Omega Navigation Q3 2009 Results
For the quarter ended September 30, 2009, Omega Navigation reported total revenues of $14.3 million and Net Income of $1.9 million, or $0.12 per basic share, excluding losses on interest rate derivative instruments and incentive compensation grants expense. Including these items the Company reported Net Income of $ 0.1 million or $0.01 per basic share. Adjusted EBITDA for the third quarter of 2009 was $8.0 million. Please see below for a reconciliation of Adjusted EBITDA to Cash from Operating Activities.
Operating Income included revenue of $0.8 million attributable to profit sharing.
The company owned and operated an average of eight product carriers during the third quarter of 2009, the same number as in the third quarter of 2008. In addition since April 2009, the company has held a 50% interest in a joint venture, which owns an additional product carrier vessel. While all nine vessels are on time charter, two of the vessels, the Omega Prince and the Omega Princess results are based on the actual earnings of a pool of seven vessels of similar characteristics which are operating in the spot market. The earnings for these vessels have been above spot market indices but below the level of earnings achieved in the third quarter of 2008. In addition, the Omega King and the Omega Queen entered into new time charters during the second quarter of 2009 but these rates were also lower than those in the third quarter of 2008. These lower rates were partially offset by somewhat higher time charter rates on the Omega Lady Sarah and the Omega Lady Miriam, which commenced toward the end of the third quarter of 2009. Excluding profit share, the Panamax vessels averaged $ 20,219 per day per vessel and the MR's averaged $11,935 per vessel per day (net of voyage expenses) for the third quarter of 2009. In the third quarter of 2008, the Panamax vessels averaged $25,035 per day per vessel and the MR's averaged $20,788 per day per vessel (net of voyage expenses).
Since the inception of our product tankers' charters through the end of the third quarter of 2009, the profit sharing element of those charters that we have or are entitled to receive amounted to approximately $14.1 million. The company has already received $13.8 million of such amount in cash and has recorded profit share revenues of $14 million, and currently expects to record an additional $0.1 million in quarters to follow for voyages performed through the third quarter of 2009. The table below presents the amount of profit share revenues recorded per quarter.
1st Quarter 2007 $1.1m
2nd Quarter 2007 $1m
3rd Quarter 2007 $1.3m
4th Quarter 2007 $.6m
1st Quarter 2008 $1.2m
2nd Quarter 2008 $1.6m
3rd Quarter 2008 $1.8m
4th Quarter 2008 $2.2m
1st Quarter 2009 $1.7m
2nd Quarter 2009 $.7m
3rd Quarter 2009 $.8m
Operating expenses for our MR product tankers averaged $5,356 per day per vessel in the third quarter of 2009, versus $4,972 per day per vessel in the third quarter of 2008. Our Panamax product tankers averaged operating expenses of $6,298 per day per vessel in the third quarter of 2009, versus $5,577 per day per vessel in the third quarter of 2008. The increase of the daily operating expenses of the vessels relates primarily to increased crew wages, the timing of crew traveling expenses and some repairs to the anchor system of the Omega Lady Miriam as well as repair to the piping system of the Omega Lady Sarah.
For the nine months ended September 30, 2009, Omega Navigation reported total revenues of $ 49.7 million and Net Income of $ 11.6 million, or $ 0.74 per basic share excluding a loss on interest rate derivative instruments, a gain on warrants revaluation, non cash incentive compensation grants and a loss related to the termination of a purchase agreement. Including these items, Net income was $4.8 million or $0.31 per share. Adjusted EBITDA for the first nine months of 2009 was $ 27.8 million. Please see below for a reconciliation of Adjusted EBITDA to Cash from Operating Activities.
Operating Income included revenue of $ 3.2 million attributable to profit sharing.
The company owned and operated an average of eight product carriers during the first nine months of 2009, the same as in the first nine months of 2008. In addition since April 2009, the company has held a 50% interest in a joint venture which owns an additional product carrier. Excluding profit sharing, the company's Panamax product carriers earned an average time-charter equivalent rate of $ 22,501 per day per vessel during the first nine months of 2009, versus $ 25,054 per day per vessel (net of voyage expenses), during the first nine months of 2008. The company's Handymax product tankers earned an average time charter equivalent rate of $ 17,222 per vessel per day during the first nine months of 2009 versus $ 20,763 per day per vessel (net of voyage expenses) during the first nine months of 2008.
Operating expenses for the MR product tankers averaged $ 5,317 per day per vessel in the first nine months of 2009 versus $ 4,880 per day per vessel in the first nine months of 2008. Panamax product tankers averaged operating expenses of $ 6,072 per day per vessel in the first nine months of 2009 versus $ 5,353 per day per vessel in the first nine months of 2008. The increase in operating expenses was primarily related to maintenance expenses incurred during scheduled drydockings in the first half of 2009, insurance deductible incurred related to a minor collision on the Omega Theodore, an increase in crew wages, the timing of crew travel and some other maintenance and repair expenses during the third quarter of 2009.
