OREANDA-NEWS. September 13, 2012. 12 September 2012 OJSC Sovcomflot (‘SCF Group’) announced its results for the second quarter and half year periods ended 30 June 2012:
 Highlights Q2 and H1 2012:

• Gross revenue in H1: USD 777.7 million (increased by 6.2 per cent in comparison to USD 732.6 million in H1 2011)

• EBITDA in H1: USD 267.9 million (increased by 1.9 per cent in comparison to USD 262.8 million in H1 2011)

• Net profit for H1: USD 50.9 million (declined by 20.7 per cent in comparison to USD 64.2 million in H1 2011)

• Long-term time charter agreements concluded with Shell Trading&Shipping Company (STASCO) for two 170,000 cubic metre ice class LNG carriers

• Long-term time charter of two 20,600 cubic metre ice-class LPG tankers concluded with Russian oil and chemical company SIBUR

• Expansion of joint venture with Glencore International AG through joint ownership and management of additional four 74,000 tonne DWT LR1 product tankers, all of four were delivered in Q1 2012.

• In Q2 NS Parade becomes the first vessel to load at Rosneft’s new deepwater loading facility at Russia’s Tuapse refinery with a maximum throughput capacity of 7 million tonnes per annum

• Nevsky Prospect becomes the first Aframax vessel to load at new Ust-Luga terminal with a maximum throughput capacity of 38 million tonnes per annum

• Successful completion of 1,800 nm towage of the 140,000 t GBS platform for the Arkutun-Dagi project (Sakhalin 1)

• USD 140 million credit facility signed with Citi and Bank of America Merrill Lynch for financing Sovcomflot’s first two VLCC tankers on long-term charter to Petrochina.

 Sergey Frank, President & CEO of OJSC Sovcomflot, said:

 “Despite continued depression in the global tanker markets resulting from a combination of sustained weak demand and increased supply from the ongoing delivery of new buildings into operation, the Group has in the first half of 2012 demonstrated resilience to these factorsand achieved substantial operational profit for the period.”

 “Over the first six months of 2012, the Group has met its targets under the development strategy to expand further its business portfolio in the offshore and liquefied gas transport sectors with significant milestones being achieved.”

 Nikolay Kolesnikov, Senior Executive Vice President, Chief Financial Officer, added:

 “A long-term financing deal with two leading global financial institutions new to the SCF Group’s pool of financial partners despite ongoing turbulence in the financial markets demonstrated confidence of international lenders in the SCF Group. We have been honouring all our existing bank debt obligations and are on track to finance outstanding capital commitments on the Group’s shipbuilding programme.”

Gross revenue for H1 2012 was USD 777.7 million (a 6.2 per cent increase on H1 2011). Meanwhile, time charter equivalent (TCE) revenue for the period was USD 500.5 million, a 3.9 per cent increase on H1 2011. The Group’s EBITDA for H1 2012 was USD 267.9 million, a 1.9 per cent increase on the corresponding period in 2011. Net profit in the first half was USD 50.9 million, 20.7 per cent below that achieved in the first half of 2011, reflecting a number of factors including higher voyage costs and other operating expenses this year, higher depreciation charges and no non-operational income from sale of assets as compared to H1 2011.

Q2 and H1 2012 Operating Highlights

Key Business Segments

Crude Oil Tankers
 Time Charter Equivalent (TCE) revenues were USD 198.8 million for H1 2012 (H1 2011: USD 218.2 million).

 On 31 May 2012, the 122,039 tonnes DWT “wide-beam” Aframax tanker Nikolay Zuyev was delivered in to the SCF fleet. As at 30 June 2012, SCF had three crude oil tankers on order (one further Aframax tanker and two Very Large Crude Carriers (VLCCs). The VLCCs represent the first to be ordered by the Group and result from the successful conclusion of long-term charter agreements with Petrochina.

 On 23 March, 2012 a new oil terminal was launched in the port of Ust-Luga and a first test shipment of oil started from the terminal, which is part of the second stage of the Baltic Pipeline System. The first vessel to start loading from the terminal was SCF tanker Nevsky Prospekt. The opening ceremony was held in the presence of the Russian President and former Prime Minister Vladimir Putin.

 Oil Product Tankers
 Time Charter Equivalent (TCE) revenues were USD 129,5 million for H1 2012 (H1 2011: USD 128.0 million).

 On 10 February 2012, SCF Group agreed an extension to its partnership project with Glencore International AG for the joint ownership and operation of a further four 74,000 tonnes DWT “LR1” product tankers. The vessels SCF Plymouth, SCF Pacifica, SCF Pearl and SCF Prudencia were built in 2011 and 2012 at the Hyundai MIPO Dockyard, South Korea and delivered under the original partnership agreement in Q1 2012. The joint fleet of sister vessels with Glencore now totals nine LR1’s.

