OMI Corporation News Release February 25, 1999 for the Quarter Ended December 31, 1998.
For The For The Three Year Ended Months Ended December 31, December 31, RESULTS OF OPERATIONS 1998 1997 1998 1997 (In thousands except per share data) (UNAUDITED) Operating revenues (TCE revenues) $ 111,711 $ 108,734 $ 24,346 $ 32,528 Operating expenses (includes charter hire expenses) 70,380 53,341 15,364 16,122 Net voyage revenues 41,331 55,393 8,982 16,406 Depreciation and amortization 24,314 22,675 6,494 5,619 General and administrative expenses 10,773 12,540 3,932 5,675 Operating income (loss) 6,244 20,178 (1,444) 5,112 Net interest expense (9,772) (9,534) (3,731) (1,835) Gain (loss) on disposal of assets-net 6,485 885 (140) (1) Other-net (882) -- 128 -- Equity in operations of joint ventures 3,684 737 522 827 Income (loss) before income taxes 5,759 12,266 (4,665) 4,103 (Benefit) provision for income taxes (37,158) 5,407 -- 1,473 Cumulative effect of change in accounting principle -- 10,063 -- Net income (loss) $ 42,917 $ 16,922 $ (4,665) $ 2,630 Net income (loss) per common share: Basic: Net income (loss) before cumulative effect of change in accounting principle $ 1.01 $ 0.16 $ (0.11) $ 0.06 Net income (loss) $ 1.01 $ 0.39 $ (0.11) $ 0.06 Weighted average shares outstanding 42,671 42,914 41,609 43,056 Diluted: Net income (loss) before cumulative effect of change in accounting principle $ 1.00 $ 0.16 $ (0.11) $ 0.06 Net income (loss) $ 1.00 $ 0.39 $ (0.11) $ 0.06 Weighted average shares outstanding 42,860 43,657 41,609 43,799 EBITDA (1) $ 33,499 $ 43,845 $ 5,627 $ 11,168 (1) "EBITDA" represents net income from operations before interest expense, income taxes, depreciation and amortization expense, gains and losses on disposal of assets and cumulative effect of change in accounting principle. EBITDA is not required by generally accepted accounting principles and should not be considered as an alternative to net income or any other measure of performance required by generally accepted accounting principles or as an indicator of the Company's operating performance. CONDENSED BALANCE SHEET 12/31/98 12/31/97 Cash and cash equivalents $ 22,698 $ 30,608 Other current assets 24,397 22,002 Vessels-net 393,862 286,996 Construction in progress (newbuildings) 34,733 56,032 Other assets 54,437 45,070 Total assets $530,127 $440,708 Current liabilities $ 45,181 $ 21,062 Long-term liabilities 239,763 136,088 Total equity 245,183 283,558 Total liabilities and equity $530,127 $440,708
Operating or TCE ("Time Charter Equivalent") revenues, which is voyage revenues less voyage expenses, increased $2,977,000, and decreased $8,182,000 for the twelve months and three months ended December 31, 1998, respectively, compared to the twelve months and three months ended December 31, 1997.
TCE revenues increased a net of $2,977,000 in the year ended 1998 compared to 1997. Increases in TCE revenue in the crude group of $22,001,000 in 1998 were from additional revenue earned aggregating $12,139,000 from four chartered-in vessels which operated for an aggregate of 755 more days in 1998 compared to 1997; revenue of $8,724,000 earned from three Suezmax vessels which were delivered in 1998 and operated for an aggregate of 511 days in 1998; increases in revenue of $8,153,000 due to three Panamax vessels carrying crude oil in 1998 which previously were included in the clean products group. Increased revenues in the crude group were offset by decreases resulting from 77 more offhire days in 1998 compared to 1997 relating to drydocking of vessels, $3,109,000 less revenues from a vessel sold in August 1998 and a decline in rates in 1998 compared to 1997.
Decreases in TCE revenues for the clean group of $17,520,000 in the year 1998 were due to revenues previously included in this group earned by the three Panamaxes in addition to decreases in revenue earned while operating in the clean products market aggregating $10,285,000, 71 more offhire days relating to drydocking of vessels in 1998 compared to 1997 and declines in rates earned in 1998 compared to 1997. Other TCE revenues for vessels not included in either the crude or the clean group in 1998 decreased $1,504,000.
TCE revenues decreased $8,182,000 for the quarter ended December 31, 1998, compared to the same period in 1997, resulting from a decline in rates, 53 more offhire days for drydocking in 1998 and vessels chartered-in for 35 less days during 1998.
