Crude Carriers Corp. Reports 2Q Resultes
Crude Carriers Corp. (NYSE: CRU), today reported its financial results for the second quarter of 2011. The Company reported a net loss for the quarter of $7.5 million or $0.48 per share, which compares with a $0.37 net income per share from the second quarter of 2010. The Company’s reported net loss for the quarter includes $1.7 million in general and administrative expenses related to the definitive merger agreement with CPLP and the proxy statement on Form F-4 filed with the Securities and Exchange Commission.
Revenues for the second quarter 2011 amounted to $9.8 million, which is lower compared to the $20.7 million in the second quarter of 2010. The Company’s drop in revenues reflects primarily the weaker crude tanker spot market, when compared to a year ago.
Total voyage and vessel operating expenses for the quarter amounted to $9.0 million, lower by $2.2 million compared to $11.2 million in the second quarter of 2010, as a result of the increased number of vessels under voyage charters at the time, which increased voyage expenses in the second quarter of 2010. Vessel operating expenses for the second quarter amounted to $4.1 million, which is $1.6 million higher when compared to the second quarter of 2010 as a result of the higher average number of vessels in operation in the second quarter 2011.
General and administrative expenses were $3.0 million for the quarter, of which $0.5 million was a non-cash charge related to the Equity Incentive Plan and $1.7 million relate to the expenses for the definitive merger agreement with CPLP and the proxy statement on Form F-4 filed with the Securities and Exchange Commission. The general and administrative expenses in the second quarter of 2010 stood at $0.6 million.
Interest expense and finance cost for the second quarter of 2011 was $1.4 million which is $0.5 million higher than the interest expense paid in the second quarter of 2010, as the interest expenses a year ago were incurred for only a part of the quarter following the debt drawdown in June 2010.
Quarterly Dividend Per Share
Due to the charter rate environment and the expenses related to the definitive merger agreement, the Company did not generate any cash available for distribution during the quarter. As a result, the Board has determined not to declare a dividend with respect to the quarter from April 1 to June 30, 2011.
Cash available for distribution is a non US GAAP financial measure described on Appendix A of this earnings release.
Crude Tanker Market Overview
The VLCC and Suezmax spot markets remained close to multi year lows, as increased demand for crude oil imports in the East was offset by oversupply of tonnage, higher bunker prices and weak US crude oil imports in the first half of 2011.
During the second quarter 2011, the TD3 (Middle East – Japan) and the TD5 (West Africa – US East Coast) indices average TCE earnings were $9,400 and $9,646 per day, respectively, compared to $13,499 and $ 12,173 per day, respectively, earned by the Company’s VLCC and Suezmax fleets.
Activity in the crude tanker period market remains limited due to the poor performance of the spot market.
On a positive note, orderbook slippage remains at high levels, as approximately 35% of the expected VLCC and Suezmax newbuildings have not been delivered in the first half of 2011.
Definitive Merger Agreement With Capital Product Partners L.P.
As announced on May 5, 2011, the Partnership entered into a definitive agreement to merge with Crude Carriers in a unit for share transaction. The exchange ratio was set at 1.56 CPLP common units for each Crude Carriers share. CPLP will be the surviving entity in the merger and will continue to be structured as a master limited partnership but will remain a corporation for US tax purposes and unit holders will continue to receive the standard 1099 form. The merger must be approved by: (i) holders of a majority of the voting power of the shares of Crude common stock and Crude Class B stock outstanding and entitled to vote at the Special Meeting, voting together as a single class; (ii) by the sole holder of the shares of Crude Class B stock outstanding and entitled to vote at the Special Meeting, voting as a separate class; and (iii) by the holders of a majority of the voting power of the shares of Crude common stock outstanding and entitled to vote at the Special Meeting that are held by the Unaffiliated Shareholders, voting as a separate class, such majority being 49.45% or more of the outstanding shares of Crude common stock. With respect to the merger, Evangelos M. Marinakis, Chairman of the Board and CEO of Crude, Ioannis E. Lazaridis, President of Crude, Gerasimos G. Kalogiratos, CFO of Crude, and Crude Carriers Investment Corp, the holder of all of the outstanding shares of Crude Class B stock, have entered into a support agreement pursuant to which they have agreed to vote their shares in favor of the merger. Assuming the requisite shareholder approval is received, Crude expects that the merger will occur during the third quarter of 2011.
Management Commentary
Mr. Evangelos Marinakis, the Company’s CEO commented: “Our second quarter results have been affected by the weakness of the crude tanker market and by the costs related to the merger process with CPLP. However, our commercial arrangements and our high specification fleet allow us to perform more favorably, when compared to the TD3 and TD5 routes in particular.”
Mr. Marinakis continued: “During the second quarter, the respective boards of CPLP and Crude Carriers agreed to enter into a definitive merger agreement as previously announced. We believe that the merger is to the benefit of the shareholders of Crude Carriers as it will allow them to receive attractive distributions, based on the $0.93 per common unit annual distribution guidance of CPLP, which translates to $1.45 per Crude Carriers share under the agreed exchange ratio. The combined fleet of the two merged entities will be diversified in both the product and crude tanker space. Together, having one of the youngest, high specification tanker fleets, along with the technical and commercial support of Capital Maritime &
Trading Corp., which brings with it the vetting qualifications of oil majors around the world, will allow the new unit holders of CPLP to benefit from a recovery in both segments.”
