Navig8 Product Tankers Inc. Reports Results for the Three and Six Months Ended June 30, 2016

LONDON, Aug. 3, 2016 -- Navig8 Product Tankers Inc. (the "Company") (N-OTC: EIGHT), an international shipping company focused on the transportation of petroleum products, today announced its unaudited financial and operating results for the three and six months ended June 30, 2016.

Highlights

• Reported revenue of $25.9 million and net income of $0.7 million, or $0.02 per share, for the three months ended June 30, 2016.
• Announced a $130.3 million senior secured credit facility to provide post-delivery financing for four 74,000 DWT LR1 product tankers under construction at STX Offshore & Shipbuilding Co., Ltd. ("STX").
• Accepted delivery of six newbuilding vessels during the three months ended June 30, 2016 and one vessel in July 2016.
• Entered into a $66.0 million senior secured credit facility with ABN AMRO Bank N.V., Singapore Branch in July 2016, to provide post-delivery financing for two 74,000 DWT LR1 product tankers under construction at SPP Shipbuilding Co., Ltd ("SPP").                                                                         

"We continued to execute on our strategy in the second quarter as we accepted deliveries of six newbuilding vessels and secured attractive financing to fund the program.  Notably, we increased the size of our owned operating fleet by 50% from the end of the first quarter, and we believe we are well positioned to take advantage of changing fundamentals in the product tanker market," said Nicolas Busch, Chief Executive Officer of Navig8 Product Tankers Inc.

"Product tanker rates continued to ease into the second quarter as the typical seasonal increase in May and June was absent. Cross-Atlantic trades were negatively affected by bloated onshore distillate inventories in Europe and global refinery throughput declined in the second quarter putting pressure on rates. Although the second quarter was challenging, the outlook for the product tanker market remains favorable with global refinery throughput expected to achieve its largest increase on record in the third quarter. In addition, the ramping up of refining capacity in Asia, Middle East and US should help should support further demand for product tankers such as ours.  A slowdown in overall fleet growth in 2017 should also bode well for product tanker fundamentals."

Fleet Update

The Company entered into contracts to acquire 30 modern, fuel-efficient newbuilding product tankers. During the second quarter of 2015, the Company entered into an agreement with an unrelated third party to sell three LR2 vessels which were under construction at Sungdong Shipbuilding & Marine Engineering Co, Ltd, Korea, for total sale proceeds of $178.5 million. One of the three vessels was delivered to the buyer in the second quarter of 2015 and the other two vessels were delivered to the buyer in the third quarter of 2015, realizing a total net gain on sale of $24.1 million.

As of the date of this release  17 of these vessels have been delivered and are in operation.  The fleet is expected to be fully delivered by December 2016.  Upon their respective deliveries, the Company's vessels will be deployed in the LR8 and Alpha8 commercial pools, both managed by Navig8 Group.  The Company's newbuilding fleet comprises:

Seven 110,000 DWT LR2 product tankers (the "Sungdong vessels") built at Sungdong Shipbuilding & Marine Engineering Co. ("Sungdong").  The Company took delivery of the first of these vessels in November 2015, four further vessels during the three months ended March 31, 2016, the sixth vessel in May 2016, and the final vessel is due to deliver in August 2016.. The delivered vessels operate in Navig8 Group's Alpha8 pool.

Eight 113,000 DWT LR2 product tankers (the "CSSC vessels") built at CSSC Offshore & Marine Engineering (Group) Company Limited ("CSSC Offshore"), formerly known as Guangzhou Shipyard International Company.  The Company's eight CSSC vessels will operate in Navig8 Group's Alpha8 pool.  Two vessels were delivered in May and June 2016. The Company expects to take delivery of the remaining vessels by December 2016.

Eight 74,000 DWT LR1 product tankers (the "STX vessels") built at STX.  The Company took delivery of the first of these vessels in November 2015 and four further vessels during the three months ended March 31, 2016.  The final three vessels were delivered in May 2016. The vessels operate in Navig8 Group's LR8 pool. 

Four 74,000 DWT LR1 product tankers (the "SPP vessels") built at SPP.  The Company's four SPP vessels will operate in Navig8 Group's LR8 pool.  The Company took delivery of its first vessel in July 2016 and expects to take delivery of the remaining vessels by December 2016.

Additionally, the Company has one ECO LR2 vessel on time charter operating in Navig8 Group's Alpha8 Pool.  The time charter expires in October 2016.