Although TCE revenues increased a net of $2,977,000 for the year ended 1998 compared to 1997, net voyage revenues (TCE revenues less vessel expenses and charter hire expenses) decreased $14,062,000. This decrease comprises an increase in the crude group of $3,968,000 and a decrease in the clean group of $14,885,000. Other operating expenses not included in either crude or clean groups increased $3,145,000. The primary reasons for the increase in the crude group's net voyage revenues of $3,968,000 are the same explanations for increases in the TCE revenues of $22,001,000 with the exception of the increase in charter hire expense in 1998 of $16,623,000 which coincides with additional TCE revenue earned on chartered-in vessels, increases in operating expenses related to the new Suezmax vessels and Panamax vessels included in crude in 1998.
Net voyage revenues for the clean group decreased by $14,885,000 in 1998. This decrease relates to decreases in TCE revenues mentioned above of $17,520,000, offset by decreased expenses from Panamax vessels included in the crude group in 1998. Increases in operating expenses include $3,145,000 relating to management fee allocations.
Net voyage revenues for the quarter ended December 31, 1998 declined a net of $7,424,000, compared to the 1997 quarter, consisting of net decreases in the clean products group operating profits of $3,502,000 and net decreases of $3,959,000 in the crude group operating profits, offset by decreased operating expenses of $37,000.
The Company drydocked eight vessels for an aggregate of 265 days in 1998, of which two vessels were drydocked for 71 days in the fourth quarter. In 1997, five vessels were drydocked an aggregate of 123 days and there was 82 offhire days, of which 25 offhire days occurred in the fourth quarter of 1997.
Operating income declined $13,934,000 from $20,178,000 for the year ended December 31, 1997 compared to $6,244,000 for 1998. The net decrease in operating income resulted from operating activities in 1998 mentioned above, in addition to increased depreciation expense of $1,639,000 from additional depreciation expense on the three new vessels delivered in 1998 offset by one vessel sold. Also, general and administrative expenses declined $1,767,000 primarily because of relocation accruals and additional professional fees for the reorganization of OMI included in the 1997 expenses. The operating loss for the quarter ended December 31,1998 of $1,444,000 decreased $6,556,000 from net income of $5,112,000 in the comparable period in 1997.
Currently, OMI's fleet comprises 27 vessels (including two chartered-in, one delivered in January 1999, and three jointly owned vessels). In June, July and August of 1998, OMI took delivery of three Suezmax newbuildings.
OMI Corporation operates primarily Suezmax and product tankers. Its fleet currently comprises eight wholly owned Suezmaxes, two chartered-in Suezmaxes, one Aframax, three 66,000 dwt. product tankers currently carrying crude oil, ten handysize product carriers transporting clean products and those jointly vessels. Two product carriers aggregating 70,000 dwt. are to be delivered in mid 1999. The Company also has on order one additional Suezmax tanker which will be delivered in May 2000. -0-
BREAKDOWN BY FLEET FOR THE YEAR ENDED DECEMBER 31, CRUDE CLEAN (UNAUDITED) 1998 1997 1998 1997 ( In thousands, except Daily TCE rate) Voyage revenue $98,517 $74,417 $50,649 $66,163 Voyage expenses 25,313 23,214 12,128 10,122 Operating revenues (TCE revenues) 73,204 51,203 38,521 56,041 Operating expenses 20,828 19,418 21,388 24,023 Charter hire expenses 25,529 8,906 -- -- Net voyage revenues 26,847 22,879 17,133 32,018 Depreciation expense 11,976 8,406 11,481 13,371 Operating income $14,871 $14,473 $ 5,652 $18,647 Daily average TCE rate $17,165 $25,209 $ 9,599 $13,863
Rates in the Product market began to decline in the second half of 1997. Therefore, OMI placed three Panamaxes which previously carried clean products, into a marketing pool in November 1997, May 1998 and July 1998, carrying crude oil. Decreases in the clean group in 1998 pertaining to the Panamaxes relate to a part of the year (367 days in aggregate) in which two of the vessels were carrying clean products and the remainder of the decrease relates to decreased rates earned for these vessels in 1998 in comparison to 1997. The crude group's operating income increased $398,000 in 1998 which includes increases of $1,876,000 for the three Panamax vessels. The clean group operating income decreased $12,995,000 including decreases from the Panamaxes of $4,647,000. The aggregate net decrease in the Panamaxes operating income was $2,771,000 in 1998 compared to 1997. -0-
BREAKDOWN BY FLEET FOR THE QUARTER ENDED DECEMBER 31, CRUDE CLEAN (UNAUDITED) 1998 1997 1998 1997 ( In thousands, except Daily TCE rate) Voyage revenues $22,706 $26,606 $11,516 $15,637 Voyage expenses 6,869 6,848 2,947 2,879 Operating revenues (TCE revenues) 15,837 19,758 8,569 12,758 Operating expenses 5,205 4,919 5,175 5,862 Charter hire expenses 5,118 5,366 -- -- Net voyage revenues 5,514 9,473 3,394 6,896 Depreciation expense 3,713 2,131 2,530 3,315 Operating income $ 1,801 $ 7,342 $ 864 $ 3,581 Daily average TCE rate $13,125 $22,190 $ 9,311 $13,863
The aggregate decreases for the three Panamaxes operating income for the quarter ended December 31, 1998 was $2,079,000, consisting of a decrease in crude of $706,000 and a decrease in clean of $1,373,000.
