Loss-Making Golden Ocean Sells Two Newbuilds to Frontline

Norway-based dry bulk shipping company Golden Ocean Group Limited has agreed to sell two of its newbuilding contracts at Chinese shipyard New Times Shipbuilding Co. Ltd to Frontline Ltd.

Under the initial contract the two 157,500 dwt ships were supposed to be Capesize bulkers, but Golden Ocean decided in November to convert the two Capesizes to Suezmax newbuilding contracts.

The vessels are expected for delivery in the first quarter of 2017.

Frontline said it would pay USD 55 million per vessel.

“The transaction will reduce the company’s newbuilding commitments by USD 95 million (including sales proceeds) and will also remove the need for financing of two Capesize vessels,” the company said. The transaction is subject to customary closing conditions and is expected to close in late 2015.

“The company expects to record a loss on the disposal of approximately USD 9 million in the fourth quarter.”

As of September 30, 2015, the company had 21 vessels under construction, of which three have been sold and will be delivered to the new owners on delivery from the yard and two newbuilding contracts have been sold to Frontline Ltd. The company expects to receive net sales proceeds of USD 46.2 million in 2015 and USD 92.4 million in 2016 upon delivery of the three vessels and sale proceeds of USD 1.9 million from Frontline Ltd in late 2015.  The company’s outstanding commitments for its 19 remaining newbuildings amount to USD 632.3 million.

During October 2015, the company also decided to postpone the delivery of three vessels from 2015 to February, March and April 2016.

The announcement on the sale comes on the back of Golden Ocean’s reported net loss of USD 40.7 million for the third quarter compared with a loss of USD 35.5 million for the preceding quarter.

The results were impacted mainly by challenging dry bulk shipping market, which Golden Ocean expects to remain challenging for the next six to twelve months.

“Rates at the current low levels are dramatic for the owners of dry bulk tonnage and there is a probability that the over supply will adjust in the prevailing market conditions. For Golden Ocean the focus in the coming months is to improve the liquidity and the balance sheet,” the company said.

Vessel earnings improved in the third quarter compared to the preceding quarter and time charter equivalent revenues increased by USD 13.4 million due to an improvement in TCE rates partially offset by a decrease in trading days.

According to Golden Ocean, the marginal improvement in the average spot market witnessed in third quarter was mainly backed by a spike that lasted from mid July through the first ten days of August. According to the Baltic Exchange, average earnings for the Supramax segment were USD 8,801 per day compared to USD 6,753 per day in the previous quarter and USD 8,887 per day in the same quarter last year.

Capesize vessels experienced a short lived spike with an average of USD 11,569 per day against USD 4,554 per day the previous quarter and USD 12,641 per Golden Ocean, 3rd Quarter 2015 day in the same quarter last year. Panamax vessels earned on average USD 7,622 per day compared to USD 5,166 during the second quarter and USD 5,868 in the same quarter in 2014.

“Well into the fourth quarter expectations for an improved market for the last months of the year have not been met and the negative sentiment has dragged down the freight forward curve,” Golden Ocean said speaking of the outlook.