Financing Update

On the 12^th of March 2015, the Company entered into a Pool Management Revenue Share Rights Agreement with Navig8 Asia Pte Ltd. and Navig8 Limited. Pursuant to this agreement, the Company places each of its 27 newbuilding vessels into Navig8 Group's Alpha8 and LR8 Pools upon delivery.  The Company also receives a 30% share of the net revenues derived from the commercial management of the two pools.  In consideration for the Pool Management Revenue Share Rights Agreement, 336,963 shares of common stock of the Company, amounting to $4.1 million, were issued to Navig8 Ltd. at an issuance price of $12.25 per share.

On the 25^th of June 2015, the Company entered into sale and leaseback agreements with CSSC (Hong Kong) Shipping Company Limited ("CSSC") for all of the CSSC vessels.  The net proceeds from the transaction (after a 20% sellers' credit) are expected to amount to $304 million.  Under the agreements, the CSSC vessels will be delivered to CSSC on their respective deliveries from GSI.  The Company has entered into 10-year bareboat charters for the vessels, commencing on delivery.  The Company has a purchase obligation to re-acquire the vessels at the end of the charter period and purchase options to re-acquire during the charter period, with the first option exercisable on the fourth anniversary of each vessel delivery.  Two of these vessels have been delivered to CSSC under the terms of the Sale MOA and then delivered back to the Company under bareboat charter. Under the sale and leaseback agreements, CSCC is also providing financing for the pre-delivery instalments for the vessels. These sale and leaseback agreements will be treated as financing transactions. As of June 30, 2016, $109.4 million has been drawn down on the facility, of which $33.4 million relate to pre-delivery instalments.

On the 10^th of July 2015, the Company entered into sale and leaseback agreements with Ocean Yield ASA ("Ocean Yield") for four Sungdong vessels.  The net proceeds from the transaction (after a 5% sellers' credit) are expected to amount to $188.1 million.  Under the agreements, the three vessels will be purchased by Ocean Yield from the Company on their respective deliveries from Sungdong.  The Company has entered into 13-year bareboat charters for the vessels commencing on delivery, and has purchase options to re-acquire the vessels during the charter period, with the first of such option exercisable on the seventh anniversary of each vessel delivery.  Three of these vessels have been delivered to Ocean Yield under the terms of the Sale MOA and then delivered back to the Company under bareboat charter, the final vessel to be delivered.  Under the sale and leaseback agreements, Ocean Yield has also provided financing for the pre-delivery instalments for the vessels. These sale and leaseback agreements will be treated as financing transactions. As of June 30, 2016, $160.9 million had been drawn down on the Ocean Yield facility, of which $19.8 million was drawn down under the pre-delivery financing facility with Ocean Yield.  

On the 10^th of November 2015, the Company announced the closing of a $64.3 million secured commercial loan facility with Credit Agricole Corporate and Investment Bank ("CACIB") for the first two of the Company's eight STX vessels.  The debt financing covers approximately 65% of the contract price of each of these two vessels, which were delivered in November 2015 and January 2016.  In January 2016, the Company announced that it had entered into an amended secured commercial loan facility for $128.5 million with CACIB and BNP Paribas to provide additional financing for the third and fourth newbuilding vessels at STX, which were delivered in January and February 2016.

On the 17^th of March 2016, the Company entered into sale and leaseback agreements with China Merchant Bank Financial Leasing ("CMBFL") for two SPP vessels.  The net proceeds from the transaction (after a 20% sellers' credit) are expected to amount to $76.9 million.  Under the agreements, the two vessels will be delivered to CMBFL on their respective deliveries from SPP.  The Company has entered into 7-year bareboat charters for the two vessels, commencing upon their respective deliveries, and has purchase options to re-acquire the vessels during the charter period, with the first such option exercisable on the third anniversary of the delivery date of each vessel.  The first of these vessels, Navig8 Pride, has been delivered to CMBFL under the terms of the Sale MOA and then delivered back to the Company under bareboat charter; the second is due for delivery from SPP in August 2016. Under the sale and leaseback agreements, CMBFL also finances the pre-delivery instalments for the vessels.  These sale and leaseback agreements will be treated as financing transactions.  As of June 30, 2016, $28.8 million has been drawn down in respect of pre-delivery instalments.

On the 25^th of April 2016, the Company announced that it had entered into a $130.3 million senior secured credit facility agreement with Citibank N.A., London Branch and Caixabank, S.A. (the "Credit Facility") to provide post-delivery financing for four of the Company's 74,000 DWT LR1 product tankers constructed or under construction at STX , including the Navig8 Experience, which was delivered to the Company in March 2016.  The Credit Facility has two separate tranches – a $26.1 million commercial tranche (the "Commercial Tranche") and a $104.2 million tranche insured by Korean Trade Insurance Corporation (the "K-Sure Tranche"). The Credit Facility provides financing of approximately 65% of the contract price of these four vessels.  As of June 30, 2016, $125.9 million had been drawn down from the Credit Facility.