 In June 2012 the SCF Group’s product tanker NS Parade became the first vessel to load at Rosneft’s new deepwater loading facility at the Tuapse refinery. The facility was inaugurated by Russian President, Vladimir Putin, who witnessed the NS Parade load 36,000 tonnes of fuel oil for discharge in Turkey.

 As at 30 June 2012, the Group had two LR2 Aframax oil product tankers on order for delivery by 2013.

 Gas Carriers

 Time Charter Equivalent (TCE) revenues were USD 41.4 million for H1 2012 (H1 2011: USD 42.8 million).
 In April 2012 the 145,000 cubic metre ice class 1C LNG tanker Grand Aniva loaded the 500th shipment of LNG to be exported from the port of Prigorodnoye (Sakhalin Island).
 As at June 2012, the Group had four ‘Atlantic-max’ ice class LNG carriers on order, each with a cargo capacity of 170,000 cubic metres with deliveries scheduled up to 2014. All are committed to long term charter contracts.

 On 10 February 2012, the SCF Group signed a long-term time charter agreement with Shell for two of the above Atlantic-max LNG carriers.
 During the period, the Group amended two existing Panamax bulker design slots at Hyundai MIPO dockyard for two 20,600 cubic metre capacity ice-class LPG carriers for delivery by September 2013. These vessels are expected to operate under long-term time charters with SIBUR, signed in March 2012, for operations from its export terminal at the port of Ust-Luga in Russia.
 Offshore

 Time Charter Equivalent (TCE) revenues were USD 97.7 million for H1 2012 (H1 2011: USD 88.9 million).

 As at 30 June 2012, the Group had two 3,950 tonnes DWT ice breaking supply vessels on order from the Arctech Shipyard in Helsinki, Finland. The keel laying ceremony for the first of the two vessels took place in January 2012 and both vessels are expected to be delivered by April 2013. The vessels are contracted to ExxonNeftegaz under long term charter to service the offshore facilities of Arkutun-Dagi, which is a major new phase of the Sakhalin 1 project on the Russian continental shelf.

 Other

 In cooperation with its partners SMNG, in May 2012 SCF has successfully completed several 3D seismic acquisition projects including the flagship one for Rosneft/ExxonMobil in deepwater Black Sea.
 In June 2012 Sovcomflot together with the its Dutch partner Van Oord company completed the towage operation of Gravity Base Substructure (GBS) Berkut – one of the largest existing platforms in the world. The production platform is expected to operate at the Arkutun-Dagi field within the Sakhalin-1 project (operator: Exxon Neftegas Ltd.).

Financial Position and Dividend

The SCF Group benefited from maintaining its well-balanced chartering policy which has protected Group income levels in part from some of the weakness of the conventional tanker freight market. In H1 2012 approximate 60 per cent of the fleet was engaged on time-charter contracts, a similar percentage to that reported at the end of H1 2011. .
 As at 30 June 2012, the Group had cash of USD 319.6 million which was 21 per cent higher than in the same period in 2011. Meanwhile, net debt to equity stood at 48.3 per cent at the period end, compared with 47.6 per cent at 31 December 2011.

In June 2012, SCF Group concluded a USD 140 million, seven year loan agreement with Citi and Bank of America Merrill Lynch to finance the construction of its two VLCCs on order.
 At the end of the period, the Group had committed capital expenditure in support of its new building programme of USD 1,579.6 million of which USD 1,138.1 million remained outstanding at 30 June 2012.
 A dividend of RUB 0.21 per share was declared on 30 June 2012, totalling RUB 420.6 million which is equivalent to USD 12.8 million (H1 2011 RUB 0.51 per share, totalling RUB 1,000.0 million).

Fleet Summary

As at 30 June 2012, SCF Group’s fleet comprised 157 vessels (including nine tugs chartered out to Rosnefteflot) with a total deadweight of [11.7] million tonnes. During Q2 2012, delivery was taken of one new Aframax tanker (Nikolay Zuyev). Together with the delivery of five new LR1 tankers in Q1 2012, the first half of 2012 saw six new vessels join the Group’s fleet, representing 493,552 tonnes of additional DWT.

 There were 15 vessels under construction at the end of H2 2012, amounting to 1.6 million tonnes DWT in total, comprising: three Aframax tankers; two VLCCs; four LNG carriers; two LPG carriers; two bulk carriers and two ice breaking supply vessels for delivery at various dates up to October 2014.