OREANDA-NEWS. November 29, 2012. (Nine months to 30 September 2012 – unaudited, under IFRS)

Highlights

Gross revenue: USD 1,114.3 million (+ 3.6 pct*)
Time charter equivalent (TCE) revenues: USD 720.2 million (+ 3.7 pct*)
EBITDA: USD 375.0 million (+ 3.5 pct*)
Net profit: USD 42.3 million (-10.7 pct*)
Total fleet: 156 owned and chartered-in vessels of 11.7 million tonnes DWT
Seven vessels of 0.6 million tonnes DWT in total added to the fleet

Long-term time charter agreements concluded with Shell Trading & Shipping Company (STASCO) for two new 170,000 cubic metre ice-class LNG carriers (June 2012)

Long-term time charter of two 20,600 cubic metre ice-class LPG tankers concluded with Russian oil and chemical company SIBUR (March 2012)

Expansion of joint venture with Glencore International AG, through joint ownership and management of additional four 74,000 tonnes DWT LR1 product tankers

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 seven million tonnes per annum (June 2012)

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 (March 2012)

Successful completion of 1,800 nautical miles towage and installation of a 140,000 tonnes gravity-based structure (GBS) platform for the Arkutun-Dagi field (Sakhalin 1 project, operated by Exxon Neftegas Ltd) (June 2012)

In Q3, the product tanker SCF Amur successfully completed a transit of the Northern Sea Route, carrying 44,000 tonnes of petroleum products for Gazpromneft.

*Comparative percentage increases on the previous nine months to 30 September 2011

Commenting on the results, Sergey Frank, President and CEO of OAO Sovcomflot, said:
 “The first nine months of 2012 have seen no overall improvement in the tanker market. Indeed, average industry earnings for all tanker segments remained near their historical lows of the last 12 years.
 “Against this background, SCF Group remained profitable in the first nine months of 2012. In part this results from our more diversified business portfolio with a substantial portion of fixed rate long-term time charters to national and international leading oil companies. It also reflects our strategy of expanding our presence in higher margin market segments, such as offshore and seismic surveying.
 “SCF Group remains grateful for the continuing support of its customers and employees, without whom we would not have been able to achieve the results we are able to report. We believe our emphasis on safety and the quality of services offered to our customers, together with SCF’s significant Arctic expertise and ice shipping, should assist us to continue implementing our plans. Importantly, we believe these factors leave SCF well placed to benefit from when the tanker market returns to a period of greater stability and growth.”

 Nikolai Kolesnikov, Senior Executive Vice-President, Chief Financial Officer, added:
 “Despite the current depressed nature of the tanker markets and the ongoing turbulence in global financial markets, SCF Group continues to meet its financial obligations. During the period, the Group concluded a long-term financing arrangement with two leading global financial institutions. This extended our access to credit and was a further demonstration of the confidence of international lenders.”
Gross revenue for the nine months to 30 September 2011 was USD 1,114.3 million, an increase of 3.6 per cent (9M 2011: USD 1,075.6 million). Time charter equivalent (TCE) revenues increased over the comparable previous period by 3.7 per cent to USD 720.2 million (9M 2011: USD 694.6 million).
 Earnings before interest, tax and depreciation (EBITDA) were USD 375.0 million, an increase of 3.5 per cent on the previous period (9M 2011: USD 362.4 million). Net profit declined by 10.8 per cent to USD 42.3 million (9M 2011: USD 47.4 million). During the first nine months of 2012, average tanker industry earnings for all market segments remained near their historical lows of the past 12 years. Significantly, in a market characterised by depressed freight rates and a continued over-supply of vessels in most tanker segments, SCF Group remained profitable.

Operating Highlights

Key Business Segments

Crude Oil Tankers

Time Charter Equivalent (TCE) revenues for the nine months period to 30 September 2012 were USD 283.0 million (9M 2011: USD 301 million). The decline of 6.0 per cent in revenues reflected the overall downward pressure on market freight rates during the period. 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’s tanker Nevsky Prospekt. The opening ceremony for the terminal was held in the presence of the Russian President and former Prime Minister Vladimir Putin.
 On 31 May 2012, the 122,039 tonnes DWT ‘broad-beam’ Aframax tanker Nikolay Zuyev and on 18 September 2012, her sister ship Georgy Maslov, were delivered to the Group.
 As at 30 September 2012, the Group had two VLCC crude oil tankers on order, each of 320,000 tonnes DWT. The vessels will operate on a seven year time charter to Petrochina.

 Oil Product Tankers

Time Charter Equivalent (TCE) revenues for the period were USD 184.9 million (9M 2011: USD 190.6 million), which represented a decline of 3.0 per cent over the comparable period in 2011.


 On 10 February 2012, SCF Group extended its partnership 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 were delivered under the original partnership agreement in Q1 2012. The joint fleet of sister ships with Glencore now comprises nine LR1 tankers.

In June 2012, the 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 begin loading 36,000 tonnes of fuel oil for discharge in Turkey.