On the 19^th of July 2016, the Company entered into a $66.0 million senior secured credit facility agreement with ABN AMRO Bank N.V., Singapore Branch (the "Credit Facility") to provide post-delivery financing for the remaining two of the Company's 74,000 DWT LR1 product tankers constructed or under construction at SPP. The Credit Facility has two separate tranches – a $13.2 million commercial tranche (the "Commercial Tranche") and a $52.8 million tranche insured by Korea Trade Insurance Corporation (the "K-Sure Tranche"). Each drawdown from the Credit Facility shall be comprised of 20% from the Commercial Tranche and 80% from the K-Sure Tranche. The Credit Facility provides financing of approximately 65% of the contract price of these two vessels.

Results for the three months ended June 30, 2016

For the three months ended June 30, 2016, the Company reported net income of $0.7 million, or $0.02 per share, a decline of $5.6 million from the three months ended June 30, 2015.

Revenue for the three months ended June 30, 2016 was $25.9 million, compared to $7.4 million for the three months ended June 30, 2015.  The total number of vessel operating days for the three months ended June 30, 2016 was 1,373, compared to 885 for the three months ended March 31, 2016 and 273 for the three months ended June 30, 2015.

The average daily time charter equivalent ("TCE")⁽¹⁾ earned by our 115,000 DWT LR2 chartered-in tankers in the three months ended June 30, 2016, was $21,157 per day.  Two of the chartered-in vessels, Captain John and Captain Paris were redelivered during the quarter, on June 10 and 23, respectively. The gross average daily TCE for our owned vessels were $16,358 and $21,821 for our 74,000 DWT LR1 and 110,000 DWT LR2 vessels, respectively.  These rates were achieved over an aggregate of 1,128 operating days. 

Vessel operating expenses across our owned and chartered-in fleet were $12.3 million for the three months ended June 30, 2016, an increase of $6.2 million from the three months ended June 30, 2015 when our fleet was limited to three chartered-in vessels.  Average daily operating expenses were approximately $5,400 for our owned vessels.

Depreciation expense for the three months ended June 30, 2016 was $5.9 million, compared to no depreciation expense for the three months ended June 30, 2015.  This is due to the Company beginning to depreciate vessels in its newbuilding fleet following commencement of fleet deliveries in November 2015. 

General and administrative expenses for the three months ended June 30, 2016 were $1.9 million, a decrease of $0.2 million from the three months ended June 30, 2015.  This decrease relates to one-time professional fees that were occurred in the three months ended June 30, 2015.              

Interest expense for the three months ended June 30, 2016 was $5.2 million, compared to no interest expense in the three months ended June 30, 2015, when the Company had not yet taken delivery of any of the vessels in its newbuilding program. 

(1) Time charter equivalent, a non-US GAAP measure, is vessel revenues less voyage expenses (including bunkers and port charges but excluding pool commission).

About Navig8 Product Tankers Inc.

Navig8 Product Tankers was established in 2013 as a joint venture between the Navig8 Group and DVB Bank to capitalize on anticipated strong supply/demand fundamentals and the accelerating growth of long-haul clean and dirty oil product cargo movements, driven by increasing geographic dislocations between producers and consumers.

Navig8 Product Tankers maintains an orderbook of long-range (LR), eco-design product tankers, comprising 15 LR2 and 12 LR1 vessels. The Company's fleet is contracted to operate in various product tanker pools managed by the Navig8 Group, the world's largest independent pool and commercial management company.

Navig8 Product Tankers is listed on the Norwegian OTC market under the symbol EIGHT.

Visit our website at www.navig8producttankers.com.

 

 

 

 

 

 

 

 

 

Forward-Looking Statements and Distribution

This press release contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Navig8 Product Tankers management's examination of historical operating trends. Although the Company believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Navig8 Product Tankers cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

Important factors that, in the Company's view, could cause actual results to differ materially from those discussed in this press release include the strength of world economies and currencies, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the tanker market as a result of changes in OPEC's petroleum production levels and worldwide oil consumption and storage, changes in the Company's operating expenses including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by the Company on the Norwegian OTC trading support system.

This communication is not for publication or distribution, directly or indirectly, in or into any state or jurisdiction into which doing so would be unlawful. The distribution of this communication may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes, should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdictions. The Company assumes no responsibility in the event there is a violation by any person of such restrictions.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/navig8-product-tankers-inc-reports-results-for-the-three-and-six-months-ended-june-30-2016-300308612.html

SOURCE Navig8 Product Tankers Inc.

CONTACT: Nicolas Busch: Chief Executive Officer + 44 207 467 5888 or Rose & Company: +1 212 359 2228 or navig8products@rosecoglobal.com

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http://www.navig8producttankers.com