With the announcement in the second quarter of 2009 of the delivery of the newbuilding vessel Omega Duke to a joint venture in which Omega Navigation has a 50% shareholding, Omega's current operating fleet includes nine double hull product tankers with an aggregate carrying capacity of 559,358 dwt. The Omega Duke has been time chartered to ST Shipping (Glencore International AG) for a period of five years until mid 2014, with a base rate that fully covers operating expenses and debt service and has a profit sharing arrangement. With the additional announcements that the Omega Queen and the Omega King, have been time chartered out, seven of the nine product tankers are currently employed under fixed rate time charters, The other two vessels results are derived by the actual operating earnings of a pool of similar vessels which currently trade on the spot market. The recent time charters are to established counterparties, ST Shipping and Torm A/S. Currently seven of Omega's nine vessels have profit-sharing arrangements associated with them which enable the Company to share in the charter market's upside potential.
With these recent charters concluded, the company has for the remainder of 2009 and until mid 2010 fixed rate time charter coverage of 79%, inclusive of the joint venture, all with profit-sharing arrangements allowing the company to take advantage of any upside in the charter market. The company has entered the Omega Prince and Omega Princess into floating rate time charters with rates based on the market results of a pool of similar vessels commercially managed by ST Shipping and through these arrangements enjoy high utilization rates and above spot market charter rates. All of the time charters recently concluded are for relatively short periods of time which increases the company's flexibility to terminate those on short notice in case the market improves and thereby take advantage of improved market conditions. Also, with these time charters we have continued full utilization of the fleet without experiencing any unscheduled off hire time.
While the global economy improved in the third quarter of 2009, the entire tanker market has remained under extreme pressure and has had a severe impact on rates and asset values. Omega's strategy of owning young, high quality assets and employing its vessels primarily through term time charters has enabled the company to present profitable operating results, even in these uncertain times and depressed tanker market. While oil demand has contracted and oil product inventories remain high, we have seen the overall economic climate recovering. As the economic recovery progresses, we would expect to see an increase in oil demand and the resultant increase in rates and asset values.
George Kassiotis, President and Chief Executive Officer of Omega Navigation, said "We are pleased to have concluded our fourteenth consecutive quarter with profitable operating results, since our IPO in April 2006. We attribute our profitable operating results to our strategy of acquiring high quality modern vessels and seeking predictable and stable cash flows through the term employment of our vessels. In addition, the fact that the charters on seven of our nine product tankers have profit sharing has enabled us to participate in any upside of the charter market and thereby maximize our profitability.
"We continue to return profitable operating results even in this most challenging economic environment. We have seen signs that the economic environment is improving and with that expect that demand for oil and oil products should gradually return as well. We would expect that once demand improves and current high inventory levels decrease, we should see an improving rate environment and asset values should also improve. Based on our current charter rates and the continued performance of each of our charterers, we believe that we are well positioned to continue to show profitable operating results even in this economic climate. While rates remain somewhat depressed, we believe we are now seeing some signs of a rebound in demand for oil products which should help stimulate rates going forward.
"We seek to optimize the management of our capital exposure, de-lever our balance sheet and create synergies which will enhance our ability to fund our growth plans and take advantage of opportunities during challenging times.
"In this respect, we are pleased to enjoy a strong business relationship with Glencore, one of the largest commodities traders in the world. The joint ownership of the Omega Duke is further evidence of the high standards of operating performance that our Company offers to its customers and end users of its vessels and also demonstrates our ability to create synergies in a challenging environment.
"We also believe that we continue to have strong relationships with our commercial lenders, which are comprised of large European and Asian banks which have continued to offer their support to the Company.
"We would like to reiterate that we are continuing to pursue a strategy of prudent growth, gradually expanding our fleet and our revenue and profit generation potential.
"We remain optimistic about the long term fundamentals of the product tanker market, the area of our strategic focus. We believe that we enjoy strong competitive advantages in this market with our focused business strategy, our fleet of young high quality vessels, term employment with established charterers, a solid and flexible capital structure and a strong management team, enabling us to continue delivering strong, stable and predictable results for our shareholders."
Gregory McGrath, Chief Financial Officer of Omega Navigation, commented, "As of September 30, 2009, the company had a ratio of net debt to net capitalization of about 64%, which we believe is modest for industry standards given our strong time charter coverage and the young age and quality of our fleet.
"We continue to have a strong relationship with our commercial lenders and have received their ongoing support and commitment to the company, even in this very challenging credit market. Our balance sheet was also recently strengthened by the formation of the joint venture company which owns the Omega Duke and the consequent novation of the debt associated with that vessel from Omega to the joint venture."