Epic Gas today (Thursday) announced its unaudited financial and operating results for the interim period ended June 30th, 2016.
Highlights show that revenue, at $32.6million, was up 1% on Q1 and down 1% year over year, while time charter equivalent revenues of $8,183 per vessel calendar day were down 6% year over year. There were 3,468 calendar days, up 3% year over year.
General and administrative expenses of $1,099 per vessel calendar day, was down 10% year over year, adjusted EBITDA of $7.5 million, up 6% on Q1, down 1% year over year, while the net loss of $0.9 million, showed an improvement by 52% year over year. Forward cover for balance of 2016 stands at 47% at $7,539 per day as of 30th June 2016.
Epic Gas completed delivery of one 11,000cbm new build from a shipyard in Japan and re-delivered one 3,500cbm bareboat charter vessel bringing the company’s on the water fleet to 38 vessels. The emaining newbuilding programme of five vessels requires $65 million in capital expenditure.
The company said it was ‘a period of mixed sentiment and outcome as the market continues to bounce along the bottom.’
The very positive 45% reduction in net fleet growth for the quarter when compared to the same period last year, has been offset by the overhang of legacy tonnage, and changes in tonne mile demand caused by the repricing of commodities.
During the quarter, four vessels representing 26,200cbm of capacity were delivered, while one pressure vessel of 10,178cbm capacity was scrapped. Of the 316 international trading pressurised ships on the water today, 21 vessels equalling 6.6% of the fleet are 25 years or older, and could be considered candidates for scrapping. There are a further 22 small semi-ref vessels of a similar age. After combining pressurised and semi-ref vessels, approximately 10% are likely scrapping candidates.
As of 30th June 2016, the order book for pressurised vessels has dropped to 13 ships and 115,000cbm of capacity, equivalent to only 7% of the existing global fleet by cubic.
East of Suez, the surge in VLGC shipments of propane into Asia and the Indian Ocean continues to feed ship to ship lightering operations for last mile demand growth for pressurised LPG vessels, with Epic Gas performing its first such operation off the new lightering area at Male (Maldives) during the period.
Iran’s LPG exports continue to grow as the country builds a strong position in the region and wider international market. Exports totalled 4.59 million tonnes in 2015, and have reached almost 2.8 million tonnes in the first half of this year, on course to annualised growth of over 20% year on year. India: LPG Imports – up almost 6% year on year.
In Asia, Chinese propylene imports picked up 25% in the quarter. Imports averaged a surprising and trend breaking 249,551 tonnes per month, which was 24.6% more than in Q2 2015, reintroducing demand for about eight to nine smaller pressurised vessels during the period.
West of Suez, the Black Sea and Mediterranean markets have delivered usual seasonality with reduced exports at the end of the heating season. North West Europe has also seen reduced activity after the end of the winter blending season leaving excess availability of both pressure and semi-ref vessels.
US exports of LPG in Q2 have continued to set new records. However, pressurised vessels have lost market share on the longer haul routes, especially those into West Africa and the Mediterranean, as traders are taking advantage of more competitively priced large vessels. The pressurised market continues to see quarterly growth in the core regional last mile trades into Central America, with total pressurised exports of 80,000 tonnes in Q2 2016.
On the back of delivery of two vessels towards the latter half of Q1, Epic Gas continued to grow its fleet during the second quarter of 2016. During the period, the company took delivery of one new vessel from a Japanese yard: the Epic Shikoku (11,000cbm), and redelivered one 3,500cbm bareboat chartered vessel. The fleet evolution towards the new generation of larger vessels continues, with a 7.6% year over year increase in the average size of our vessels to 6,037cbm. Our revenue day exposure to vessels over 7,000cbm now stands at 43%.
During the second quarter the fleet experienced 82 technical off-hire days, primarily due to three routine and one unscheduled vessel docking during the period (Q1, one vessel). This resulted in fleet availability of 97.6% (Q2 2015, 98.8%), with Operational utilisation of 94.8% (Q2 2015, 96.7%).
TCE revenue per calendar day of $8,183 was lower than the $8,735 in Q2 2015, despite the increased average vessel capacity, and down by 5% from the previous quarter. Revenue reduced on account of a reduction of fleet availability, lower rates, and positioning time. The fleet traded in the spot market for 28.4% of total voyage days, with 76% of these spot voyage days occurring in the West and 24% in the East. Whilst the vast majority of our business will remain time charter in nature, we continue to develop Contracts of Affreightment (“COAs”) which accounted for 19% of spot days in Q2.
As of 30th June 2016, the Company was 47% covered for the balance of the year 2016 with 3,391 voyage days covered at an average daily TCE rate of $7,539, leaving 3,764 calendar days open on the current fleet for the rest of the year.
Total expenses decreased 7% year over year despite a 3% increase in fleet calendar days.
Vessel operating expenses were $4,040 per vessel calendar day in the second quarter of 2016, 1% below the $4,061 per vessel calendar day during the second quarter of 2015, and irrespective of the 7.6% up-scaling in our average vessel size over the period. Our focus remains on improving the quality and performance of our vessels to further increase utilisation.
Charter-in costs decreased 13% year over year from $3.9 million to $3.4 million due to the re-delivery of two bareboat vessels in Q4 2015 and Q2 2016 respectively. As of 30th June 2016, the company had seven ships on traditional inward bareboat charter arrangements under which charter payments are expensed.
General and administrative expenses of $3.8 million during the period reflected a year over year decrease of 7%. SG&A per vessel calendar day fell 10% to $1,099 which, in our integrated model, includes the cost of commercial and technical management of our fleet as well as all corporate-level general and administrative expenses.
Finance expenses during the period were $3.4 million compared to $3.3 million in Q1 2015. The increase reflects the higher underlying 3-months Libor year over year. During the period Epic Gas recognised $1 million in other income reflecting the foreign exchange gain on JPY deposits which we converted as part of our hedging strategy for payment obligations to Japanese yards.
Epic Gas is the only owner offering customers the full spectrum of pressurised vessels, from 3,300cbm to 11,000cbm. The company’s contracted growth and investment programme, focused on vessels larger than 7,000cbm, continues through Q1 2017.
The 11,000cbm LPG carrier Epic Shikoku, the third vessel in our series of new buildings, delivered to the Company on 13th May 2016 from Kyokuyo Shipyard, Japan. She was transferred from the East to the West by performing spot voyages and is now trading spot/under a CoA. Of the remaining five vessels still to deliver, one will be chartered to Epic Gas under a long term bareboat charter, and four are owned by Epic Gas.
During the period, the company paid $22 million towards the construction of the new buildings of which $16 million were drawn under a Term Loan Facility. As of 30th June 2016, the company had remaining capital expenditure to cover newbuilding instalments of $65 million, $63 million will come from our existing credit facility with the remaining $2 million to be funded from the company’s cash balance.
The increase of the Term Loan Facility for the seven (7) owned new buildings from $101.3 million to $112.4 million, which is equivalent to 60% of current fair market values, has been agreed and signed in June. The top-up amount for the three new buildings on the water of $4.9 million was drawn down in July, the remaining $6.2 million will be available on delivery of the new buildings.