Russia: Sovcomflot Posts H1 2011 Results

Sovcomflot (SCF Group) announced its financial and operating results for the six months ended 30 June 2011:

H1 2011 Highlights:

• SCF Gross revenues USD 732.6 million (+8.0 pct on H1 2010)
• SCF time charter equivalent revenues USD 484.2 million (-2.4 pct on H1 2010)
• EBITDA USD 262.8 million (-10.0 pct on H1 2010)
• Net profit USD 64.2 million (-36.1 pct on H1 2010)
• 11 vessels delivered during the period (1.1 mln tonnes DWT) increasing the SCF owned and chartered in fleet to 157 vessels ( 11.7 million tonnes DWT) as at 30 June 2011
• Consolidation of market position in servicing the Sakhalin I,II oil&gas subarctic offshore projects through the acquisition of six PRISCO’s shuttle tankers
• Long-term charter with Gazprom Global LNG for two new generation ice-class “Atlantic-Max” 170,000 cubic metre LNG carriers
• SCF Aframax tanker Primorsky Prospect (ice-class 1B) becomes first vessel to load at Ust-Luga’s new oil products terminal (Leningrad Region)
• BBB- long-term credit rating with a stable outlook assigned by Standard & Poor’s

Commenting on the results Sergey Frank, President & CEO of OAO Sovcomflot, said:

“The financial results for the first half of 2011 demonstrate that Sovcomflot is one of the few tanker companies in the world to end the period in profit, despite the ongoing stagnation of the world shipping market. The first half of 2011 saw no signs of revival in the global tanker market, which continued to suffer from an over-supply of new vessels entering the market. Against this extremely difficult background, SCF Group demonstrated more resilience in the face of shipping industry bottoming. This was in part due to SCF Group timely reducing its exposure to the spot market. In line with its strategy, the company increased its focus on the Russian offshore sector and specialized energy shipping projects, such as LNG and shuttle tankers operations. We appreciate our shareholders support in putting these plans into effect. As ever, these results also owe much to the ongoing support of our clients around the world, professionalism and commitment of the SCF team – both at sea and ashore.”

Evgeniy Ambrosov, Senior Executive Vice-President, Chief Operating Officer (Business development&Commercial issues), said:

“SCF has a strong position of an integrated provider of marine logistics serving the hydrocarbons market. The company will continue to focus on the sectors of the tanker market most demanded for Russia’s energy exports. Taking account of industry innovations and new technologies, we have opened up new possibilities: SCF was successful in a Gazprom Global LNG tender for the delivery of two new generation LNG carriers. We have increased our participation in the Sakhalin-1 and Sakhalin-2 major industrial projects, following the purchase of six PRISCO Aframax shuttle tankers and have consolidated the transportation elements of these projects. We’re planning further participation in complex industrial energy projects on Russia’s continental shelf, and have ordered two advanced design icebreaking supply vessels for the drilling platforms, which will operate under the agreement with Exxon Neftegas”.

Sergey Popravko, Senior Executive Vice-President, Chief Operating Officer (Technical Performance&Innovations), noted:

“When planning for a new project, we apply an individual approach, offering our clients the best solutions that meet the growing needs of major oil companies. We continue to maintain and strengthen our industry-leading position in technical management of work in the harsh environment and closely monitor the quality of services we provide. After the acquisition of six ice class oil shuttle tankers from PRISCO Group, all these vessels were transferred to SCF’s technical management. In attempt to be closer to our clients and meet the evolving needs of Asian markets we opened up the office in Singapore providing technical management of the vessels. Providing safe shipping services continues to be the number one priority for all SCF’s marine operations. To strengthen the company’s efforts in the light of the challenging tasks of operating in harsh climatic conditions and the Arctic seas, we have launched a research and engineering centre for shipping safety in St. Petersburg.”

Nikolay Kolesnikov, Senior Executive Vice President, Chief Financial Officer, added:

“SCF continued to move into higher value-added and higher margin segments and build up its portfolio of fixed-term business. As a result, future contracted revenues increased to over USD 5.5 billion as on 30 June 2011. The share of gas transportation and upstream services which form the backbone of the Company’s Strategy going forward kept growing steadily and now accounts for over 35% of the Group’s total profit on vessels’ trading (increased from 25% at the end of 1st half 2010). As an investment-grade credit rated company SCF maintained access to capital through the trough of the cycle.”

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Source: Sovcomflot, September 13, 2011;