516 |
| Accumulated depreciations at 30 September 2021 | -133 | -12 | -22 286 | -22 431 |
| Book value at 30 September 2021 | 338 | 5 | 335 742 | 336 084 |
| This period's depreciation | 67 | 6 | 10 433 | 10 506 |
Hunter Saga and Hunter Laga were sold in 2020 for an en-bloc price of USD 168.4 million, with a gain of USD 2.5 million. Hunter Atla was sold in 2Q 2021 for an en-bloc price of USD 84.5 million, with a gain of USD 2.6 million.
The board ….
Hunter Group ASA Org. nr. 985 955 107
Address: Dronningen 1, 0287 OSLO E-mail: Erik A. S. Frydendal CEO [email protected] Lars M. Brynildsrud CFO [email protected]
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