During August 2012, the tanker SCF Neva (47,125 tonnes DWT) began transporting oil from the Gulf of Ob (in the Yamal-Nenets Autonomous District). She became the largest tanker to operate in this remote area of the Russian Arctic, and was operating under time charter to the Russian oil major Lukoil. Part of her voyage included the Northern Sea Route, representing a further important step towards expanding commercial shipping in the Arctic, which is an important strategic focus for SCF Group.

Later in the period, on 3 September 2012, the oil product tanker SCF Amur successfully completed a full transit of the Northern Sea Route, with a cargo of 44,000 tonnes of petroleum products for Gazpromneft.

 Gas Tankers

Time Charter Equivalent (TCE) revenues for the period were USD 63.7 million (9M 2011: USD 65.3 million), which was a decline of 2.5 per cent over the previous period.
 On 10 February 2012, SCF Group signed a long-term time charter agreement with Shell for two ice-class Atlantic-max LNG carriers. At 30 September 2012, the Group had four such LNG carriers on order, each with a cargo capacity of 170,000 cubic metres, with deliveries scheduled up to 2014. The other two vessels are expected to be operated under a long-term charter with Gazprom.
 In April 2012 an important milestone was reached when Grand Aniva, the 145,000 cubic metre ice-class 1C LNG tanker, loaded the 500th shipment of LNG to be exported from the port of Prigorodnoye (Sakhalin Island).
 In March 2012, the Group signed long-term time charters with SIBUR, for the operation of two 20,600 cubic metre capacity ice-class LPG carriers from its export terminal at the port of Ust-Luga in Russia.

 Offshore services

Time Charter Equivalent (TCE) revenues for the nine month period ended 30 September 2012 increased by 7.7 per cent to USD 145.4 million (9M 2011: USD 135.0 million). This business segment is one of strategic importance to the Group and has grown rapidly over recent years. It now represents a fifth of the Group’s TCE revenues, and approximately 27.5 per cent of profits on vessels’ trading for the nine months ended 30 September 2012.

On 30 June 2012, the first of the Group’s two multifunctional icebreaking supply vessels (3,950 tonnes DWT each) was launched from Arctech Helsinki Shipyard Oy (a joint venture of OAO United Shipbuilding Corporation and STX Finland) in Helsinki. These multifunctional supply vessels are the result of an agreement signed in December 2010, between SCF Group and Exxon Neftegas Limited (operator of the Sakhalin-I project). Under this agreement, the Group will provide two specialised ice-class supply vessels on a long-term time charter. Both vessels will provide year-round support for the oil platform at the Arkutun-Dagi offshore oilfield (part of the Sakhalin-I project).

 Other

This business segment includes dry bulkers, seismic vessel operations and towage. Time charter equivalent revenues for the first nine months of 2012 grew strongly to USD 43.1 million (9M 2011: USD 5.1 million).
 In cooperation with its partners SMNG, the Group successfully completed several 3D seismic acquisition projects, including a flagship one for Rosneft/ExxonMobil in the deep waters of the Black Sea.
 In June 2012 the Group, together with its Dutch partner Van Oord, completed a 1,800 nautical mile towage and installation assignment for Berkut, a Gravity Base Substructure (GBS). As one of the largest platforms of her kind in the world, she is expected to operate at the Arkutun-Dagi field within the Sakhalin-1 project (operator: Exxon Neftegas Ltd.).

Fleet Summary

As at 30 September 2012, SCF Group’s fleet comprised 156 vessels (including nine tugs leased to Rosnefteflot) amounting to 11.7 million tonnes DWT. During the first nine months of 2012, the Group took delivery of seven new vessels (615,570 tonnes DWT in total), comprising five LR1 type tankers and two Aframax vessels. Over the period one vessel was sold, the 40,584 tonnes DWT MR tanker Tambov.
 The Group had 14 vessels under construction at 30 September 2012, amounting to 1.46 million tonnes DWT in total. These comprise: two Very Large Crude Carriers (VLCCs); two oil products Aframax tankers (LR2 type); two Panamax bulk carriers; four LNG carriers, two LPG carriers and two Multifunctional Ice breaking vessels. The vessels are all scheduled for delivery between November 2012 and October 2014.
 A detailed fleet list is available on the Group’s website (www.scf-group.com).


Financial Position

The Group continues to pursue a conservative financing policy. At the end of the period, the Group had cash and bank deposits of USD 302.5 million (9M 2011: USD 334.8 million), with undrawn revolving credit facilities of USD 245.0 million. As at 30 September 2012, the total contracted cost of the 14 new vessels the Group had on order was USD 1,516.2 million. At this date, USD 467.7 million of these contracted costs had already been paid. During the period, further progress was made to finance the outstanding capital commitments of the Group’s shipbuilding programme. In June 2012, for example, a USD 140 million, seven year loan agreement was concluded with Citigroup and Bank of America Merrill Lynch, to finance the construction of the two VLCCs that SCF has on order.

 Dividends of RUB 0.21 per share, amounting to RUB 420.6 million in total (2011: RUB 0.51 per share, amounting to RUB 1,000.0 million in total) were declared on 30 June 2012 and were paid on 22 August 2012.