PAO Sovcomflot (‘SCF Group’), Russia’s largest shipping company and one of the world’s leaders in energy shipping, as well as in servicing offshore upstream oil and gas projects, has today announced its results for the full year to 31 December 2016.
Gross revenue (freight and hire) of USD 1,388.1 million (2015: USD 1,483.0 million) vs the tanker spot market drop by more than 40 per cent and time charter market drop by up to 25 per cent
Time charter equivalent revenue (TCE*) of USD 1,142.2 million (2015: USD 1,240.1 million)
EBITDA** of USD 706.5 million (2015: USD 780.1 million)
Net profit of USD 206.8 million (2015: USD 354.5 million)
Three 42,000 tonnes DWT, double-acting, Arc7 shuttle tankers delivered to service Gazpromneft’s Novy Port export facility in the Ob River Estuary
Enhancing of SCF ice-fleet capacity by acquisition of nine modern ice-class tankers
Consolidation of all fleet technical management operations within a single governance structure under the new uniform brand SCF Management Services
Strengthening of Sakhalin 2 Icebreaking Support Vessel services with launch of Gennadiy Nevelskoy (IceBreaker6) and acquisition of two IBSVs from Swire Pacific Offshore, SCF Endeavour and SCF Enterprise (IceBreaker ICE-10), extending the Group’s global leadership in the IBSV segment
Christophe de Margerie launched – 172,600 m3, innovative double-acting, Arc7 LNG carrier designed to serve Russia’s Yamal LNG project
Raising of USD 1.26 billion of debt capital including USD 750 million of unsecured public debt and USD 512 million of bank loans raised for purposes of funding the SCF fleet renewal programme and for the refinancing of maturing debt.
* Time charter equivalent (TCE) represents shipping revenues less voyage expenses and is commonly used in the shipping industry to measure financial performance and to compare revenue generated from a voyage charter to revenue generated from a time charter
** Earnings before interest, tax, depreciation and amortisation
Sergey Frank, President and CEO of Sovcomflot said:
“Sovcomflot has delivered a solid set of results for 2016, despite market volatility in a year that has severely tested our industry. As growth in oil refinery throughput and up-front demand ran ahead of end-consumption underpinning tanker rates in 2015, so 2016 witnessed a material softening in demand that impacted negatively spot tanker freight rates, albeit with some respite in the final quarter.
“Sovcomflot strengthened its position as the World’s largest harsh environment tanker operator through the opportune acquisition of nine well-maintained tankers that became available as part of the PRISCO bankruptcy proceedings. Further, we built upon our leadership position in IBSVs with the acquisition two existing vessels and launched a new IBSV all committed to the Sakhalin II Project. In a year when we celebrated our tenth anniversary as an independent owner and operator of gas carriers, we launched the first of a new class of pioneering Arctic LNG carriers, in which our technical experts have played a vital developmental role.
“Our overall performance owes much to having a diversified fleet, where our conventional tanker operations are balanced by our strategic focus on higher value added market sectors, such as offshore development services and gas transportation. Serving the transportation needs of large scale industrial projects such as Sakhalin 1 and 2, Novy Port, Varandey, and Prirazlomnoye provides consistent earnings visibility to underpin tanker market volatility and ensures continuous employment for a significant proportion of our fleet. Reflecting this, we ended the year with substantial future contracted revenues of USD 8.1 billion.
“As ever, I am especially grateful to our seafarers and personnel for their professionalism and loyalty. This team, along with the continuous support of our core charterers, has made 2016 another year of solid performance for Sovcomflot.”
Evgeniy Ambrosov, Senior Executive Vice-President, Chief Operating Officer of Sovcomflot, commented:
“In 2016 we successfully introduced three advanced design Arctic shuttle tankers to serve the Novy Port project. These vessels were developed specifically to address the navigational year-round demands of the Ob River Estuary. Their introduction serves to demonstrate our desire to work closely with charterers to resolve complex maritime challenges for our mutual benefit. Later in the year one of these three vessels, Shturman Albanov, was awarded the world’s first Polar Ship Certificate.
“With our commitment to operating in some of the world’s harshest environments, in January we were particularly pleased to see the launch of Christophe de Margerie, the world’s first ice-breaking LNG carrier. Together with other developments during 2016, it has strengthened Sovcomflot’s reputation as an owner and operator of some of the most advanced vessels afloat.
“2016 saw a strengthening of Sovcomflot’s position in the marine 3D seismic market, arising from further detailed survey work. During the year, the company successfully surveyed about 7.3 sq km of Arctic shelf, in cooperation with key Russian oil and gas majors, which obtained quality data despite the complicated geological-geophysical conditions.”
Igor Tonkovidov, Executive Vice-President, Chief Technical Officer of Sovcomflot, said:
“In 2016 we took the important step of consolidating all our technical fleet management activities under a single governance structure and overarching brand – SCF Management Services. This successful reorganisation draws upon the significant technical skills and heritage of our legacy technical management operations, whilst providing improved organizational effectiveness and efficiency associated with a larger unified operation. The new structure also allows us to better respond to the increasing complexity of international regulation’s impact on maritime operations.
“SCF Group continues to invest significant resources into in-house training of its crews and to enhance the proficiency of the support teams ashore. The structured development of this specialized expertise and skill base is a source of competitive advantage for Sovcomflot. It was no surprise, therefore, that in 2016 insight from the Group’s technical experts was sought for and provided to a wide range of international maritime initiatives, from developing pioneering new classes of ships (e.g. for Yamal LNG), to formulating the IMO’s Polar Code and developing policies through the Arctic Council. Underpinning our work, however, is our philosophy that whatever the operational context, ‘Safety Comes First.”
“SCF Group actively facilitates the use of LNG fuels in the marine transportation of commodities which will pave the way for a cleaner and more environmentally friendly shipping industry profile. This is very much in line with Company’s environmental policy especially in ecologically sensitive areas and matches well the aspirations of oil majors and the International Maritime Organization’s Marine Environment Protection Committee (MEPC) in their drive for cleaner fuels”.
Nikolay Kolesnikov, Executive Vice-President, Chief Financial Officer of Sovcomflot, commented:
“Last year the Group was successful in raising an additional USD 1.26 billion in debt capital. This has enabled the Group’s debt repayment profile to be significantly improved, and has covered our capital expenditure requirements. The deals include USD 512 million of long-term bank loans from Russian and international banks raised for purposes of funding the fleet renewal programme and for the refinancing of maturing debt.
Additionally last summer SCF Group returned to the international debt capital markets with a new USD 750 million seven year Eurobond offering to finance a simultaneous tender offer for the Group’s outstanding Eurobonds due in 2017. The new bond offering generated strong demand from investors and enabled very competitive pricing, with a coupon of 5.375 per cent which matched the coupon on the Group’s debut 2010 Eurobond issue, whereas the tender offer achieved one of the highest ever tender participation rates for borrowers from Russia of 83 per cent”.
Communiqué de Sovcomflot, 20/03/2017