General and administrative expenses, management fee expenses allocated to vessels, and in 1997, operating income for the year generated from a Liquid Petroleum Gas Carrier sold that year are excluded from the preceding tables.
The improvement in crude tanker rates, which began in 1995, continued through the early part of 1998. The rate gains in the past few years have been the result of growth in the world oil demand which, together with a modest increase in the supply of tankers, created a better supply/demand balance. Freight rates weakened in the second half of 1998 and the tanker market is expected to continue to be weak in the foreseeable future as a result of OPEC oil production cuts to support oil prices, relatively high world oil inventories, weakness in oil demand due to the continued Southeast Asian economic crisis as well as the onset of a recession in Latin America and the relatively large tanker newbuilding delivery schedule.
However, it should be mentioned that about 37% of the total tanker fleet and 39% and 52% of the Suezmax and VLCC fleets, respectively, are 20 or more years old. The combination of the tanker market weakness, the relatively high orderbook, an expensive fifth special survey and stricter environmental regulations would accelerate scrappings of the old tonnage.
The Suezmax market was relatively weak in the fourth quarter. Good compliance to cutbacks in oil production, agreed early in the year, by OPEC and other oil producing nations as well as stock withdrawals have reduced oil liftings. In addition, there were a number of temporary regional supply disruptions in the Atlantic basin including pipeline closures in Nigeria, shutdowns in the North Sea and interruptions in the flow of Iraqi oil to Ceyhan, Turkey, due to disputes between Iraq and the United Nations concerning the embargo imposed on Iraq after the end of the Iraqi/Kuwaiti conflict in the early 1990s.
The product carrier market is the segment of the tanker market which transports refined petroleum products such as gasoline, jet fuel, kerosene, naphtha and gas oil. Freight rates in this market were relatively strong from 1995 through the first quarter of 1997 showing seasonal improvement in the winter months. After the product tanker market reached a very high level in early 1997 it began receding gradually as a result of reduced oil product imports in the Pacific region due to refinery capacity additions in the area and lower oil consumption because of the financial crisis in Southeast Asia and Korea, higher throughput in industrialized countries, and higher product tanker fleet growth relative to product tanker ton-mile demand. For 1998, average freight rates for product tankers were substantially lower than rates prevailing in 1997. However, freight rates improved towards the end of 1998, but softened again early in 1999.
Net interest expense increased $238,000 for the year ended December 31, 1998 compared to the year ended December 31, 1997 and increased $1,896,000 for the quarter ended December 31, 1998 compared to the 1997 quarter. The increases were primarily due to interest expense on additional borrowings upon delivery of three newbuildings.
Equity in operations of joint ventures increased $2,947,000 for the year and decreased $305,000 for the three months ended December 31, 1998. The increase in joint venture equity in the 1998 year was primarily due to better operating results for a vessel operating in a 49.0% owned venture and a loss in 1997 from the sale of a joint venture vessel. Decreases in the 1998 quarter resulted from losses on the sale of an asset sold by a joint venture, Mosaic Alliance Corporation. This joint venture was dissolved in November 1998.
The total world tanker fleet stands at approximately 273 million dwt. Approximately 37% of this fleet is 20 or more years old. The tanker orderbook totals approximately 47 million dwt or 17.2% of the existing fleet.
World oil demand increased marginally in 1998 and is expected to increase by about 1.3 million barrels per day in 1999. World commercial oil inventories increased substantially in 1998, especially in the first half of the year. World oil inventories are expected to fall in 1999 in line with OPEC oil production cuts and the increase of oil demand.
Any improvement in freight rates in both the clean and crude markets will be largely dependent upon improvement in the Far East and Latin American economic conditions as well as an increase in the rate of tanker scrappings in view of the relatively high tanker orderbook for delivery in the foreseeable future.
Based upon information to date, the Company anticipates that results from operations in the first quarter of 1999 will not produce in a material loss or gain from operations.
FORWARD LOOKING INFORMATION
This release contains certain forward-looking statements. These statements are based on management's current expectations and observations, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additional information concerning these statements and other matters is contained in the Company's periodic filings with the Securities and Exchange Commission.
OMI Corporation has made arrangements to use the service of DeraCom for its earnings presentation which is scheduled for February 25,1999 at 2:00 p.m. Conference participants should call 1-800-633-8638, and the international number is 1-609-683-0165. There will be a recorded playback available after the teleconference call for two weeks after the original call. The toll free number is 1-800-835-2663 and 1-609-896-8185 for international playbacks.
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|Date:||Feb 25, 1999|
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