GOGL Still in The Red

Dry bulk shipping company Golden Ocean Group Limited (GOGL) managed to narrow its net loss in the first quarter of 2017, reaching USD 17.9 million, compared to a loss of USD 68.2 million posted in the respective period a year earlier. 

In a what was described as “slightly weaker” market environment, the company’s total operating revenues stood at USD 83.8 million, compared to USD 45 million seen in 1Q 2016.

Adjusted EBITDA for the quarter increased to USD 17.5 million from USD -14.2 million recorded in the respective period last year.

During the quarter, GOGL entered into agreements to acquire sixteen dry bulk vessels in a ship-for-share transaction in exchange for 17.8 million shares and the assumption of USD 285.2 million in debt.

Of the sixteen ships to be acquired, fourteen will be acquired from subsidiaries of Quintana Shipping, and two ice class Panamax vessels will be acquired from subsidiaries of Seatankers, an affiliate of Hemen Holding, the company’s largest shareholder.

“The freight rate environment held up in the first quarter of the year, a quarter that is typically characterized by seasonal weakness. Demand growth was sufficient to partially offset seasonal weakness as well as the 13 million dwt net growth of the global fleet during the quarter. Against this backdrop, we believe that our acquisition of a large fleet of modern, high-quality vessels in a ship-for-share transaction was timely. The acquired vessels, averaging 4 years of age, which matches the age profile of our existing fleet, will further enhance our … commercial scale and increase our operational leverage. We believe these acquisitions will … position us well for further improvements in the dry bulk market,” Birgitte Ringstad Vartdal, Chief Executive Officer of Golden Ocean Management AS, commented.

In mid-March, the company completed an equity offering at NOK 60 per share, raising gross proceeds of NOK 516.5 million (around USD 60 million) to provide financial support for the vessel acquisitions.

“We will pay the full accumulated deferred repayments of USD 54 million of bank debt in the second quarter of 2017 by triggering the cash sweep mechanism put in place during our first quarter 2016 restructuring due to earnings levels in excess of those anticipated at that time. Also, following the delivery of the recently-acquired 16 vessels, we expect our cash breakeven levels to be further reduced. Given our significant leverage to an improving market and highly competitive cash breakeven levels, a sustained period of market strength will allow us to continue to deleverage the company’s balance sheet,” Per Heiberg, Chief Financial Officer of Golden Ocean Management AS, added.

In the three-month period ended March 31, 2017, GOGL took delivery of two Ultramax newbuildings, Golden Virgo and Golden Libra, and two Capesize newbuildings, Golden Surabaya and Golden Savannah, and decided to postpone the delivery of six remaining newbuilds until 2018.

On May 23, GOGL took delivery of the ninth bulker from the batch of the sixteen recently acquired ships. The vessel in question is the 179,200 dwt Q Anastasia which will be renamed Golden Anastasia.

GOGL said it has issued 550,000 consideration shares to Quintana and associated companies in exchange for the 2014-built vessel. Following this transaction, the company’s issued share capital is USD 6,233,649.60 divided into 124,672,992 issued shares, each with a nominal value of USD 0.05.

In its outlook for 2017, GOGL said: “The company’s results for the first quarter reflect rates obtained by favorable fixtures done in the fourth quarter of 2016 as well as a sustained rate environment in the first quarter of 2017. Based on these conditions, the board is pleased that the company is able to deleverage through paying down the full one-year deferred debt. So far in the second quarter rates remain above cash breakeven levels, enabling the company to deleverage further.”

“The company has a strong cash position and limited cash funding of the remaining newbuilding program net of debt commitments…We expect to see continued volatility over the course of the year. A broader global growth is positive for the dry bulk trade and should be supportive to the market development. The current order book is at acceptable levels and new regulations should over time also keep scrapping activity up. However, new ordering of vessels is a threat to a broader recovery in the dry bulk market,” GOGL concluded.