OREANDA-NEWS. December 23, 2009. The Sovcomflot (SCF Group) Board of Directors at a regular meeting on 18 December 2009 considered the results of the implementation of the Principal Directions of Sovcomflot’s Development for the period of 2004-2009 and approved the SCF Group’s Strategy for 2010-2015.

During the past five years the SCF Group’s fleet has grown by more than three times and currently exceeds 10.4 million tones (DWT). The average age of the SCF Group’s tankers has been reduced from 7.5 to 6 years. By entering such segments as the transportation of liquefied natural and petroleum gas, as well as the development of new and unique transportation technologies for crude oil shuttle tanker operations in extremely harsh and heavy ice conditions of the Arctic and the Far-Eastern seas, the range of services offered to customers has been significantly broadened. Revenues have increased more than three times and in 2009 amounted to USD 1.23 billion. The book value of net assets has doubled to USD2.81 billion and dividends paid have increased by 14 times.

Sergey Naryshkin, Chairman of the Board, stated: “In the last five years Sovcomflot has not only become by far the largest Russian shipowner, but has also achieved excellent commercial and financial results, and has become a flagship of Russia’s shipping industry. Fundamental changes in the SCF Group’s structure and operational activities has taken place. On the basis of our previous successful development, strategic tasks for SCF Group from 2010 to 2015 include both further growth in the SCF Group’s share of servicing Russia’s seaborne exports  the provision of integrated logistical solutions for offshore upstream oil and gas projects, and the continuing expansion of traditional shipping services in the global market.”

While looking into the future with cautious optimism, the Board of Directors recognises that the SCF Group’s Strategy for 2010-2015 will be implemented in a challenging market environment. In the short and medium term the oversupply of tonnage will continue, resulting from the decline in global trade and transportation volumes and massive deliveries of newbuildings. Negative trends in world freight markets will be combined with limited access to traditional sources of bank financing for ship-owning companies. At the same time, the level of requirements of both market regulators and clients in respect of quality and safety in seaborne transportation will continue to increase.

Sergey Frank, Sovcomflot President & CEO, noted: “Based on the analysis of market trends, the Board considers that it is desirable to maintain the SCF Group’s industrial business model providing for deep integration in the oil and gas industry value chain, and in the servicing of oil and gas companies at all phases of their production cycle from the wellhead to the end users of oil products. This strategy is based on the SCF Group’s desire to maintain its leading position as regards quality of service, safety and environmental standards, and the development of energy efficient technologies, and further widening of the scope of services offered to its clients.”

Evgeny Ambrosov, Sovcomflot Senior Executive Vice-President, emphasised that while maintaining a balanced portfolio of business with Russian and international oil and gas companies, the strategy envisages the strengthening of the Group’s position in the Pacific, as well as further growth of its Russian-generated business in its total volume of trade, first and foremost by means of the SCF Group’s involvement in servicing new projects in the Arctic and the Far-Eastern regions with a view to making Sovcomflot a truly global enterprise.

Target parameters of the strategy include:
• maintaining the SCF Group’s leading position in servicing Russian exports of hydrocarbons;
• the creation of a national integrated offshore upstream services provider centred on Sovcomflot with a specific focus on operating in the harsh environment and ice conditions of Russia’s Arctic and Far-Eastern regions;
• strengthening Sovcomflot’s status as “preferred carrier” for core Russian and international oil and gas companies and maintaining its position within the world’s top tanker companies;
• further consolidating the Group’s market positions, both by expanding its own fleet, by operating chartering pools and by providing commercial operation of third parties’ vessels;
• focusing the SCF Group’s investment policy on the needs of core Russian and international oil and gas clients as opposed to more speculative market expectations. The volume of investments in 2010-2015 will exceed USD 5.5 billion;
• doubling key economic parameters of the SCF Group’s activities by the end of 2015, maximizing the return on invested capital , and achieving sustainable long-term growth of the Group’s equity value.

Nikolai Kolesnikov, Sovcomflot Executive Vice-President, said: “The Development Strategy supported by the Board, envisages investments of up to USD5.5 billion in the course of the next six years. We will seek to diversify our sources of finance, including accessing debt and equity capital markets, and will use market conditions to grow the Group’s business through mergers and acquisitions.”

Sergey Popravko, Executive Board member and Managing Director of Unicom, noted that the SCF Group’s Strategy for 2010-2015 will be based on further improvement of its fleet technical management systems, including employment policy, maintaining competitive terms for officers, crew members and onshore personnel, so as to attract and retain the best specialists in the industry. In addition, the SCF Group’s technical policy is aimed at the construction of highly efficient ships through introducing innovative technologies, at increasing energy efficiency and at reducing the SCF Group’s carbon footprint.

“Institutional and corporate development of the company will be further aimed at achieving full compliance with the leading Stock Exchanges’ requirements for public companies”, said Charles Ryan, an independent Director and Chairman of the Board’s Audit Committee.

Sergey Naryshkin, Chairman of the Board, concluded as follows: “The SCF Group’s Strategy takes into account the priority tasks set by the transport and energy strategies of the Russian Federation. The Board fully supports the SCF Group’s aspirations to achieve a leadership position in the global shipping industry, not only by the size of its fleet but also by the highest level of service quality and continuous innovative approach. The company’s management together with the Board’s Strategy Committee, assisted by the best experts in the industry, have carried out substantial work, resulting in the Board’s approval of the Strategy for the period to 2015.”